Conti Backs Out of Qingdao Agreement

Continental AG has retreated from its memorandum of understanding with China’s Qingdao Doublestar, Bloomberg has reported. A Continental spokesperson told Tyres & Accessories that the decision was made recently when the company realised it would not be able to gain a majority share in the Chinese joint venture. Because the decision was taken at this early stage, no money has been lost, the representative said.

The reason the two companies’ joint venture plans came to a halt before they started is largely down to Chinese legislation, the spokesman explained. Chinese law makes it almost impossible for foreign investors to hold the majority share in a joint venture company. On top of this Chinese state institutions also hold shares in the company. Continental says it will continue in talks with other Chinese manufacturers and a new memorandum of understanding is expected. “We want to act quickly, but not hastily,” the Continental spokesperson added.

Continental is not the only company to encounter difficulties in China. In January, Michelin temporarily closed down production at its Michelin Warrior Tyre joint venture with Shanghai Tyre and Rubber. According to news reports, this was because of “continuing hard times” and a general slowdown in the Chinese automobile sector.