Updated: Continental stops production, business in Russia

HANOVER, Germany—Continental has suspended production operations in Russia as the country's attack on Ukraine continues.

European Rubber Journal reports that the tire maker not only halted operations in Kaluga—located in Western Russia—but it had also stopped imports and exports from Russia company-wide.

According to Rubber News data, Continental manufactures 3 million passenger car and light truck tires at its Kaluga plant. The facility employs 1,000 people.

“We have made this decision as a result of the war and the related current upheavals,” Nikolai Setzer, Continental CEO and chairman of the executive board, said during the company’s financial presentation March 9. “We will support our local staff who are affected by this. We are currently looking into how their basic needs can be met.”

Regarding its European tire operations, Continental said it is positioned to continued to meet the needs of its customers "at the moment," but noted that the availability of materials could become more problematic as supply chain problems compound.

"We expect the supply situation for raw materials required for tire production in Europe to gradually deteriorate in light of the sanctions imposed and the further worsening of logistics bottlenecks," Continental said.

To mitigate the situation, Continental activated corresponding contingency plans that include safety stocks and alternative suppliers.

The tire maker stressed that at this moment, it was not possible to predict what further economic effects the current crisis will have for the company or its customers.

"We are monitoring the current situation very closely and are constantly reviewing all options available to us," it added.

This, according to Continental, applies in particular to "supply chains for raw materials, the transport of supplies and goods, and the effects of the sanctions imposed as a result of the armed conflicts."

“Please note that, in the event the geopolitical situation, in particular in Eastern Europe, remains tense or even worsens, it can result in lasting consequences, especially for production, supply chains and demand,” Katja Duerrfeld, Continental’s chief fincial officer, said during the financial presentation. “Depending on the severity of the disruption, this may result in lower sales and earnings in all group sectors as well as for the Continental Group compared to the prior year.”

The automotive parts supplier, which ranks No. 4 on Automotive News’ list of North American suppliers, has committed to supporting Ukrainian citizens as Russia’s war continues.

“Although we do not have any locations in Ukraine, we do have Ukrainian employees, particularly in the neighboring countries,” Setzer said. “We are in closest contact with them and supporting them wherever possible.”

Continental also has made a donation to the United Nations Refugee Agency.

“The attack on Ukraine has deeply shocked us all,” Setzer said. “Our thoughts are with those affected and their loved ones. As a company, we believe that conflicts can only be resolved by diplomatic means. The combat operations must end as quickly as possible.”

Separately, Continental published its 2021 financial statement on March 9, where it warned of "lasting consequences" for production, supply chains and demand, if the geopolitical situation, remains tense "or even worsens."

Depending on the severity of the disruption, 2022 sales and earnings could be impacted in all group sectors.

Not including these risks, Continental said it expected that the global production of passenger cars and light commercial vehicles will increase by 6-9 percent in 2022.

In 2021, this figure increased year-on-year by 3 percent to 77 million vehicles as a result of the semiconductor shortage.

The company also said that it anticipated higher procurement and logistics costs of around $2.5 billion.

The German group expects 2022 consolidated sales to come in at $41 billion to $43.5 billion with an adjusted pre-tax operating (EBIT) margin of 5.5-6.5 percent.

Continental said it expects business to improve gradually following "a subdued start to the year."

In 2021, Conti reported a 37.7 percent increase in adjusted EBIT to $2.25 billion, on 6 percent higher sales of $40 billion. The firm did not release a breakdown of segment performance for 2021.

In 2022, Continental expects its Tires business unit to report sales of between around $14.5 billion and $15 billion with an adjusted EBIT margin of 13.5-14.5 percent.

Continental is the No. 4 tire maker worldwide with 2020 sales of about $9.9 billion, according to Rubber News Global Tire Ranking.