HANOVER, Germany—Continental A.G. is set to cut up to 20,000 jobs by 2029, as part of its Strategy 2030, which was unveiled Sept. 25.
The road map involves a "transformation 2019–2029 structural" plan, which aims to increase efficiency and productivity through a turnaround in the organization and portfolio, Continental said in a statement.
The Strategy 2030 plans are intended as a proactive response to the declining automotive industry and the challenges it presents. These moves also come amid Continental's previously disclosed plans to divide its operations into three distinct business units: Rubber Technologies, Automotive Technologies and Powertrain, which will called Vitesco.
The powertrain unit either will be spun off or separately listed in a public stock offering, depending on whether economic conditions are favorable for a listing.
"Thanks to our organizational realignment, our solid balance sheet structure and our Strategy 2030, we are well prepared for the challenges ahead," Continental CEO Elmar Degenhart said in a statement, noting that the company will "emerge stronger."
All of the company's moves are intended to position it as a leader in the automotive industry, especially as it prepares to embrace a new mobility landscape. Doing so, Continental said, requires new and sometimes disruptive technologies.
"With our strategy and our structural program, we are laying the next decisive groundwork and bringing clarity for everyone involved: employees, customers, investors, business partners and other stakeholders," Degenhart said.
As part of Strategy 2030, the company will cease the production of truck tires at its manufacturing facility in Petaling Jaya, Malaysia, by the end of this year, a move that impacts 270 employees.
The Malaysian plant, which has been in operation since 1963, also manufactures agricultural, earthmover and industrial tires, according to Rubber & Plastics News' Global Tire Report. Continental has not yet commented on the future of the production of these tire types at the plant.
Despite the cuts at the Malaysian plant, the new strategy pledges further investments in the tire division. Continental said it will be promoting organic growth in its tire business with the goal of becoming "one of the top three suppliers worldwide."
Between 2011 and 2018, Continental invested more than $1.15 billion in the expansion of its tire production capacity.
Through its Strategy 2030 efforts, Continental aims to strengthen its competitiveness over the long term by focusing on electric mobility and digital solutions. The moves will cost about $1.2 billion throughout the next decade, Continental said, noting that a bulk of those costs will come between 2019 and 2022. The moves, however, are expected to save about $550 million annually, beginning in 2023.
Continental also has not ruled out additional projects if the moves it makes do not achieve the desired impact.
The plans disclosed by the company on Sept. 25 cover various market developments, including the increasingly digitalized working environment, the emerging crisis in the automotive industry and the rapid change in powertrain technology caused by more stringent emissions legislation.
Continental also said it looks to reduce its dependence on original equipment manufacturers in the industrial section, including conveyor belts, hoses, spare tires and auto spare parts. Meanwhile, it has set goals to increase its aftermarket sales to the agriculture, railway engineering, mining and construction segments, which now have consolidated sales between 30 percent and 40 percent.
The strategy detailed by Continental also will see the Instrumentation & Driver HMI business unit gradually withdrawing from mass production in Babenhausen, Germany, by the end of 2025. The business unit also plans to transfer certain research and development activities from Babenhausen to other locations by the end of 2021, a move the firm believes will reduce development costs to a competitive level.
These efforts will impact a total of 2,200 jobs, according to initial planning.
Production and development of high-pressure hydraulic pumps for gasoline and diesel engines will be discontinued in Roding, Germany, by 2024, a move that impacts a total of 540 jobs. Continental said 220 of those jobs will be transferred to similar functional areas.
The company's Limbach-Oberfrohna, Germany, location will discontinue the production of injectors for diesel engines in 2028, resulting in the elimination of 860 jobs. The remaining 370 jobs at the site will be transferred to "similar functional areas."
Similarly, the production of injectors for gasoline engines in Pisa, Italy, will be discontinued between 2023 and 2028, resulting in 500 job cuts. The remaining 440 jobs at the site will be transferred to similar functional areas.
In addition, the company expects to begin discussions over the closure of its gasoline engine injectors production unit in Newport News, Va., by 2024. The plant employs 740.
The company's hydraulic brake systems production unit in Henderson, N.C., will be closed, affecting up to 650 jobs. No specific timeline has been offered for the closure of the plant, which, according to Continental, has failed to acquire new customer projects in recent years.