Continental is pushing through with a spinoff of its poorly performing car parts business, Bloomberg reported. This is even as the company struggles to keep pace with recalls related to faulty braking systems it supplied, persons in the know told the newswire.
The German firm had called on investment banks to make pitches for a spinoff of the auto business, the persons said.
Whereas requests for proposals were given out earlier this September, pitches are still under way even after the recall announcement, the sources told Bloomberg on condition of anonymity.
The company’s shares tanked the earlier week, as BMW disclosed the spiraling cost of a recall affecting 1.5 million vehicles due to faults with their Continental braking systems, estimated at nearly 1 billion euros, the newswire noted.
A Continental spokesperson said that at present, they expect the cost of brakes to be in mid-double digit millions of euros, the newswire noted.
Bloomberg Intelligence pegs the company’s auto business at 4.3 billion euros, based on a sum of the parts analysis.
Some persons in the know told Bloomberg that even as Continental is working on a spinoff, it could further push back the timeline, even before it completes the formalities of culling out the auto business from the rest of the group.
The company is mulling a spinoff of the auto unit in what is touted to be the largest restructuring in the company’s 150 year history, the newswire noted.
The shareholders will get stock in an independently listed entity with no new money raised. The firm will decide in the fourth quarter of this year, as the listing is slated for 2025 end, the newswire reported.
The auto business has been grappling to keep business, with significant investments and reducing demand, the newswire noted. Higher interest rates are an impeding factor in buying cars, with auto sales below expectations in China, the newswire noted.
Talks are ongoing and contours of the spinoff are subject to change, the newswire noted.
A Continental spokesperson noted that preparations for a spinoff are under way, and it is certain of achieving preconditions for the spinoff, which includes strong underlying operations and a strong standalone business case, the newswire said.