Continental and Schaeffler aim to Leverage Joint Purchasing Power

Continental AG and the Schaeffler Group have initiated a joint global purchasing project, which was contractually agreed on 27 March 2009. According to the two companies the project’s goal is to optimize the cost of materials and achieve an annual triple-digit million benefit through access to the steel markets and component suppliers as well as investments and non-manufacturing materials. The combined purchasing volume of Continental and Schaeffler totalled approximately 20 billion euros in 2008, with the amount expected to benefit calculated at 6.6 billion euros. The companies are hoping to achieve total savings of between 350 and 400 million euros for the period between 2009 and 2011 alone.

According to a company statement announcing the cooperation, both companies follow the principle of acting in the market as independent entities but “creating synergies through cooperative actions.” Purchasing is an ideal area for this cooperation because this is where the strengths of Continental and the Schaeffler Group complement one another. While Schaeffler’s annual purchasing volume of as much as 1 million tons of steel brings it direct access to steel producers, a high level of competence in this segment and also very good purchasing conditions, Continental’s strength lies in the purchase of mechanical and electronic components. Both companies have a well established portfolio of suppliers. The joint access to the partner’s purchasing expertise makes it possible for both companies to benefit from the improved purchasing conditions.

“The purchasing cooperation will offer everyone involved – the Schaeffler Group, Continental and our suppliers – the opportunity to benefit. The mutual build up of our purchasing activities will enable us to achieve significantly improved cost structures. This is a first important step into a successful future,” Dr. Jürgen M. Geißinger, Schaeffler Group president and CEO pointed out. Dr. Karl-Thomas Neumann, chairman of the executive board of Continental AG, underscored the potential of the cooperation:

“Continental and the Schaeffler Group will now operate in the market with a single purchasing strategy, uniform quality standards and a common supplier base. This will enable us to purchase the most advanced technology with maximum quality from the best suppliers. This is an important element in maintaining the leading position of our companies in the market and transforming ourselves into a global champion of the automotive supplier industry.”

One of the goals of purchasing management is also to achieve cost advantages by exchanging technology expertise and establishing value added supply chains in the most important automobile manufacturing regions of Western and Eastern Europe, North and Central America, Asia and Brazil. At the same time, both companies are striving toward concentration in the supplier segment. Future plans are to cooperate with 2,800 suppliers of production materials rather than 5,600 as in the past. Based on the high production competence of the Schaeffler Group with its brands INA, FAG and LuK in the manufacture of precision engine, transmission and drivetrain components, both companies will pursue a new opportunities in make-or-buy decisions in the future.