HANOVER, Germany — Continental A.G. is looking to reduce investment, decrease working capital and cut labor and material costs in a bid to address the financial impact of the Covid-19 pandemic.
The German group has launched an "over-arching readjustment" of its financial structure, as its cost structure is no longer in-line with lower global vehicle production, CEO Elmar Degenhart said in a virtual address to Conti's annual shareholders' meeting on July 14.
"We are building ourselves a bridge over the coming years [that will] lead us back to success," he said.
The restructuring is on top of Continental's 10-year transformation program to 2029, which includes a target to deliver $550 million of annual savings, from 2023 onwards.
The latest cuts, Mr. Degenhart said, are expected to lead to "several hundred million euros" of savings by 2022, and will likely lead to "redundancies, despite all efforts."
Conti is in contact with union representatives and is trying now trying to make progress "quickly and effectively."
The CEO also pointed out the stronger performance of Continental's tire and rubber businesses compared with its automotive segment, at the time of slowdown and COVID difficulties.
The ContiTech and tire business areas, Mr. Degenhart noted, serve markets with different cycles and "their success is supporting us now."
In tires, Conti profits from business with consumers, while ContiTech serves entirely different industries such as food, agriculture, rail transport and shipping.
According to the CEO, the quarter that ended June 30 was the weakest quarter in history of the automotive industry since 1945, but production figures are rising slowly.
"Since 2017, more than 25% fewer vehicles have rolled off the line. And there will not be a fast recovery, neither in Europe nor in North America," he stated.
Despite a slow increase in global car production, Mr. Degenhart said he does not expect to see the 2017 levels until after 2025 "at the earliest."
The CEO anticipates that the third quarter will be "very difficult" for the German group, although sales will be higher than second quarter.