Hanover, Germany – Continental AG is looking to reduce investment, decrease working capital and cut labour and material costs in a bid to address the financial impact of the Covid-19 pandemic.
The German group has launched an ‘over-arching readjustment’ of its financial structure, as its cost structure is no longer in-line with lower global vehicle production, according to CEO Elmar Degenhart.
“We are building ourselves a bridge over the coming years [that] lead us back to success,” Degenhart said in a virtual address to the group’s annual shareholders meeting on 14 July.
The restructuring is on top of Continental’s 10-year transformation programme to 2029, which includes a target to deliver €500 million of annual savings, from 2023 onwards.
The latest cuts, said Degenhart, are expected to lead to “several hundred million euros” of savings by 2022, and will likely lead to ‘redundancies, despite all efforts’.
Conti is in contact with union representatives and is trying now trying to make progress “quickly and effectively.”
The CEO also pointed out the stronger performance of Continental’s rubber & tire businesses compared to its automotive segment, at the time of slowdown and Covid difficulties.
The ContiTech and Tire business areas, noted Degenhart, serve markets with different cycles and “their success is supporting us now.”
In Tires, Conti profits from business with consumers, while ContiTech serves entirely different industries such as food, agriculture, rail transport and shipping.
According to the CEO, the quarter ended 30 June was the weakest quarter in history of the automotive industry since 1945, but production figures are rising slowly.
“Since 2017, more than 25% fewer vehicles have rolled off the line. And there will not be a fast recovery, neither in Europe nor in North America,” Degenhart stated.
Despite a slow increase global car production, Degenhart does not expect to see the 2017 levels until after 2025 "at the earliest."
The CEO anticipates that the third quarter will be “very difficult” for the German group, although sales will be higher than second quarter.