Continental’s Split Shows How Germany’s Business Model Is Shifting

(Bloomberg) – Continental AG aims to be the latest German productions to dismantle itself, and emphasizes the pressure of being more agile to the air structural problems at home and responding to the assembly competition abroad.

The Hanover -based company, which follows its roots to produce rubber toothmaks for horses at the end of the 19th century, plans to divide it into three: core rubber work, rubber components and automobile pieces. The movements that Continental will sell to investors on Tuesday will loosen the diversification of decades and reflect Germany’s changing business model.

Stefan Bratzel, President of the Automotive Management Center in Bergisch Gladbach, Germany, said, “Continent is a very good example of how German companies find it difficult to navigate in transformation,” he said. “This disintegration shows that the model of a big, one -hand shop no longer works.”

Once after choosing the expanding structures, German businesses become smaller and more agile in response to rapidly changing technology and geopolitical volatility. Industrial giant Siemens AG and steel manufacturer Thyssenkrupp AG has already moved to leave years ago.

Automobile manufacturers have changed and industry reacted to the transition to Chinese competitors and electric vehicles. Daimler shows cars and truck businesses and the Volkswagen AG from the Porsche Sports-Car brand and the commercial vehicle unit, and the strategic shift of Continental shows how the supply chain is now adapting.

Nikolai Setzer, Chairman of the Executive Officer, was not always very eager to disintegrate. Two years ago, he told investors that the global automotive and the industrial group would remain dependent on the three elephants structure, because it provided better insulation than unpredictable regression.

This changed when Continental announced his plans to close the automobile parts unit and reduced earnings forecasts due to the demand for weak automobiles in Europe. At this point, according to the 54 -year -old manager, the non -large rubber unit Contitech became a more industrial player and moved away from the automotive business. A second carving would leave Continental with a portfolio for tires, the biggest wife crying.

Setzer said in an interview, “The common markets of our three sectors were decreasing or decreasing over time – the sectors had different purposes, customers and products, so synergies were limited,” he said. “As soon as you have different assets within a company, you should see if the synergies are more out of the difficulties of keeping them together.”

After two years of contraction, winds increased in Germany and minimum growth was envisaged this year. For the largest economy in Europe, the changing corporate strategy is not risk -free. Smaller companies can be swallowed more easily by competitors or can be transported to escape from suffocating bureaucracy and high labor costs.

Although the Chancellor illuminates hundreds of billions of euros mood in government expenditures financed by the Planned Debt to the administration of the Chancellor, he rapidly pressure on reforms that can revive expectations for domestic companies.

Although Aumovio’s carving of the parts of the parts is a finished agreement, the union leaders are worried that separating the rubber unit Contitech from the rubber business will add costs and at risk. They threaten to control half of the seats on the Audit Board to try to prevent the movement.

What does Bloomberg Intelligence says:

Restructuring will make Continental a pure rubber job, which can replace it.

– Gillian Davis, Industry Analyst (Click here for full report)

Matthias Tote, the Chief of the Business Council of the Unit and a member of the Board of Auditors, said in an internal note sent to workers on Monday, “There are important synergies between tires and Contitech. Jörg Schönfelder, another employee representative on the board of directors, said that the managers proceeded without adequately evaluating potential risks ”.

The company has announced that it plans to close five Contitech sites completely and partially, which will cut hundreds of jobs. Despite the resistance, President Wolfgang can break the dilemma, but tensions can create legal difficulties and delay the process.

Management motivation is clear. In the last five years, the stock is effective in the last five years, the Continental is about one -third of the opponent Michelin, which recently moved in the opposite direction and expands its indifferent business.

The disintegration of Continental will take place in two stages with the list of Aumovio planned in September. Globally employing approximately 40,000 people and making a series of rubber and plastic products is targeted for next year.

Bernstein analyst Harry Martin said, “Automatic Spinoff, probably five years too late, the right thing to do,” he said. “It does not reveal too much growth potential.”

Of course, some German holdings remain intact. Robert Bosch GmbH, a large automotive supplier and industrial technology company, is protected from the basic ownership of separation. Merck KGAA and Henkel, a active in drugs and special chemicals, are largely untouched.

Once upon a time, he promised stability and efficient capital allocation between the sectors, but the investors fell in favor of expanding portfolios as they pushed for focus and higher return. The distribution of Continental reflects a wider retreat than the model because it is increasingly outweighed by the benefits of complexity and diversification of weak synergies.

For Setzer, Germany’s economic problems are just part of the division of division. The company said that it has seen “tempered growth ında in its global markets, especially in Europe and North America. In China, the sales of the automotive unit remain under the market and this will continue according to Aumovio’s senior executive.

Setzer, “In such an environment you need to adapt quickly, visibility is very low, customers can not always give you reliable predictions, small, agile teams you need,” he said. “The better you can adapt now, the better profit in the future.”

-Help from William Wilkes and Isolde Macdongh.

There are more stories like this Bloomberg.com