HANOVER Germany—Continental A.G. is looking to reduce investment, decrease working capital and cut labor and material costs in a bid to address the financial impact of the COVID-19 pandemic.
The swift drop in global vehicle production has forced the German auto supplier to realign its costs with an "over-arching readjustment" of its financial structure, according to CEO Elmar Degenhart.
"We are building ourselves a bridge over the coming years (that) leads us back to success," Degenhart said in a virtual address that was part of the group's annual shareholders meeting on July 14.
The restructuring is separate from Continental's 10-year transformation program, which looks to deliver $570 million of annual savings beginning in 2023.
The latest cuts, Degenhart said, are intended to have more immediate results, saving several hundred million euros by 2022. Achieving this goal, likely will mean eliminating jobs, despite the company's efforts to avoid doing so. Continental is in contact with union representatives and is trying to make progress "quickly and effectively."
The automotive industry, which was seeing a slow decline in production at the start of the year, was hit particularly hard by the COVID-19 pandemic, which shut down manufacturing operations around the globe. Continental was not immune from the industry slowdowns, but has been bolstered by the successes of its rubber and tire segments during the difficult periods this year.
"Their success," Degenhart said, "is supporting us now."
The company's ContiTech and Tire business areas faired better than other segments because they serve different markets with different cycles. The tire unit profited from its consumer business. ContiTech, meanwhile, benefited from its ability to reach industries such as food, agriculture, rail transport and shipping, all of which fared better than automotive during the COVID-19 slowdowns.
According to Degenhart, the quarter that ended June 30 was the weakest quarter in the automotive industry since 1945, but production figures are rising slowly.
"Since 2017, more than 25 percent fewer vehicles have rolled off the line," Degenhart said. "And there will not be a fast recovery, neither in Europe nor in North America."
Despite a slow increase in global car production, Degenhart does not expect to see the 2017 levels until after 2025 "at the earliest."
He anticipates that the third quarter will be "very difficult" for the German group, although sales will be higher than the second quarter.