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Another New Continental?

July saw all the leading tyre manufacturers report lower than expected earnings as a knock-on effect of high raw material prices and lower new vehicle demand. Everyone saw this coming. The 11.3 billion euro “sneaking” bid ball bearing maker Schaeffler Group pitched to buy Continental AG was distinctly less predictable. In the days that followed Continental’s management went on the defensive and cried foul to financial regulator Bafin, making what had up till then been the largest takeover bid in Europe into the largest hostile takeover the continent has seen this year.

5th August 2008/by Tyrepress Editors

Live by the Sword, Die by the Sword

In July those at Continental AG learnt what it feels like to be victims of their own success. Only a year after it multiplied group annual sales to over 25 billion euros through the acquisition of Siemens VDO, it appears Continental has made itself so attractive to bearing maker Schaeffler Group that the privately held company (which is about a third of Conti’s size) stalked its way to controlling roughly 36 per cent of the tyre and automotive supplier (see August's Tyres & Accessories for full coverage). On the one hand this is a compliment to the leadership that has brought Continental to where it is today. But on the other hand it comes as stark warning that stock markets can be fickle and public ownership can leave you at the mercy of shareholders.

Furthermore, it could be argued that leveraging itself and courting the stockmarkets in order to achieve its ambitious goals has been a double-edged sword – and in July Conti’s management felt the sting of its own blade. In the last few years Continental has been on something of corporate shopping trip. The biggest single purchase by some way was the acquisition of Siemens, announced in July 2007. This move was perhaps the biggest step towards Conti’s vision of a “new Continental,” which would produce cutting edge tyre to brake automotive technology.

5th August 2008/by Tyrepress Editors

Nexen “Providing Safety, Stable Driving All Around Europe”

Nexen Tyre, a company at the forefront of the Korean winter tyre market, believes that it has the overseas reputation not only for the company’s popular non-winter tyres, but also for its winter tyres.

The Korean company is attempting to penetrate Europe’s winter tyre market with its Euro-Win, Winguard, Winguard-SUV and Winguard 231 lines. The firm is also announcing for this season its brand new ultra-high performance winter tyre called the Winguard Sport, which, the company claims, “is ready to be the first runner of the premium UHP winter tyre both in the domestic and overseas tyre markets.”

4th August 2008/by Tyrepress Editors

Zeus Acquires Liebherr Site

Zeus recently acquired the current offices and workshop complex of Liebherr’s Dortmund plant and equipment services facility. According to company representatives, the move is designed to further Zeus’ global strategic growth programme for large earthmoving, OTR and general industrial tyre filling and puncture proofing solutions.

The new site is located adjacent to Zeus’s main manufacturing plant in Dortmund, Germany. Once the new complex is refurbished and fully equipped, it will add an extra 7,000 square metres of office space, laboratory, manufacturing, distribution and servicing facilities.

4th August 2008/by Tyrepress Editors

Professor: Schaeffler’s Creeping Takeover Illegal

Prof. Mathias Habersack, of Eberhard Karls University in Tuebingen, Germany, has spoke out against the way in which Schaeffler Group purchased share swaps in the build-up to its creeping takeover bid for Continental AG. In the course of defending itself from Schaeffler’s unsolicited 11.3 billion euro bid, Continental’s management cried foul and called in Bafin the German federal financial regulator. The officials cleared the takeover bid itself, but are reportedly still investigating the legality of the so-called creeping part of the takeover. The fact that Prof Habersack, himself a member of the board of trustees of the German Banking Law Association, has leant his support to Conti’s case, could suggest the legal angle will continue to be a key role in the company’s defence plan.

In a report commissioned by Continental AG Prof Habersack concluded that Schaeffler’s methods demonstrate “a clear infringement of the reporting and notification provisions of the German Securities Trading Act and Securities Acquisition and Takeover Act.”

1st August 2008/by Tyrepress Editors

Delticom H1 Revenues Continue Growth

Internet tyre retailer Delticom has released news that, in spite of the general market slowdown, Europe’s number one e-tailer continues its impressive record of growing revenues. The first six months of fiscal year 2008 have seen the company storm to 121.5 million euros, preliminary figures reveal, showing a proportional increase of 19.1 per cent on last year’s H1. The news displays an impressive Q2 for Delticom, having returned a 9.4 per cent rise in Q1.

