Continental to Eliminate Jobs, Cut Costs in Shift to E-Cars

(Bloomberg) -- Continental AG plans to eliminate jobs and may sell some combustion-engine component businesses, deepening an overhaul at the German automotive supplier caught up in the disruptive industry shift to battery-powered vehicles.

The reductions could affect positions globally, Chief Financial Officer Wolfgang Schaefer said in an interview. He declined to discuss numbers or potential restructuring costs because negotiations with unions are underway. The world's second-biggest auto-parts maker employs about 244,000 people in 60 countries.

Continental also said on Wednesday it decided to stop growing its hydraulic components business, which makes injectors and pumps for gasoline and diesel engines. It's also reviewing operations that make parts for exhaust-gas treatment and fuel-supply systems.

The latest move underscores the urgency for manufacturers to adapt their operations to a rapidly changing industry. Stricter emission regulations in China and Europe are forcing vehicle manufacturers to sell more electric cars, at a time of weakening global demand after a decade of almost constant growth.

The shares rose 1.5% to 120.38 euros at 11:59 a.m. in Frankfurt. Continental last month cut its full-year financial outlook, joining a host of of automotive companies in lowering annual targets due to softening demand in key regions including China and Europe.

Continental also said Wednesday it scrapped potential plans to start making solid-state battery cells. German rival Robert Bosch GmbH likewise abandoned such plans as too risky.

Overhauling Operations

While Continental has sufficient scale and a strong presence in the growing electronics components business, many smaller peers specialized in traditional combustion-engine technology are getting squeezed.

Signals for suppliers from major auto manufacturers point to a persistent market weakness. Volkswagen AG reduced production plans for this year by about 450,000 cars to adapt to cooling demand and avoid the build up of inventory. BMW AG also said it would align production plans with demand.

IPO Plans

Continental continues to work toward a potential initial public offering of its powertrain unit Vitesco Technologies in 2020, Chief Financial Officer Wolfgang Schaefer said in a telephone interview. A final decision will depend on market conditions. The company had postponed the project after initially planning to complete preparations in the second half of this year.

What Bloomberg Intelligence Says

“The proposal to spin off the unit still lacks allure, in our opinion, as it excludes driverless operations, limiting the appeal.”

--Michael Dean, European Automotive senior automotive analyst
Click here to view the research.

The company will consider bond sales in coming months if opportunities arise, but Schaefer said the manufacturer wasn't under any pressure to access capital markets.

To contact the reporter on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net

To contact the editors responsible for this story: Elisabeth Behrmann at ebehrmann1@bloomberg.net, Tara Patel

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