Continental expands cost-saving efforts, 30,000 jobs to be impacted

HANOVER, Germany—Continental A.G. is ruling nothing out when it comes to cost-saving measures intended to right-size operations and manage profitability as the automotive industry continues to contract and the global economic downturn from the COVID-19 pandemic worsens.

The global auto supplier said Sept. 1 that it will expand cost-saving efforts set in 2019, eyeing a gross annual savings goal of about $1.19 billion beginning in 2023. This more than doubles its previous savings aims.

"That is a huge number," Ariane Reinhart, Continental's executive board member for human relations, said in a video statement. "It will demand a lot from us in the short term and push us to our limits. All business units will be called on to contribute in Germany and abroad."

To this end, the company is expediting its automation processes, reducing labor costs, closing and consolidating some of its locations and preparing to sell unprofitable operations.

Combined, these efforts could directly impact as many as 30,000 jobs worldwide through modification, relocation or layoffs. About 13,000 of the jobs expected to experience some impact are in Germany.

"We are looking beyond the short term," Reinhart said. "Our goal: a bridge to a more successful future in the long term. The more we all save in an intelligent and sustainable manner now, the more jobs we will save in the medium and long term."

The cost-cutting measures, set forth in 2019, called for changes that would have impacted 20,000 jobs, including 7,000 in Germany.

Continental employs 232,000 globally, with 59,000 in Germany. The company also noted that during the last decade, it added 84,000 jobs in total—including 13,000 in Germany—as the automotive market grew.

But the market is changing, Continental said.

"The entire automotive industry is currently faced with enormous challenges," CEO Elmar Degenhart said in a written statement. "It has not experienced a larger, more severe crisis in the past 70 years. This crisis is hitting suppliers particularly hard."

Every aspect of Continental's global business and all business units will be asked to contribute to the savings efforts. This includes "portfolio adjustments" as well as steps to consolidate production and research and development tasks at "the most competitive" locations worldwide.

All of the cost-savings moves align with the belief that it will be at least 5 years before the automotive industry recovers.

"After roughly a decade of fast, profitable growth and work force expansion in line with the growth model of the automotive industry at that time, we are now gearing our operations to a new kind of growth with future technologies," Degenhart said. "That is why we are in intensive discussions with employee representatives to find the most sustainably effective solutions and strike a balance with the interests of our work force."

Continental believes there will be opportunities for growth, especially in the area of mobility, even as the automotive market continues to contract. This, the company said, has potential to create some jobs. The number of jobs expected to be added was not detailed.

"Our aim is to maintain our position among the global elite when it comes to the providers of top technologies and top software for mobility," Degenhart said. "To this end, we are focusing on maximizing our competitiveness at all locations while concentrating fully on our growth areas.

"Our future organizational structure, our reorganized worldwide manufacturing network, and a cost structure in line with the lower level of vehicle production: taken together, this will give us sufficient room to maneuver and the vital resources we need to return to fast, profitable and sustainable growth with the relevant future technologies. We are now deciding upon the necessary steps."