Accuride Announces Second Temporary Waiver Agreement with Lenders
On August 14 Accuride Corporation announced its entry into a Second Temporary Waiver Agreement with its lenders, effectively extending its original July 1 agreement until September 7.
Tyre industry jobs, appointments and personnel-related information.
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S&P Downgrades Conti Following Neumann’s Departure
Career TracksDow Jones reports that Standard & Poor's has reduced Continental AG’s credit rating two notches in light of concerns it has over the influence major shareholder Schaeffler has on the company's strategy and credit quality. The downgrading occurred a day after Karl-Thomas Neumann stepped down from Conti’s Executive Board following a power struggle with the Schaeffler, and according to Standard & Poor’s, Neumann’s resignation "heightens our concerns of a negative influence of Schaeffler on Continental."
Continental Reshuffles Executive Board
Career TracksFollowing a meeting of the Supervisory Board of Continental, the company’s Executive Board has been reshuffled. Effective immediately, the Supervisory Board appointed Dr. Elmar Degenhart, formerly president of the Schaeffler Group’s Automotive Division, as chairman of the Executive Board.
Continental Reports 32% Sales Drop; Achieves “Intermediate Goal”
Career TracksContinental reported mixed news in its half-year financial results. Sales are down 31.6 per cent to 9.063 billion euros from 13.254 billion in the same period in 2008, but the company’s press release was keen to play up its Adjusted earnings before interest and tax (EBIT) figure of 248.7 million euros, representing an effective return to profitability, albeit with a figure considerably down from 2008’s first half Adjusted EBIT figure of 1.184 billion euros – of course, in the context of the worldwide financial crisis, this drop is less than surprising, and the positives to be gleaned from this years figure are numerous. (“Adjusted” is defined by Continental as the EBIT figure, “before amortization of intangible assets from PPA, changes in the scope of consolidation, and special effects, including severance payments from the worldwide cost-cutting programme in 2009.”)
Yokohama Rubber Sales and Earnings Down
Career TracksYokohama Rubber Co., Ltd., first quarter sales are down 22.7 per cent compared with the same period in the previous financial year. Yokohama's sales totalled 95.2 billion yen in the three months to 30 June 2009. The company's Tire Group sales slumped amid weak demand in Japan and in North America, western Europe, and “most other overseas markets,” according to the company. Although Yokohama posted tyre sales gains in the Russian and Chinese markets.
Schaeffler, Employee Representatives Agree Upon Cost Cuts
Career TracksSchaeffler reports a “successful reconciliation” of its interests has been achieved. The company’s Executive Management Board and plant management representatives, in talks with labour representatives, have agreed upon a package of measures to reduce personnel costs at Schaeffler’s German locations. The total adjustment volume, required due to slack demand, amounts to €250 euros per annum. Schaeffler now reports these savings can be achieved through natural fluctuation, voluntary redundancies and partial retirement along with the continued use of short time work and reduced working hours including adjustment of salaries and wages.
Pirelli Freezes China Investment
Career TracksThe changes that have occurred in global markets since last year have prompted Pirelli to mothball its planned US$100 million investment in China. In July 2008 the company announced it would invest this sum in China over a two-year period in order to double production capacity by 2011. Yet despite at 40 per cent year-on-year increase in sales within China during the first half of 2009, weak global demand has led to a rethink in Milan.
Kumho Inaugurates New Chairman
Career TracksIn a press release that avoids mentioning the recent Park family tussle, Kumho Asiana has announced the official inauguration of the group’s fifth chairman. Chan-Bup Park, who is no relation to San-koo and Chan-koo Park, began in his official capacity following an inauguration ceremony in Seoul on the morning of July 31.
Ruia Group Toys with European Acquisitions
Career TracksThe lights may still be out and the machinery standing idle at Dunlop India’s Sahaganj factory, but this isn’t stopping parent company the Ruia Group from eyeing up new acquisitions further afield. The Indian conglomerate is reportedly in “an advanced stage of talks” regarding the purchase of a European sealing systems company.
Schaeffler, Employees Reach Agreement on Cost Cutting Measures
Career TracksCompany management and employee representatives at Schaeffler KG’s facility in Schweinfurt, Germany have reached an understanding on a package of staff cost cutting measures. According to Schaeffler, this
measure has been taken due to weaker demand creating the necessity to make adjustments amounting to a total of 50 million euros. The savings will be generated through naturally occuring labour turnover, voluntary redundancy and part time work for older employees, plus a shortening of working hours and an extension of government subsidised short-time work. Apprentices at the site will be retained.
