By Liz White, ERJ staff
Hanover, Germany-ContiTech AG announced 14 Aug that it is to sell its automotive sealing systems business operation by 1 Oct 2005, following earlier revelations that it was in talks to divest this unit.
ContiTech decided to sell because it lacks sufficient "strategic clout" to compete effectively in the automotive sealing components market. "The sale was prompted by our strategically weak position," admitted Claus Peter Spille, general manager of ContiTech Sealing Systems in Hanover, in a company statement.
No price for the sale was revealed. Following the sale, the ContiTech profiles plant in Hanover, which employs about 300 people, will be closed, but the jobs of another 850 workers at the main operation in DolnÃ© Vestenice in Slovakia and another 150 at a unit in Arnedo in Spain are safe, ContiTech indicated.
The buyer is Special Situations Venture Partners LP of Guernsey, owners of SG Sealing Ltd-which is the former SaarGummi automotive profiles and rubber moulding business, acquired from RAG Saarberg in 2004. Special Situations Venture Partners is an investment fund advised by Orlando Management GmbH of Munich.
Competition authorities are expected to approve the transaction at the end of August, said ContiTech.
SG Sealing has some 20 percent of the vehicle weatherstripping market in Europe, according to ContiTech's statement, and will add ContiTech's four to five percent share to this. ContiTech's profiles business posted sales of Euro 76 million in 2004, while SaarGummi reported sales of around Euro 300 million in 2004.
ContiTech has struggled with the automotive profiles operation in recent years. "Despite investments in the tens of millions of euros in the last five years, we did not succeed in expanding market share in Europe from four to five percent," commented ContiTech's Spille "Our assessment of the markets and the competition were apparently overly optimistic," he added.
For SG Sealing, the logic behind the acquisition is the ongoing consolidation in the car body sealing business," an Orlando spokesperson earlier commented. Overcapacity in the business has resulted in low profitability and high competition in the automotive profiles sector for many years. Finally, the sector has seen a recent spate of equity group takeovers of major sealing systems groups, which is forcing rationalisation of the sector.
SG Sealing is actively participating in this consolidation, expanding in Europe, South America and Asia, but only supplying core customers in North America. As part of this process, in February 2005, the group took over a small German competitor, ElaTech, with three factories in Germany and annual sales of about Euro 40 million.
And in an earlier strategic move, SG Sealing's owners sold SaarGummi's Canadian and Mexican profiles units, with Euro 62 million in annual sales, to GDX Automotive in North America. SG Sealing acknowledged at the time that these operations did not have sufficient size to compete effectively in the North American market-but the group also kept its Tennessee plant, which supplies parts for BMW and DaimlerChrysler models made in the US.
ContiTech said production from its Hanover operation will be split between various SaarGummi locations and plant will be closed 31 March 2006. "Together with the employees' council, we have agreed on a social scheme for those affected by the layoffs. We are in dialogue with other companies as well so as to assist the workforce, which was always highly committed to the company, in finding other jobs," assured Spille.