Conti halts tire production in Russia, warns of ‘long-lasting effects’ of crisis

Hanover, Germany – Continental AG has temporarily suspended production of tires at its manufacturing plant in Kaluga, western Russia, as the war against Ukraine continues.

In a statement provided to ERJ 8 March, the German manufacturer also confirmed that it had halted imports and exports of products to and from Russia company-wide.

Commenting on the impact of the war on Continental’s tire operations in Europe, the company said it is able to meet supply obligations “at the moment”.

“However, we expect the supply situation for raw materials required for tire production in Europe to gradually deteriorate in light of the sanctions imposed and the further worsening of logistics bottlenecks,” the statement added.

Continental said it had activated corresponding contingency plans that include safety stocks and alternative suppliers.

The tire maker stressed that at this moment, it was not possible to predict what further economic effects the current crisis will have for the company or its customers.

“We are monitoring the current situation very closely and are constantly reviewing all options available to us,” it added.

This, according to Conti, applies in particular to “supply chains for raw materials, the transport of supplies and goods, and the effects of the sanctions imposed as a result of the armed conflicts.”

According to ERJ’s Global Tire Report 2021, Continental manufactures 3 million units of passenger car and light truck tires at its Kaluga plant. The facility employs 1,000 people.

Separately, Conti published its 2021 financial statement on 9 March, where it warned of ‘lasting consequences’ for production, supply chains and demand, if the geopolitical situation, remains tense "or even worsens."

The group said depending on the severity of the disruption, 2022 sales and earnings could be impacted in all group sectors.

Not including these risks, Continental said it expected that the global production of passenger cars and light commercial vehicles will increase by 6-9% in 2022.

In 2021, this figure increased year-on-year by 3% to 77 million vehicles as a result of the semiconductor shortage.

The company also said that it anticipated higher procurement and logistics costs of around €2.3 billion.

The German group expects 2022 consolidated sales to come in at €38-€40 billion and adjusted EBIT margin to reach 5.5% to 6.5%.

Continental said, however, that it expects business to gradually improve following “a subdued start to the year.”

In 2021, the German group report a 37.7% year-on-year increase in adjusted EBIT to €1.9 billion, on 6% year-on-year higher sales of €33.8 billion.

At the time of reporting, Conti had not released a breakdown of segment performance for 2021.

In 2022, Continental expects its Tires business unit to report sales of between around €13.3 billion and €13.8 billion with an adjusted EBIT margin ranging between 13.5-14.5%.

For the ContiTech group sector, Continental projects sales of between around €6.0 billion and €6.3 billion with an adjusted EBIT margin ranging between 7.0-8.0%.