Schaeffler Accused of Blocking Continental Merger
Career TracksContinental AG chief executive, Dr Karl-Thomas Neumann, has reportedly written to the Schaeffler Group’s family owners alleging Schaeffler has tried to block the two companies’ merger with “incorrect assumptions about the company’s value and a reluctance to agree to key points.” According to the Financial Times, the letter alleged that Schaeffler’s banks had “communicated an unrealistic value of 12 billion euros (£10.325 billion; $17 billion) for the automotive supplier.
FT reports that Dr Neumann is now “heading for a showdown with Schaeffler at [the] supervisory board meeting next week, when he will push for a decision on several key points as a basis for a merger of the companies.” The financial newspaper described a proposal document Dr Neumann has presented to supervisory board members ahead of the meeting. In it he demands that the combined group strive toward an investment grade rating as quickly as possible: “From 2010, the group should have a maximum net debt of three times operating profit (earnings before interest, tax, depreciation and amortisation) and equity ratio of 25 per cent, the document says.”
Reports: Continental Considers 1 billion euro Capital Increase
Career TracksContinental AG is reportedly considering a 1 billion euro (£865 million; $1.4 billion) capital increase. According to an article published in the Financial Times, Conti CEO Dr Karl-Thomas Neumann is to make the proposal at a supervisory board meeting next week scheduled in advance of the company’s combination solution announcement, expected at the end of July. Neumann’s suggested capital raising is being described as “an alternative to a merger with Schaeffler,” FT said.
According to the newspaper recent plans for Continental to regain control of the merger through a reverse takeover of its 90 per cent shareholder have been “torpedoed” by Schaeffler Group. Schaeffler is reportedly negotiating with its backs to delay loan payments for two years. Under current terms it would have had begin repaying a first 500 million euro debt tranche in January 2010. Meanwhile, Continental is said to need a “quick merger or a capital increase” owing to the fact that it has 800 million euros in debt maturing in August and a further 3.5 billion euros maturing in 2010.
Analysts Hail ‘10x Better Than Expected’ Continental Results
Career TracksMorgan Stanley has raised its estimates for Continental AG shares following what the analysts described as “much stronger than expected second quarter results” According to Morgan Stanley the pre-announced second quarter results reveal an adjusted group EBIT figure “10 times higher than…expected.” The 5.9 per cent EBIT margin therefore compares very favourable with the analysts’ 0.6 per cent forecast.
Furthermore, this positive surprise appears to be split 50 per cent between the Auto and Rubber groups, where sales in the Chassis & Safety division and “strong winter tyre sell-in won the quarter.” However, the analysts also warn that while the company has obviously benefited from “early winter tyre sell-in…this cannot be extrapolated into the third quarter where we think profit will certainly be lower.”
Conti/Schaeffler Solution ‘May Take Months’
Career TracksFinding a permanent solution to the Continental AG/Schaeffler Group combination stalemate may take months, according to a Reuters report. The news agency quotes “sources familiar with the matter” as saying: “There is a chance that the companies and their banks will decide on key points by the end of this year…but it is rather unlikely that this will happen this month."
Are We Witnessing a Conti/Schaeffler U-turn?
Career TracksInside sources recently told reporters that Schaeffler Group is considering unravelling its hostile takeover of Continental AG – offering itself up for reverse takeover by Conti. The automotive parts takeover-predator now finds itself pushed into the role of prey as it struggles to manage debts of 11 billion euros. As a result of the potential corporate role reversal, Continental could find itself well and truly back in the driving seat – but will the company be able to execute this move and at the same time exercise some poetic justice?
There is no question that Schaeffler desperately needs to save money. In the first quarter of 2009, the company’s Automotive division recorded a downturn of 33 per cent compared to the previous year, which is now said to have “stabilized” at 25 per cent below last year, while its Industrial division is down around 40 per cent. However, lost sales don’t just mean reduced income. With output not expected to return to 2008 levels for another four years, the company has announced that it has to cut German labour costs by 250 million euros (the equivalent of 4500 jobs). Schaeffler has already cut 5,000 jobs in other countries, but redundancies at home make the automotive supplier very unpopular with the only people who are now realistically likely to help – the state and federal governments.
