Update: Conti cutting 20k jobs amid major strategy shift

Hanover, Germany – Continental Corp. is set to cut up to 20,000 jobs, including tire-related positions, by 2029, as part of its Strategy 2030 which was unveiled 25 Sept.

The roadmap involves a so-called “transformation 2019–2029 structural programme”, which aims to increase efficiency and productivity through a turnaround in the organisation and portfolio, Conti said in a statement.

As part of this, the company will cease the production of truck tires at its manufacturing facility in Petaling Jaya, Malaysia by the end of the year, affecting 270 employees.

Operational since 1963, the Malaysian plant also manufactures passenger, agricultural, earthmover and industrial tires, according to ERJ Global Tire Report 2018.

Continental has confirmed that the production of  passenger tires and the commercial speciality tires are not affected by the decision.

The Hanover-based automotive, technology and tire company also confirmed that it did not plan to introduce further "short-term working" or cut jobs within the tire division.

"We are, however, monitoring and analysing the development of demand levels very closely in order to adapt our capacities very quickly if this becomes necessary," the company said in a written statement to ERJ 26 Sept.

Despite the cuts at the Malaysian plant, the new strategy pledges further investments in the tire division.

The technology company said it will be promoting organic growth in its tire business with the goal of becoming "one of the top three suppliers worldwide."

Between 2011 and 2018, Continental invested more than €1 billion in the expansion of its tire production capacity.

Transition to future mobility

The restructuring measure, according to Conti, aims to strengthen the company’s competitiveness over the long term by focusing on electric mobility and digital solutions.

With an estimated cost of €1.1bn over the 10 years, the programme is expected to reduce costs by €500 million annually from 2023, according to Continental.

The Hanover company expects the costs to mostly be incurred between 2019 and 2022, but has not ruled out additional projects if the programme fails to achieve “the desired impact”.

The scheme will cover various market developments, including the increasingly digitalised working environment, the emerging crisis in the automotive industry and the rapid change in powertrain technology due to more stringent emissions legislation.

As a key growth area, Continental will aim to reduce its dependence on original equipment manufacturers in the industrial section, including conveyor belts, hoses, spare tires and auto spare parts.

The company expects to increase its aftermarket sales to the agriculture, railway engineering, mining and construction segments from the current 30% to 40% of consolidated sales.

Restructuring in Europe, US

The turnaround measures will see the Instrumentation & Driver HMI business unit gradually withdrawing from mass production in Babenhausen, Germany, by the end of 2025.

In addition, in order to reduce development costs to a competitive level, the business unit plans to transfer certain R&D activities from Babenhausen to other locations by the end of 2021.

This will impact a total of 2,200 jobs, according to initial planning.

Furthermore, in Roding, Germany, where around 540 people are currently employed, the production and development of high-pressure hydraulic pumps for gasoline and diesel engines is to be discontinued in 2024.

The move will affect approximately 320 production jobs, while the remaining 220 jobs will be transferred to similar functional areas.

The company's Limbach-Oberfrohna, Germany, location, with 1,230 employees, will discontinue the production of injectors for diesel engines in 2028.

Here, job cuts will impact 860 people while 370 jobs will be transferred to “similar functional areas.”

Similarly, the production of injectors for gasoline engines in Pisa, Italy, will be discontinued between 2023 and 2028, affecting 500 jobs.

Some 440 remaining jobs at the site will be transferred to similar functional areas.

In addition, the company expects to begin discussions over the closure of its gasoline engine injectors production unit in Newport News, Virginia by 2024. The plant currently employs 740 people.

Conti’s hydraulic brake systems production unit in Henderson, North Carolina, will also be closed affecting up to 650 jobs.

No specific timeline has been offered for the closure of the plant, which according to Conti has failed to acquire new customer projects in recent years.

Emerging from crisis

“Thanks to our organisational realignment, our solid balance sheet structure and our Strategy 2030, we are well prepared for the challenges ahead,” said Continental CEO Dr. Elmar Degenhart commenting on the decision.

With the programme, said Degenhart, Conti is responding proactively to the crisis in the automotive industry, adding that “like 10 years ago, we will emerge stronger.”

The strategic shift, according to the Conti boss, is to prepare the company for the mobility of the future, which requires new and sometimes disruptive technologies.

“With our strategy and our structural programme, we are laying the next decisive groundwork and bringing clarity for everyone involved: employees, customers, investors, business partners and other stakeholders,” he concluded.