Continental AG to Focus Solely on Tire Manufacturing Amid Corporate Restructuring
The automotive supplier plans to divest its Contitech business unit as part of a strategic return to its roots
Continental AG, one of Germany's leading automotive suppliers, has announced a significant restructuring that will see the company refocus solely on its core tire manufacturing business.
Following the separation from its automotive supply segment, the company intends to divest its Contitech division, which specializes in plastic and rubber technologies.
This move is part of Continental's strategy to streamline operations and is planned for completion by 2026.
Continental has developed three strong business units over the past three decades, predominantly through acquisitions and expansions.
According to CEO Nikolai Setzer, these units have now reached a stage where they are ready for independent operation.
The company aims to operate as a focused global tire manufacturer, with the tire segment recognized as its primary profit driver.
The announcement was well-received in the stock market, with Continental shares experiencing a rise of more than four percent, marking them among the largest gainers on the DAX index.
Investors have shown a preference for pure-play companies, leading to an ongoing trend of conglomerates like Continental spinning off their diversified operations.
Setzer noted that both Contitech and the remaining tire business would be better positioned to respond to the dynamic nature of current markets if they were more focused on their specific product lines.
However, labor unions, including IG Metall and the Industrial Union of Mining, Chemicals, and Energy (IGBCE), have strongly criticized the company's decision.
IGBCE board member Francesco Grioli described the restructuring as a peak in a long-standing trend towards dismantling corporate structures, emphasizing that the tire and Contitech sectors are interconnected.
He argued that this separation is socially irresponsible and poses economic risks, as well as technological challenges.
Union representatives on the supervisory board have indicated they will not approve the plan without significant employment and site guarantees for affected workers.
Hasan Allak, the chair of the works council, expressed concerns that the decision could lead to dire consequences for employees, reducing them to mere tools for profit maximization.
On the other hand, Contitech's management stated that they are engaged in constructive discussions with labor partners and are working towards solutions.
Currently, there are no plans for further job cuts beyond the existing reduction of approximately 1,200 positions.
Last year, Continental reported a workforce of 190,000 employees.
The restructuring comes as the third-largest automotive supplier in Germany faces significant pressure due to a downturn in the automotive sector and the costly transition to electric mobility.
The plan is expected to result in the loss of over 10,000 jobs across the company.
Competitors such as Bosch and ZF Friedrichshafen have also reported job losses but have thus far restructured at a lesser scale.
Continental is preparing to take its automotive division public in September, despite its largest segment, which reports an annual revenue of around €19 billion and employs 92,000 people, experiencing net losses for several years.
Contitech specializes in the manufacturing of belts, hoses, and similar products utilized by various industries, including mining.
In 2024, this segment was projected to achieve approximately €6.4 billion in revenue with a six percent margin.
A strategic decision has already been made to separate the majority of automotive-related rubber products this year.
The pending changes will affect around 16,000 of Contitech's current employees.
The company intends to position itself as a global leader in material solutions post-separation.
Currently, Contitech operates with 23,000 employees and reported a recent revenue of roughly €4.5 billion with an 8.1 percent margin.
Potential buyers for the divested business unit include strategic competitors and financial investors, according to CFO Olaf Schick.
The remaining tire division employs around 57,000 individuals and generated approximately €14 billion in revenue last year, achieving a profit margin of 13.7 percent.
Among other leadership changes, Chief Human Resources Officer Ariane Reinhart will leave the company by June 30, with Ulrike Hintze set to succeed her.
CFO Schick is also scheduled to exit in October to join Mercedes-Benz as legal counsel.
CEO Setzer emphasized his commitment to guiding Continental through this restructuring until its successful completion.
Following the separation from its automotive supply segment, the company intends to divest its Contitech division, which specializes in plastic and rubber technologies.
This move is part of Continental's strategy to streamline operations and is planned for completion by 2026.
Continental has developed three strong business units over the past three decades, predominantly through acquisitions and expansions.
According to CEO Nikolai Setzer, these units have now reached a stage where they are ready for independent operation.
The company aims to operate as a focused global tire manufacturer, with the tire segment recognized as its primary profit driver.
The announcement was well-received in the stock market, with Continental shares experiencing a rise of more than four percent, marking them among the largest gainers on the DAX index.
Investors have shown a preference for pure-play companies, leading to an ongoing trend of conglomerates like Continental spinning off their diversified operations.
Setzer noted that both Contitech and the remaining tire business would be better positioned to respond to the dynamic nature of current markets if they were more focused on their specific product lines.
However, labor unions, including IG Metall and the Industrial Union of Mining, Chemicals, and Energy (IGBCE), have strongly criticized the company's decision.
IGBCE board member Francesco Grioli described the restructuring as a peak in a long-standing trend towards dismantling corporate structures, emphasizing that the tire and Contitech sectors are interconnected.
He argued that this separation is socially irresponsible and poses economic risks, as well as technological challenges.
Union representatives on the supervisory board have indicated they will not approve the plan without significant employment and site guarantees for affected workers.
Hasan Allak, the chair of the works council, expressed concerns that the decision could lead to dire consequences for employees, reducing them to mere tools for profit maximization.
On the other hand, Contitech's management stated that they are engaged in constructive discussions with labor partners and are working towards solutions.
Currently, there are no plans for further job cuts beyond the existing reduction of approximately 1,200 positions.
Last year, Continental reported a workforce of 190,000 employees.
The restructuring comes as the third-largest automotive supplier in Germany faces significant pressure due to a downturn in the automotive sector and the costly transition to electric mobility.
The plan is expected to result in the loss of over 10,000 jobs across the company.
Competitors such as Bosch and ZF Friedrichshafen have also reported job losses but have thus far restructured at a lesser scale.
Continental is preparing to take its automotive division public in September, despite its largest segment, which reports an annual revenue of around €19 billion and employs 92,000 people, experiencing net losses for several years.
Contitech specializes in the manufacturing of belts, hoses, and similar products utilized by various industries, including mining.
In 2024, this segment was projected to achieve approximately €6.4 billion in revenue with a six percent margin.
A strategic decision has already been made to separate the majority of automotive-related rubber products this year.
The pending changes will affect around 16,000 of Contitech's current employees.
The company intends to position itself as a global leader in material solutions post-separation.
Currently, Contitech operates with 23,000 employees and reported a recent revenue of roughly €4.5 billion with an 8.1 percent margin.
Potential buyers for the divested business unit include strategic competitors and financial investors, according to CFO Olaf Schick.
The remaining tire division employs around 57,000 individuals and generated approximately €14 billion in revenue last year, achieving a profit margin of 13.7 percent.
Among other leadership changes, Chief Human Resources Officer Ariane Reinhart will leave the company by June 30, with Ulrike Hintze set to succeed her.
CFO Schick is also scheduled to exit in October to join Mercedes-Benz as legal counsel.
CEO Setzer emphasized his commitment to guiding Continental through this restructuring until its successful completion.
Translation:
Translated by AI
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
