HANOVER, Germany—Continental A.G.'s moves to explore options for a major restructuring of the group are being driven by transformation within the automotive industry, CEO Elmar Degenhart said.
Technology changes require flexibility and agility, and that was why the company wanted to gear itself toward rapid growth, Degenhart said in a 2017 annual results statement March 8.
"We are currently assessing our options. A plan is yet to be finalized," Degenhart said in comments indicating that major changes do, indeed, lie ahead for the Hanover-based group.
The CEO pointed to the DAX-listed group's adaptability, saying: "Continental has been undergoing a process of gradual transformation for nearly 150 years. In the past 20 years alone, Continental has transformed from a purely tire manufacturing business and industrial partner into a global technology company."
In a separate document posted on Conti's website, the company outlined seven strategic dimensions it sees as keys to sustainability.
- Value creation — enhancing the value of the corporation on a long-term basis;
- Regional sales balance — globally balanced sales distribution;
- Top market position — be among the three leading suppliers in all relevant markets;
- In the market for the market — high degree of localization; Conti is represented in 56 countries with production sites in 35 of them;
- Balanced customer portfolio — balance between automotive and other industries;
- Technological balance — combination of established and pioneering technologies; and
- Great people culture — an environment where employees feel free to use their creative energies; develop a culture of trust throughout the organization.
Regarding point 5, Conti elaborated, saying it is pursuing three approaches in this regard:
- investing in additional tire production capacity geared predominantly toward the end customer business;
- strengthening the automotive end customer business through customer-specific solutions and products; and
- increasing sales with industrial customers from sectors outside of the automotive industry both organically and through acquisitions.
Degenhart's comments accompanied Continental's 2017 results announcement, showing year-on-year earnings (EBIT) up 11.4 percent at $5.7 billion on 8.5 percent higher sales at $54.1 billion.
The German technology and automotive supplier said its Rubber Group registered 8.6 percent higher sales for the year at $21.5 billion. However, segment's earnings (EBITDA) at the Rubber Group, which comprises its tire division and ContiTech, fell 1.6 percent to $4.3 billion.
Commenting on company results, Continental Chief Financial Officer Wolfgang Schaefer said exchange rate effects and higher costs of materials affected the margins in 2017. Assuming the current exchange rates represent the average for the current year, Conti expects negative exchange rate effects of more than $1.2 billion in 2018, Schaefer said.
He also noted that the German corporation anticipates additional negative effects of $61.5 million from price increases for natural and synthetic rubber this year.