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September 2, 2020

Continental looks to achieve EUR1bn in savings from 2023 onwards

Continental is restructuring its business to achieve more than EUR1bn (US$1.2bn) in gross annual savings by 2023 onwards, in a move which could affect around 30,000 jobs worldwide, including 13,000 in Germany.

By Rhodri Morgan

Continental is restructuring its business to achieve more than EUR1bn (US$1.2bn) in gross annual savings by 2023 onwards, in a move which could affect around 30,000 jobs worldwide, including 13,000 in Germany.

The supplier is expanding the Transformation 2019–2029 structural programme it initiated in 2019 with additional measures to cut costs and increase efficiency.  The goal is to achieve gross annual savings now totalling more than EUR1bn from 2023 onwards.

The Hanover-based company is further increasing its previous savings target, which it has already announced on several occasions, by slightly more than EUR500m.

Continental says reasons include persistently low global vehicle production as well as the deepening economic crisis as a result of the coronavirus pandemic. The company does not expect vehicle production to return to the pre-crisis levels of 2017 before 2025.

“The entire automotive industry is currently faced with enormous challenges,” said Continental CEO, Elmar Degenhart. “It has not experienced a larger, more severe crisis in the past 70 years. This crisis is hitting suppliers particularly hard.

“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 workforce 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.

“That is why we are in intensive discussions with employee representatives to find the most sustainably effective solutions and strike a balance with the interests of our workforce.”

All central functions and business units are contributing to the targeted savings and optimisations at all locations in Germany and abroad. Subject to approval by the supervisory board, the strategy includes the bundling of production, research and development tasks at the most competitive locations worldwide as well as portfolio adjustments.

In addition, the company is pushing ahead with the automation of its processes, with Industry 4.0 for example, as well as providing greater work flexibility and cutting labour costs. Furthermore, business operations that are persistently unprofitable are to be sold.

Parts of this strategy will likely lead to the relocation or closure of facilities and operations at locations where costs are persistently too high, where technologies are becoming obsolete, or where production capacities cannot be utilised profitably in the medium and long term.

Overall, Continental expects the planned changes from the ongoing structural programme, which was initiated in September, 2019 and has now been expanded, will all in all likely affect more than 30,000 jobs directly worldwide in the future.

These will be modified, relocated, or made redundant. Around 13,000 of those jobs are located in Germany and a further major portion in countries which also have high labour costs. Some 90% of the targeted adjustments should have been completed by 2025.

Continental currently employs more than 232,000 people worldwide, including about 59,000 in Germany. Between 2010 and today, following the previous crisis, the number of jobs at Continental grew by some 84,000 worldwide, around 13,000 of which were in Germany.

The company had originally announced measures in September, 2019, which would have affected up to 20,000 jobs worldwide, including some 7,000 in Germany. A portion of the transformation programme has already been completed, directly affecting some 3,000 jobs worldwide since the end of September, 2019.

This does not take into account the number of jobs that will be created by contrary positive effects in the coming years, such as from the targeted growth in future fields of mobility. These include technologies and software for digitalisation, assisted and automated driving as well as zero-emission mobility.

“Our aim is to maintain our position among the global elite when it comes to the providers of top technologies and top software for mobility,” added Degenhart. “To this end, we are focusing on maximising our competitiveness at all locations while concentrating fully on our growth areas.

“Our future organisational structure, our reorganised worldwide manufacturing network and a cost structure in line with the lower level of vehicle production: taken together, this will give us sufficient room to manoeuvre and the vital resources we need to return to fast, profitable and sustainable growth with the relevant future technologies. We are now deciding upon the necessary steps.”

For her part, Continental executive board member for Human Relations, Ariane Reinhart added: “The exploratory talks we have been holding for some time in Germany are now entering a decisive phase. The more we all save intelligently when it comes to costs in the long term, the more jobs we will safeguard together in the medium and long term.

“We are staying true to our culture. 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.

“Offering employment protection in these times would not be fair to employees as we cannot guarantee it.” The company will announce the results of the talks once they have been completed.

Reinhart pointed out the willingness of the company to discuss methods such as reduced working hours and simultaneous further training.

“In our talks, we are looking for sustainable solutions that go beyond the short term,” she said. “We are striving to draw up a plan together as a bridge to a successful future.”

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