New ContiTech structure taking shape for industrial markets

NASSAU, Bahamas—Three months after the realignment of Continental A.G.'s ContiTech business became official, what that means to the industrial customers of the unit is starting to take shape.

Rather than being set up more along product lines—such as core offerings of industrial and hydraulic hose, conveyor belting, power transmission belts and air springs—that side of ContiTech instead now is restructured to focus on three geographic regions.

In practice, that means ContiTech now is aligned to ensure its leaders focus on making this entire range of industrial products successful in each of the following regions: Industrial Solutions Americas, Industrial Solutions EMEA (Europe and the Middle East), and Industrial Solutions APAC (Asia and Pacific).

Along with this remake of ContiTech's industrial businesses, ContiTech consolidated its automotive activities into an Original Equipment Solutions business area, which will operate globally to follow its customer structure. And the Surface Solutions unit—the final piece of ContiTech—will retain its current structure, with the automotive interior segment serving suppliers to the automotive industry, and LivTec focusing on private customers.

"We are enhancing our profile and becoming more efficient by consolidating our activities," Philip Nelles, a member of the Continental Executive Board and CEO of the ContiTech group sector, said when the realignment was announced. "In our industries and markets, we want to be the technological leader for material-driven solutions."

The new ContiTech operating blueprint was made public about 16 months after the larger Continental underwent a remake of its own. That aligned Conti under three main segments: Automotive Technologies (further split into five business areas), Continental Tire and ContiTech.

Previously, ContiTech and tires had been grouped together in one rubber segment.

And as that structure for the parent company took hold, it made sense for ContiTech to take an introspective look into whether it needed to tweak its structure as well, according to Andreas Gerstenberger, now CEO of ContiTech USA Inc. and head of the Industrial Solutions Americas business area. He previously had been head of Continental's global Industrial Fluid Solutions business area.

Under the guidance of Nelles—whose contract in July was extended by five years until July 2029—Gerstenberger said ContiTech's leadership was asked to analyze where the business was doing well and where they were not.

"Within that frame, we as a management team together with (Nelles) basically questioned our vision, our strategy," said Gerstenberger, who discussed the new alignment along with other leaders of Industrial Solutions America at the recent NAHAD annual convention in Nassau.

For about a half-dozen years, ContiTech has followed its "Smart Solutions Beyond Rubber" approach as its North Star. The team had to decide if that still made sense, or if it was time to put a new face forward to customers in its various business sectors.

It was determined that, in some ways, the structure of ContiTech became a bit too complicated as it grew, both organically and through acquisitions, particularly when it purchased the Veyance Technologies business that previously operated as Goodyear Engineered Products.

Gerstenberger said in practice the overall realignment focus for the industrial side of ContiTech had gone from a 3-dimensional organization to a 2D approach. Rather than having a structure that was aligned under the major product area and then geographically as well, restructuring under the three global regions is much simpler overall.

"You have the business, and you have the headquarters for the central functions," he said. "That's it. Those are the two dimensions."

Gerstenberger will lead the Americas Group out of its Fairlawn, Ohio, headquarters, while EMEA is based in Germany and led by Song Qi. APAC is headquartered in Singapore and led by Hannes Friederichsen.

Jim Hill, now vice president of marketing and strategy for Industrial Solutions Americas, said the new structure helps both internally within the company, and externally to show the market the role of ContiTech within Continental.

"Our role really is to be industrial," said Hill, who previously had been CEO of Continental's ContiTech North American operations. "How do we simplify our organization, but also how do we organize to grow in this industrial space.

"In creating these industrial regions that we have was one of the key things of how we capture those industrial markets. How do we fulfill our role within Continental? And this whole reorganization is a very big part of that."

Gerstenberger added that many customers had told them the product focus was a great thing, but there were other ways ContiTech could help them succeed.

"They said, 'We think you should be closer to us and be more agile,' " Gerstenberger told Rubber News. "And we took that feedback, and basically in the new organization formed the three industrial business areas in the three large regions of the world."

Without providing sales data, Gerstenberger said the Americas and EMEA regions are pretty comparable in size, while APAC offers the most room to grow.

Besides the industrial, automotive and surface solutions units, the new ContiTech structure includes five central functions, all reporting to Nelles. Those include two new positions—a chief technology officer and chief operating officer—along with a chief human resources officer, chief financial officer, and a head of quality and technical compliance.

The CTO will be tasked to drive "comprehensive and cross-functional research activities as well as the development of material-driven, value-creating and sustainable solutions for customers."

ContiTech chose Michael Hofmann, from the conveying solutions business area, and Hill is a big fan of the selection.

When the conveyor belt business previously put together a marketing/communications team—one of the first areas in ContiTech to do so—Hill said Hofmann used his technical expertise to help tell the story of how the business should market its solutions and technology.

"Having that technology background, having that marketing background, and then making him the chief technology officer of ContiTech, it was just a natural fit," Hill said at the NAHAD meeting.

