AUBURN HILLS, Mich. (Sept. 19, 2000)—Continental A.G. plans to double its 1999 global sales of $9.7 billion in the next five years.
About 50 percent of the firm´s growth will be organic, and the other half will come through acquisition, according to Jeffrey C. Klei, vice president of sales and marketing for Continental Teves Inc.
Most of the organic growth is tied to the new brake technologies supplied by Continental Teves. The unit has doubled its sales since 1997 to $1 billion and will increase revenues to $1.7 billion by 2003 through booked business, according to William Kozyra, president of Continental Teves North America Inc.
"Clearly for North America, the growth comes from brakes more so than tires," Mr. Klei said. "There is growth in tires, but they are not doubling like the brake business."
Overall, Continental projects its North American business will grow 50 percent in the next couple of years.
"Our strategy is to be always ahead in technology and to make sure we have the good margins of this early business," Continental A.G. Chairman Stephan Kessel said Sept. 7 at the dedication of the manufacturer´s new North American original equipment headquarters in Auburn Hills.
Continental will add 50 engineers to its relocated staff of 550 at the $40 million site to accommodate new business.
Strategic acquisitions and divestitures also will be a part of Continental´s overall growth strategy. Acquisitions likely will be in the areas of electro-mechanical steering and damping, Mr. Kessel said.
ContiTech and Continental General Tire Inc. sales projections for the next five years are fairly flat compared with the brake unit, a company spokesman said.
"Becoming a systems provider really is the biggest advantage Continental has," said Bernd Frangenberg, president and CEO of Continental General Tire. "You (can) optimize a certain component like a tire or a disc brake only to a certain point."
Even so, Continental views its Conti Wheel System as competition for the Pax system Michelin and Goodyear are co-developing, Mr. Frangenberg said. "We believe the end customers will decide which system will be superior."
But other things like Conti´s Intelligent tire will enhance brake technologies like its Electronic Stability Program. "That´s where we see the tire playing a much more important part of the vehicle," he said.
In the next one-and-a-half to two years, Continental expects significant increases in installations of its ESP braking system, Mr. Klei said. He estimates that by the 2004 model year Continental Teves will supply approximately 15 North American platforms covering most of its auto-maker customers. Three-quarters of those developing programs are for sport-utility vehicle platforms, Mr. Klei said.
In the North American industry, electronic vehicle stability technology, as a broad product, has very low installation today at only 3 to 4 percent, according to Mr. Klei. By 2005, Conti predicts it will go up to about 20 percent.
Several key contracts fueling the company´s growth include:
* The complete braking systems and corner modules for the 2001 Ford Escape and Mazda Tribute sport-utility vehicles;
* Installation of its ESP brake technology on the 2001 models of the Lincoln LS, the Mercedes M-Class and the new Lexus Sequoi large SUV;
* A 2002 model year contract under which Continental will supply a large SUV program with products from its three core technologies: a complete brake system, tires and the first North American application of an air suspension system, complete with an assembled shock;
* A 2002 contract for the first North American application of its Deflation Detection System in a program not tied to a run-flat tire program;
* A 2003-2004 model year launch of its Intelligent Tire with an undisclosed global auto maker; and
* Within four to five years, Conti´s first application for its Intelligent Tire tied into the electronic stability technology.