German company Continental, which makes automotive parts and tyres, has decided to undertake what it says is one of the largest organisational realignments in the company’s history, to spin off its powertrain unit, by breaking up the company into three divisions: Continental Rubber, Continental Automotive and Powertrain, under a new holding company structure starting in 2020.
While it will retain control of its rubber division, which is the nucleus and origin of the 147-year-old Hanover-based company, it will also look at a sale of a minority stake in the rubber group, possibly through a stock market flotation, as an option for the future to raise funds for other expansions.
The company plans to carve out the powertrain division, which includes parts needed for electronic vehicles as well as for traditional combustion engine powered cars, early next year into a separate entity. It will keep majority control in any share sale that could happen as soon as mid-2019. The carve-out of Powertrain will lead to estimated operational costs of EUR350 million, Continental said, adding that a large part of that will be incurred in 2018 and 2019. According to Bloomberg, listing part of Continental’s powertrain division would also generate cash to invest in growth areas such as electric vehicles and self-driving features. The unit generated EUR7.7 billion in sales last year and employed more than 40,000 people.
Continental said it may also seek to invest in solid state battery production, although a decision on whether to pursue this line of business will not be taken until after 2020.
Furthermore, Continental’s current Chassis & Safety and Interior divisions will be reorganised by the beginning of 2020. They will become two business areas newly named “Autonomous Driving Technologies” and “Vehicle Networking Technologies”, with their business results being reported in the new Continental Automotive group sector. Both areas will be supported by a newly created central Automotive Research and Development function. The Autonomous Driving Technologies business area will thus comprise automated and autonomous driving as well as all familiar chassis functions including for example electronic and hydraulic braking, stability and chassis control, and electronic air suspension. The Vehicle Networking Technologies business area will deal with a vehicle’s internal connectivity as well as its external connectivity with other vehicles and traffic infrastructures. The details are expected to be worked out and announced by mid-2019.
The two current divisions Tyres (Tyre Technologies in the future) and ContiTech will retain their independent organisational structure and will be reported in the future in the Continental Rubber group sector.
With this reorganisation, Continental says it is “above all pursuing the goal of gearing its business with pioneering technologies toward continuing profitable growth, while exploiting this and future growth opportunities faster and more efficiently”. In its new automotive business (without the Powertrain division), the technology company expects to increase sales from about EUR19 billion in 2017 to approximately EUR30 billion in 2023.
The world’s second-largest car parts maker says it is looking on how to best move forward, and is set to follow competitors like Delphi Automotive and Autoliv AB that have split up, to keep pace with the automotive industry’s transformation to an electric, self-driving future.
Companies are responding to new pressures and investment demands to develop new technologies, particularly for electric cars. According to Bloomberg, Daimler AG, the world’s biggest producer of luxury cars and commercial vehicles, is also pursuing a plan that would hand greater autonomy to its individual units, to help speed up decision-making and keep new competitors like Uber Technologies Inc. at bay.
Brokering the company’s split is another achievement for Chairman Wolfgang Reitzle, who is also arranging a merger for industrial-gas maker Linde AG, where he also leads the supervisory board. He was brought in to Continental in 2009 after an aggressive stake purchase by the billionaire Schaeffler family triggered departures of top management.
The family holding in Continental is controlled by Maria Elisabeth Schaeffler and her son Georg Schaeffler, who own industrial-bearings manufacturer Schaeffler AG.