"I think that he's also a very progressive thinker, out of the box. He came from conveyor belts, but he has a much broader history within ContiTech. He's not your typical R&D type. He's very outgoing, very outspoken, energetic. He's really big on the ideation process and how do we develop new ideas for new solutions."

Gerstenberger added that the CTO will be able to synergize technical advances globally across all of ContiTech where it makes sense, but the structure also allows for applications engineers who are close to the market to develop solutions on a faster timeline.

"So it's a central and decentralized approach at the same time," he said. "That's why we shifted from 'beyond rubber' to materials-driven solutions, because we have so much expertise in ContiTech. We believe that we can offer more than just one product or one solution to the market if we combine under one ContiTech all our strengths—as we call them 'super powers'—to provide solutions."

In the world of Continental and its $42 billion in 2022 sales, the ContiTech business may seem small. But in the non-tire sector, its more than $7 billion in revenues last year and 40,000 employees loom large, trailing only Freudenberg Group in the most recent ranking of Rubber News' World Top 50 Non-Tire Rubber Products Manufacturers.

Because of this size, Gerstenberger said it will take some time over the coming months to make sure the ContiTech restructuring is done right—all while continuing to service customers properly in the meantime.

The first step was to formulate the vision and strategy, which was completed after more than a year of work. Next is to make sure the structure and processes are set up properly to meet those objectives.

For ContiTech, that brings a higher level of customer focus, or being "in the region for the region."

"For us, in the Americas, that means that we, in the future, have more independence and more centricity to our North and South American customers. We will serve those two channels through distribution and engineered solutions," Gerstenberger said. "And we will have faster decision-making processes, knowing that we are, basically, relatively self-sufficient."

Industrial Solutions Americas Group will facilitate that with two customer-focused support segments. One will focus on distribution, headed by Guy Enta as the vice president of segment's Distribution Solutions Business (DSB). The other is the Customer Engineered Solutions (CES), which will cater to customers like John Deere, where ContiTech has direct business to OEMs. Gerstenberger will manage this channel until a leader is named for the post.

ContiTech set up the industrial business on a regional basis, Hill said, largely to align as its customers are organized. "Our distributors and our industrial OEs are much more regionally based (as opposed to automotive), so we are organizing regionally to be closer to them," he said.

Enta, previously VP in charge of the Americas region for the former Industrial Fluid Solutions business, said the Distribution Solutions Business will have four sub-regions with the business: the U.S.; Canada; Mexico and Central America; and South America.

The DSB will put much effort on distributor-run organizations such as NAHAD for the hose sectors, NIBA for conveyor belt producers, and the Power Transmission Distributors Association for PT belts used in that area.

New to the structure will be a head of E-commerce, who will work to grow with the firm's distributor partners in that channel. The applications/engineering team also will engage with distributor and CES teams to find new growth areas.

"We want to work with our partners and drive innovation and really cool solutions from the end user back," Enta said. "We're not just coming up with new ideas and saying, 'Try this,' but actually going out and working with our mutual customers to address their pain points. We'll then go back to the organization and develop great solutions, and then come back through our channel partners to deliver those solutions."

Gerstenberger said there also will be some learning curves for those in new positions, including himself, as he now will oversee operations not only for the industrial and hydraulic hose business, but also for conveyor belts, PT belts and air springs.

In setting up the first and second levels of the new organization, he said the goal was to make sure the team in the Americas had enough "expertise and curiosity to be on the one side different and new, but on the other side also make sure that we basically continue to do what we have done well over the past."

Gerstenberger has been busy meeting those in operations around the region, so he can learn about and evaluate the entire manufacturing and service footprint in the Americas region.

"If we look at the region, we still basically want to be in the market for the market. And for us that means we are represented operationally out of Canada, the U.S., Mexico, Brazil and Chile," he said, noting there are projects in the planning stage, but nothing that could be shared presently. "Our task is to grow, and that includes organic growth like new plants or brownfields, as well as mergers and acquisitions."

Hill added that ContiTech's industrial unit benefits from having a top position in such a wide range of products across as hose, conveyor and PT belting, and air springs.

"Building those capabilities and the breadth of our product offering is a unique attribute to us," he said. "There really isn't any other competitor that (is) in all four of those like we are. So we think that is something we can bundle and use in our distribution network."

Out of that product lineup, the Americas segment has identified "growth fields" in the off-highway, energy management and construction industries.

Off-highway can encompass hydraulics or air springs, with applications on construction or ag equipment, or in mining.

Energy management will bring opportunities not only in fossil fuels, but also in renewable energies like hydrogen, wind or solar.

And construction, Hill said, is a broad field that can be anything from pouring sand, gravel or cement, all the way to home improvement and goods they might sell inside a big box retailer.

Enta said by identifying these fields of growth, ContiTech can put together a package with its distributor partners that highlights all the solutions they can offer in each area, rather than in the past where each product team would put forth its own pitch.

And going forward, the distribution sales staff will concentrate solely on business with distributors.

"They won't have OEM and direct accounts," he said. "They'll really focus on making this channel successful for both our partners and us. The one task we have is how do we add value and grow together in this channel with our distributor partners."