Even the chilly early-spring’s assault on the summer tyre market hasn’t been able to dent Delticom’s progress because the May heat in Western Europe and sales in other regions continued to lift figures, thanks to the international nature of Delticom’s e-commerce. In fact, sales in other regions accounted for 65 per cent of H1 revenues, allowing the company headroom in markets where units could not be shifted as quickly.

31st July 2008/by Tyrepress Editors

CSEasy Wins Another Innovation Award

The CSEasy industrial tyre system developed by Continental has won the silver ‘IQ Innovation Prize Central Germany 2008’. Judges met three times to establish the winner of the Chemicals/Plastics sector.

Hans-Jürgen Sauerwald, inventor of the CSEasy, said: “We were confident and optimistic about our chances when we took part in this competition and we are also in the running for the next contest, the ‘Innovation Prize Thuringia’. It is great for the CSEasy to be so widely recognised”.

29th July 2008/by Tyrepress Editors

Conti’s Rearguard Action Takes Shape

As an increasing number of voices speak out in favour of the proposed Conti/Schaeffler merger, Continental AG executives have called in a number of high profile investment banks to advise it on how best to defend its position. The most recent addition to this team is Deutsche Bank, which joins Goldman Sachs and JPMorgan as advisors.

The strategy behind the defensive manoeuvre appears to have two key objectives: to wrest complete control out of the clutches of the rapidly advancing Schaeffler; and to raise the suitor’s bid. Germany’s Handelsblatt reported that Conti chief executive, Manfred Wennemer told board members 89.74 euros per share (roughly 30% higher than the Schaeffler’s current 70.12 euros per share bid) is a ‘fair market price,’ for the tyre and automotive supplier. Other sources quote board members as saying 90 to 100 euros a share would be better. Could this be the target level the defence team will be seeking to achieve? And if so, how can Conti defend its position?

29th July 2008/by Tyrepress Editors

Brands Hatch Sees Müller, Menu Record WTCC Victories

The British stage of the FIA World Touring Car Championship – staged this weekend in front of 35,000 at a humid Brands Hatch, Kent – saw Jörg Müller of BMW Team Germany and Chevrolet’s Alain Menu claiming 13th and 14th round victories.

The reigning world champion, the UK’s Andy Priaulx, racing for BMW Team UK, found things tougher going in both races; he was first held at arm’s length for all 14 laps by Yvan Muller in the SEAT – who remains the championship leader thanks to that determined display – and then suffered a puncture-enforced retirement in the second outing. In spite of this setback, Priaulx leapfrogs Rickard Rydell of Sweden into third place overall. Priaulx stated afterwards that he was relatively happy with the performance.

28th July 2008/by Tyrepress Editors

Conti Appoint New South African Marketing Manager

Gareth Passmore has taken over Continental’s marketing operation in South Africa, having been shifted from his post as head of sales and marketing for the Middle East, Near East and North Africa region.

Passmore, originally from Wales, stated that his personal motivation behind the move was to seek out a new challenge for his career, to “experience a new way of life in a different environment” and to be in South Africa during the 2010 football World Cup, an event that the company is sponsoring. Having experienced Conti’s involvement in the 2006 tournament in Germany, Passmore is looking forward to the challenge of helping to develop the sport’s popularity in a country where Rugby Union and Cricket share the nation’s sporting enthusiasm.

18th July 2008/by Tyrepress Editors

VW Supports Schaeffler Takeover

Volkswagen AG chief executive Martin Winterkorn says he backs Schaeffler Group’s takeover bid for Continental AG. Speaking to Germany news agency DPA, he described the proposed merger as “altogether positive” and warned that a protracted takeover battle would distract the two companies from their respective businesses. VW is a key customer for both Schaeffler and Continental.

Earlier German news sources had reported that VW was angry with Schaeffler Group for not tipping it off on its Continental takeover plans. Hannoversche Allgemeine Zeitung (HAZ) cited “company sources” as saying that Volkswagen expected to be let in on the plans. The HAZ story reported that Schaeffler chief executive, Juergen Geissinger, has since apologised to VW.

