Will Continental Retreat from the North American Market?

Dr Alan Hippe has admitted that retreating from the North American tyre business is an option. This is the first time a top-level manager has made such an assertion. Dr Hippe, board member responsible for finance, controlling and law – and also Continental Tire North America (CTNA) president and CEO – told German daily Die Welt: “In principle, if there is no more prospect of profitably working in the US passenger car tyre business, in the long run we will withdraw the US market.” CTNA’s US passenger car tyre business has been in the red since 2000.

Production costs at the company’s passenger car tyre plant in Charlotte (North Carolina), where Conti also has its US headquarters, are too high for the automotive supplier. According to Hippe: “The factory is not competitive.” On the one hand the company has made “very good progress,” in the US passenger car tyre aftermarket, resulting in improved turnover – and this could have improved due to the launch of new products. However, the company cannot succeed in passing the rising cost of raw materials onto the original equipment customers.

Hippe once again confirmed that Continental would gladly buy parts of two US suppliers (Delphi or Dana) both of which remain under insolvency administration in accordance with “Chapter 11″. The chances are small however, since the units that Conti would be most interested in are probably not for sale.

The executive board member also registered his interest in American hose specialist Goodyear Engineered Products. “That would be interesting for us,” Hippe told Die Welt. But so far this business unit has not given any public signals that it is for sale. This is surprising since Goodyear boss Robert J. Keegan has said his company wanted to separate this department in order to concentrate on the core business tyres. Just last Thursday Keegan confirmed this intention during a telephone conference call: The process is still to begin in the second quarter, according to Keegan, and the timing would be even “optimal,” reported Dow Jones.

Goodyear Engineered Products obtained a first quarter operating profit of $29 (21) million dollars or 7.3 per cent. Turnover sank, in relation to the previous year, to $395 million.

Regarding China Hippe announced there would be a decision about building a tyre plant this year. Three locations are already under close scrutiny.