HANOVER, Germany-Continental A.G. has abandoned previous plans to build a new headquarters, and tapped U.S. financial markets for $160 million in new funds through the sale of receivables. In Hanover, Conti revealed it has canceled a headquarters project on tap since mid-1990 and instead will redirect the estimated $58 million investment into research, development and related activities.
In the U.S., the firm has undertaken an ``asset securitization program'' with Citibank N.A. and J.P. Morgan Delaware whereby both have taken over receivables from Conti worth $58 million, and from General Tire worth $125 million.
The moves are not related directly to the $100 million capital infusion Conti recently announced for General Tire, said Gregor Schoess, Conti director of finances.
The firm hopes to take advantage of this type of financial instrument again in the future, Mr. Schoess said; the net effect is a change in the balance sheet to reflect lower liabilities and assets, while providing a short-term boost in cash flow.
Conti first announced plans for a new headquarters in June 1990, when the state of Lower Saxony agreed to buy the firm's 14-story headquarters in central Hanover for $61 million. Conti then laid claim to a 322,800-sq.-ft. site on the outskirts of Hanover.
Meanwhile, Conti renovated its former Hanover/Vahrenwald tire plant and relocated 650 staff there. It put a like number in a leased facility nearby.
Another 260 research and development and tire marketing staff were put into new quarters at the Hanover/Stoecken plant.
These projects cost Conti about $42 million, financed primarily by the sale of the old headquarters.
Now, a combination of the European recession, rising land acquisition costs and tight earnings projections has caused the company to rethink the headquarters project, according to board of directors spokesman Hans Kauth.