Conti may look to sell tyre and rubber unit

ERJ staff report (TB)

Hanover, Germany -- Continental AG's recent restructuring into two operating groups, automotive systems and rubber, is leading to market speculation the company is considering spinning off or selling the rubber businesses.

Conti made the restructuring official Oct. 1, naming CEO Karl-Thomas Neumann to lead the automotive group-formed from the company's powertrain, interior and chassis and safety divisions-and Alan Hippe, his second-in-command, to lead the rubber group, comprising the passenger and truck tyre units and the ContiTech non-tyre rubber division.

Speculation is Continental's tyre activities, along with Contitech, will become legally independent. That would clear the way for a purchase by an investor or a merger.

When asked for comment, Conti officially has said only, “The repositioning opens up a broad spectrum of offerings for us.”

The restructuring-the rubber group accounts for about 35 percent of Conti's sales-comes on the heels of a merger/takeover scenario that will leave fellow German automotive supplier Schaeffler Group as Conti's single largest shareholder, at an agreed-to maximum of 49.99 percent for four years.

Schaeffler owns considerably more than that for now following its Euro 75 per share bid in August/September. The Herzogenaurach, Germany-based family-run company has stated it will sell enough shares to other investors to get to the minority position.

In the merger/takeover agreement, Schaeffler agreed to not demand a sale of activities or seek other material structural measures and at the same time support the ongoing strategy and business policies of Conti's management board.

Some observers noted this latter postion would allow the divestment of certain asssets, as long as the initiative to do so came from Conti and not from Schaeffler.

Asked at the recent Paris Auto Salon about the possibility of Conti's spinning off the rubber business, an executive at Group Michelin said, “We are following the ongoing events in Hanover very closely. After all, Continental is certainly one of our most important rivals.”

From Tire Business (A Crain publication)