news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

After the powertrain business group, Continental may continue to split up its divisions and seek a listing for the new company.

Recently, Continental announced that it will conduct a further detailed evaluation of the split of the automotive sub-group and make a decision on the split in the fourth quarter of 2024. Subsequently, the split and listing plan of the automotive sub-group business will be voted on at Continental's annual shareholders' meeting on April 25, 2025. If approved, the split plan will be completed by the end of 2025. Like the split of Vitesco Technologies in September 2021, Continental shareholders will receive shares in an independently listed automotive company in proportion to their shares in Continental.

"In recent months, the market and customers have changed dramatically, especially in the automotive industry. Looking ahead, the sharp fluctuations in regional markets and software-driven technological transformation require companies to have greater flexibility and independent decision-making capabilities. Against this background, we plan to split Continental into two independent companies," said Continental CEO Stefan Stucher.

As part of the restructuring, the profitable tire and ContiTech sub-groups will remain under Continental. Currently, Continental is divided into the automotive sub-group focusing on automotive safety, electronics, etc., the tire sub-group focusing on the tire business, and the ContiTech sub-group focusing on industrial solutions and rubber business.

Among them, the automotive business department, which was highly anticipated and received high investments over a long period of time, has been in a loss-making state for several consecutive years. The problem of unbalanced profit contribution has plagued Continental for many years.

Financial report data shows that the adjusted EBIT margin of the Automotive Sub-Group was 1.9% in 2023, turning positive for the first time; during the same period, the adjusted EBIT margins of the Tire Sub-Group and the ContiTech Sub-Group were 13.5% and 6.7% respectively. The net profit provided by the two major business groups of the Tire Sub-Group and the ContiTech Sub-Group accounted for 93.3% of Continental's net profit in fiscal 2023.

Continental also said in its outlook that rising salary costs in 2024 are expected to be around 500 million euros, which will have a significant impact on profitability in that fiscal year, with about half of the costs coming from the automotive sub-group.

"For 2024, we may not see significant market growth. Continental can achieve its business goals by changing its organizational structure and improving efficiency in a planned way," said Situ Che. Since 2023, Continental has reduced R&D spending, integrated R&D centers, and laid off some R&D personnel to reduce costs and increase efficiency.

For Continental, it is a favorable strategic choice from both business development and financial perspectives to separate the automotive sub-group and keep the tire and other businesses that contribute more to profits within the Continental Group. In addition, if the IPO is successful, the automotive sub-group can also bring a considerable amount of funds to Continental.

In addition to Continental, many auto parts giants have split and reorganized their businesses in recent years. In 2017, Delphi Automotive split its powertrain business and established Aptiv; at the end of 2022, ZF announced that it had decided to split its passive safety division, but the progress of the split was slower than expected and it has not yet been completely independent; in 2022, BorgWarner announced that it would split its fuel system and aftermarket departments to form an independent listed company.

In addition, in 2022, Faurecia completed the acquisition of Hella, and after the merger and reorganization, formed a new parts company Faurecia. In 2019, ZF announced the acquisition of WABCO to strengthen its commercial vehicle intelligent driving and chassis control business.

A domestic foreign-funded parts supplier said in an interview with a reporter that with the deepening of electrification and intelligence, traditional giant automotive suppliers have faced huge transformation challenges, and mergers and reorganizations will become the norm. After mergers, reorganizations and eliminations, the automotive supply chain is likely to form a new pattern, and traditional giants may be brought down by "upstarts". This is also an opportunity for Chinese automotive supply chain companies to go global and become giants.