At a time when some of its major competitors are jettisoning their automotive component operations, Continental A.G. took a number of steps this year to strengthen its segment.
Most obvious was Conti's recent $275 million acquisition of fellow German rubber product maker Phoenix A.G. and pending integration of Phoenix's various businesses with its own ContiTech operations.
Acquiring Hamburg, Germany-based Phoenix will strengthen ContiTech internationally, the company said, especially in the fluid transfer, conveyor belt and air spring systems businesses-although Conti has agreed to divest certain assets in the latter two businesses in order to satisfy European cartel authorities.
The deal will create a business entity with about $3 billion in annual sales from activities in several sectors, including hose, belts, molded goods, calendered goods/coated fabrics, air springs, anti-vibration components and automotive interiors. Rubber-related sales should be in the $2 billion range, making ContiTech among the world's five largest non-tire rubber product makers, according to Rubber & Plastics News' global company rankings data.
The combination of ContiTech and Phoenix is expected to yield synergies of about $36 million a year, according to Continental CEO Manfred Wennemer, who also pointed out that Phoenix has a measurable manufacturing presence in low-cost countries in Eastern Europe and Asia.
At the same time, Conti made several moves -some controversial-to reduce costs and expand capacity for its tire business, especially for North America, where the company has been in the red the past several years.
Most noteworthy, Conti is suspending tire production at its Mayfield, Ky., plant by year-end and has made provisions for sourcing tires for North America from Malaysia and Brazil, budgeting $305 million over four years to increase global tire capacity by 7 million passenger and 700,000 truck tires.
The strategy includes expanding its Continental Sime Tyre operations in Malaysia and building two factories in Brazil. More recently it signed a memorandum of understanding with China's Qingdao Doublestar Tire Industrial Co. Ltd., covering both companies' intention to establish a joint venture by the spring.