Schaeffler has confirmed it is considering a plan that could see it merge with Continental as the junior partner, reversing last year’s massive debt-incurring bid to take over its far bigger rival.
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The ball-bearing specialist last July launched a hostile US$18bn bid for Continental but ended up collecting more shares than it could afford, saddling itself with crushing debt as car sales collapsed.
Abandoning the plan would be a humiliating climbdown for ball-bearings baroness Marie-Elisabeth Schaeffler and would mirror a turning of the tables in Porsche’s bid for Volkswagen , which also backfired in the financial crisis, Reuters reported.
“The Schaeffler group is working on options for future cooperation between both companies,” a spokesman said on Wednesday.
“The integration (of Schaeffler into Continental) is also an option. The result of this process is open.”
Schaeffler, with debts of almost EUR11bn (US$15bn), has said it may have to lay off 4,500 staff as it struggles through a recession which it believes may last another four years.
Continental, which has debt roughly as big, is also facing problems as the global slump bites.
Insiders believe, however, that a sale of parts or all of Schaeffler would accelerate cooperation with Continental and reap cost savings that could help it through the crisis, Reuters noted.
One source close to Schaeffler told the news agency the group may be left with little choice but to swallow this bitter pill.
“The logic of the original plan no longer works,” he said, referring to the group’s bid to buy the bigger group.
“To solve Schaeffler’s problems, something radical has to happen. We have to think about switching the roles (of Continental and Schaeffler).”
A dispute between the two firms’ management has made it hard to achieve synergies and cost savings from a merger.
