Conti to decide on future of rubber unit in next 100 days

ERJ staff report (DS)

Hannover, Germany -- In a presentation outlining the problems facing Continental AG, and the rest of the automotive supply chain, Dr Karl-Thomas Neumann, chairman of the executive Board of Continental said the company will need to present a strategic plan within the next 100 days (by the end of July). This plan will address the future of Continental's rubber activities.

Before that plan can be formulated, however, the company needs answers to certain questions from outside agencies. Nevertheless, in the absence of such answers, the company is aiming to formulate a plan which gives it maximum flexibility in the short term.

Neumann said the company has committed to paying large sums as part of its agreement with the banks over the acquisition of Siemens VDO. The next tranch of Euro 3500 million is due in the Summer of 2010. The company has three options for doing this: First: paying off the existing credit lines by borrowing from other sources. Second, an increase of capital, or third, the divestment of corporate entities.

Neumann said the current financial markets make the first two options very challenging. In any case, before making a decision on which option to select, the company needs to review its own internal strategic direction. "As long as this basic course has not been charted, Continental's room for maneuver is very limited," said Neumann, suggesting that, in the worst case, the company is paralysed by its inability to formulate a plan for the future.

Neumann then outlined three key questions that need to be answered in this strategic review:

• Should Conti concentrate on its automotive supply busines. If so, what happens to the rubber activities?
• Given the financial crisis, how can the automotive business on its own finance future repayment commitments without the contributions from the rubber group?
• Over the long term, should Conti continue to balance its positioning between Automotive and Rubber, and if so, how does it make decisions about acquisitions and investments in a very restrictive financial environment.

Neumann noted that if Conti is to maintain its historic balance, then no part of the business is large enough to pay off the next tranche of cash demanded by the banks.

This is an external link and should open in a new window. If the window does not appear, please check your pop-up blocking software. ERJ is not responsible for the content of external sites.

Speech by Karl-Thomas Neumann (Translated into English by Continental) from Continental.