Continental's recovery plan to affect thousands, yield savings of $1.17B

HANOVER, Germany — Continental A.G.'s decision to close a tire plant in Aachen, Germany, is just part of a larger global restructuring program that's expected to affect at least 30,000 jobs worldwide, including thousands in North America.

Conti's supervisory board, citing the "deepening economic crisis" caused by the coronavirus pandemic and its impact on auto parts sales, approved the restructuring plan Sept. 30, which includes at least four North American facilities, numerous German plants and other international plants.

The restructuring is expected to save about $1.17 billion per year by 2023, Conti said. The company previously had eyed a restructuring that would affect 20,000 jobs globally and save the company more than $580 million per year.

"The current crisis is the largest, most severe one we have seen in the past 70 years," Continental CEO Elmar Degenhart said.

"So the aim of our plan is now to prepare for our sustainable success and to ensure the future viability of our organization. As important as these resolutions are for our future, the consequences can be just as painful for the employees affected."

The company's plan to close the Aachen tire plant — expected to be finalized by year-end 2021, with the loss of 1,800 of the 2,000 jobs there — is based on its need to ensure the competitiveness and long-term success of its European tire production network in the face of shrinking market demand for certain tire types.

The company reiterated that it continues to invest in Germany with technology and research centers, such as the Taraxagum Lab Anklam research laboratory in Anklam, where it is analyzing using the Russian dandelion as a raw material source to replace the rubber tree.

North American impact

The restructuring is expecteed to affect thousands of jobs in North America, including jobs at four automotive components plants targeted for closure: a hydraulic engine component facility in Newport News, Va., (740 employees); a hydraulic brake component plant in Henderson County, N.C. (650 employees); a Vehicle Dynamics plant in Culpeper, Va. (200 employees); and an automotive electronics plant in Nogales, Mexico (2,000 employees).

Conti stressed that the term "affected employees" does not always mean layoffs, as employees could be shifted or re-trained for future technologies and locations.

"This unprecedented situation led to the difficult decisions to close our Nogales automotive facility located in the state of Sonora, Mexico," a Conti spokeswoman said Sept. 30, adding the Nogales plant is part of the company's Connected Car Networking business unit.

The Nogales and Culpeper locations are slated to be shut in 2024, the company said. The Henderson County and Newport News locations, the latter of which is part of Conti's former powertrain division, a carve-out soon to be known as Vetesco, also will close in 2024.

Pushed by the pummeling of the auto industry during the pandemic, the 232,000-employee company has said it will transition into assisted, automated, connected and zero-emission driving; integrated software-based system solutions, including services for mobility customers; and tire, industrial and end-customer businesses.

Mr. Degenhart added he does not expect vehicle production to return to pre-crisis levels before 2025.

"This crisis is hitting suppliers particularly hard," he said. "It will demand a lot from us in the short term and push us to our limits in the coming years. After roughly a decade of fast, profitable growth and work force expansion in line with the growth model of the automotive industry at that time, we are now gearing our operations to a new kind of growth with future technologies."

And the restructuring, Conti said, does not take into account the number of jobs that will be created in the coming years, such as the targeted growth projected in mobility. These include technologies and software for digitalization, assisted and automated driving as well as zero-emission mobility.

"The company continues to invest in its employees, offering training programs and academies to help prepare for the shift to EV," the spokesperson said.

Earlier this year, Continental announced plans to build a plant in New Braunfels, Texas, to produce advance driver assistance systems. The greenfield facility will retain approximately 450 jobs in Texas and create an additional 130.

In addition, the company is automating its processes, with the implementation of Industry 4.0, as well as providing greater work flexibility and cutting labor costs. Further, business operations that are unprofitable will be sold, Conti officials said Sept. 30.

"The current crisis is the largest, most severe one we have seen in the past 70 years," Mr. Degenhart said. "So the aim of our plan is now to prepare for our sustainable success and to ensure the future viability of our organization."

"We are staying true to our culture," Ariane Reinhart, Conti's executive board member for human relations, said. "Our principle is to undertake these changes in a balanced and fair manner, in line with our values — such that the changes strengthen our long-term success and innovative prowess."

Conti also is targeting three auto supply plants in Europe for closure:

• Roding, Germany, which produces hydraulic components for gasoline and diesel engines (high-pressure pumps).

• Limbach-Oberfrohna, Germany, which makes hydraulic injectors for gasoline engines.

• Pisa, Italy, which makes hydraulic injectors for gasoline engines.