Continental restructure could mean auto business spinoff

HANOVER, Germany — Continental A.G. is seriously considering spinning off its Automotive business into a separate entity, a move the German company said will allow for more agility and flexibility.

"A spin-off of Automotive has the potential to create competitive opportunities, enhance agility and increase transparency," Wolfgang Reitzle, chairman of the Continental Supervisory Board, said in a statement. "As a strong, independent entity, Automotive would be able to harness its full potential for creating value. In addition, investors would be able to invest in a company focused specifically on automotive electronics."

The Continental Executive Board is expected to make its decision on the spin-off in the fourth quarter of this year. If the company were to spin off the automotive business, the ContiTech and tires divisions would remain under the Continental umbrella.

The spin-off, if approved, would be completed sometime in 2025. As with the spin-off of Vitesco Technologies in September 2021, Continental shareholders would receive shares in an independently listed Automotive entity in proportion to their Continental holding.

Should the board agree to the move, the company would essentially be halved. In 2023, the automotive division saw sales of about $22.31 billion, while the ContiTech, tire and plastics businesses combined sales of around $22.5 billion.

Both groups employ around 100,000 employees.

"Our strategy aims to increase our value creation," Continental CEO Nikolai Setzer said in a statement. "This involves systematically analyzing how we can best position our group sectors for success. Markets and customers, especially in the automotive industry, have evolved extremely dynamically in recent months. Looking ahead, sharply fluctuating regional developments in the markets as well as the software-driven technology transformation will require even greater flexibility and entrepreneurial freedom. Against this backdrop, we are aiming to divide Continental into two independent companies."

Automotive News notes that Continental's Automotive business has been struggling with low profitability in its automotive business for some time, so the company is overhauling the unit. This involves cutting more than 7,000 jobs worldwide and closing some sites.

The supplier, Automotive News said, is under pressure to cut costs while having to invest in new technologies as the industry shifts to software-defined electric vehicles. Continental, it said, is also being squeezed by higher energy and labor costs as well as tough price renegotiations with its clients.

Continental was the fourth-largest tire maker globally in 2023, according to Tire Business data, with sales of around $12.4 billion.