Continental is putting parts of its automotive supply business to the test. CEO Nikolai Setzer (52) announced on Monday at the Dax Group’s Capital Markets Day in Hanover that parts of the automotive division were being considered to be spun off. Overall, it accounts for around a quarter of the division’s sales. However, he ruled out a complete sale of the business area. About the Manager Magazine had already reported plans recently
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Specifically, it is initially about the business with car cockpits and displays. The business area, with sales of 3.5 billion euros to date, will initially be set up independently in terms of organization so that options can then be examined. Everything is possible, from the entry of an investor or a joint venture to a sale or an IPO. But nothing has been decided yet and Setzer did not provide a timetable when asked. In addition, the same is being examined for other, small peripheral areas of the division with a total turnover of 1.4 billion euros. Setzer has not yet given any details. Setzer emphasized that the business of autonomous driving is not under scrutiny.
With this step, Continental wants to concentrate on profitable and high-growth future areas and move even further from a pure parts supplier to a technology partner for the automotive industry. In the summer, the group had already announced that it would separate the automotive business in the Contitech division and would also examine all options here, from the entry of a partner to a sale or an IPO. The area produces, among other things, hoses and cables, but also supplies the mining industry with conveyor belts. Setzer announced that the renovation should be completed here by 2025. He did not yet provide details about possible discussions with potential partners.
No complete exit from the automotive sector
Two years ago, the group had already outsourced the combustion engine business in Vitesco and put it on the stock exchange. Recently there was speculation that Continental could concentrate on Contitech’s profitable tire business and the industrial area with conveyor belts, for example. Setzer now rejected this. “Automotive will remain a strong pillar for us in the future,” he said. The conclusion was reached that Continental was the best owner for this area. “And we see great potential here.” Even after the possible spin-off of the cockpit business and other areas, the area, with sales of around 15 billion euros, is still just as large as the company’s own tire business. “So we are still a big player.”
Overall, Continental has recently fallen short of its own expectations, Setzer admitted. The goals set for 2020 have not yet been achieved. “Especially in the automotive sector, it is taking longer than expected in 2020. We are not satisfied with what we have achieved.” In order to reduce costs, Continental now also wants to reduce its spending on research and development in this segment. In the automotive sector, these expenses should initially fall from 12 percent of sales to 11 percent and in the medium term – i.e. in three to five years – to less than 10 percent.
Development centers are being merged
In order to achieve this, the number of the current 82 development locations worldwide should also be reduced. The main thing is to merge small and inefficient locations with others. Continental had also already announced that it would cut jobs in the division’s administration. This is expected to save 400 million euros. Around 5,500 administrative positions are to be eliminated as manager magazin had already reported
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Continental, on the other hand, wants to increase the distributions to its shareholders. Instead of the previously promised 15 to 30 percent of the net profit, 20 to 40 percent will be paid out as dividends in the future, announced CFO Katja Garcia Vila (51).
In the medium term, Conti wants to increase total sales from the 41 to 43 billion euros targeted this year to 51 to 56 billion euros. In the short term – that is, in two to three years – the DAX group wants to achieve the target adjusted operating margin range of 8 to 11 percent and then continue to improve within the range.