18th July 2008/by Tyrepress Editors

Continental Confirms Takeover ‘Conversation’ with Schaeffler

Continental AG has confirmed it has had “one brief conversation” about a possible engagement by Schaeffler-Group. Now the tyre and automotive supplier is said to be waiting for Schaeffler to substantiate its plans, before the management board of Continental evaluates these. The initial talks took place on Friday (11 July) afternoon. According to Continental AG, no further conversations took place.

The official statement appears to confirm a Financial Times (FT) report that Schaeffler had approached Continental about a takeover which could value Europe’s second biggest tyre company at more than 10 billion euros (5.8 billion). FT reports that Schaeffler generates 9 billion euros in revenues compared with Conti’s 26 billion euros.

Herzogenaurach, Germany-based Schaeffler is apparently aiming to take Continental private. One report, in the German daily Frankfurter Allgemeine Zeitung, said the company would consider spinning off the tyre business to help finance the transaction. However, a Continental spokesperson was swift to respond by saying the Hannover-based company would fight any hostile takeover: “In principle, our stand is that we have no reservations against investors who support our long-term strategy and our business policy and above all do not intend to break up Continental…Those who might want to launch a hostile takeover would need all the luck available because we will fight against it.”

14th July 2008/by Tyrepress Editors

Olympic Spirit

Attending the Essen show reminds you just how much trends change. This year there was less emphasis on size and performance, and much more on green issues (see page 52 onwards of the forthcoming July edition of Tyres & Accessories for comprehensive coverage). And yet as many budget tyres are being imported from the Fast East and China as ever. Seeing as I am on the subject of Essen, take the German market for example: here the budget segment has doubled over the last decade and now holds a 31 per cent share of the summer PCR market, according to 2hm & Associates. And while the share of budget summer tyres has doubled over the past 10 years, the share of premium products has fallen to 39 per cent from 50 per cent during a decade. The same analysts put this trend down to Germany’s ageing car parc – the average age is now 8.2 years compared with 6.2 years old a decade ago. Something similar is happening in the UK market with the familiar 40:20:40 (Premium:Mid-range:Budget) boundary lines being continually blurred.

So increased demand equals increased supply from the Far East does it? That’s how it used to work. And there are certainly more radials being exported from China than ever before. Just look at the record number of radial imports into markets like India. As a direct result of this, certain segments are finding it increasingly difficult to source what they are looking for. This is the other side of the supply and demand coin.

The situation is further complicated by China’s willingness to do almost anything to strengthen its place on the global trade map through a successful Beijing Olympics – a policy that has the knock-on effect of complicating various supply chains in the process. Basically it comes down to factory output and China’s national stance on green issues: “Quick tidy up we have got visitors.” The current situation is that the government of the People’s Republic has taken draconian steps to rein-in factory emissions during the countdown to Beijing 2008. And not everyone is aware of the effect this is having on parts of the tyre market.

You see, the name ‘Beijing Olympics’ is actually something of a misnomer. In fact, the 2008 event will actually spread across large parts of China – as far as major tyre producing cities such as Qingdao (which will host the sailing events). This means some factories have had to reduce production from three-shift patterns to just one. And of course this means product output has also followed suit. The result is that some factories only have enough capacity currently available to fulfil their OE commitments and so are prioritising this above export and aftermarket sales.

Here’s one (real life) example of what this means for purchasers from the world of ply wood. Customer X places an order, but due to government restrictions the company involved cannot supply the customer with the product on time. However, despite placing the order in good faith, customer X is also facing difficulties getting his money back because the supplier is either unwilling or will only do so at the current exchange rate. This puts customer X between a rock and hard place. He either has to wait till after the Olympics to get the plywood he has already paid for, or take a hit on the foreign exchange rates. Either way he and his customers ultimately lose out from China’s bid for Olympic glory.

10th July 2008/by Tyrepress Editors

Sibur Expands Into Europe

During May’s Essen show, plenty of rumours about Sibur Russian Tyres was bidding for Amtel-Vredestein were circulating. The difficult part was trying to pin someone down to go on the record and confirm what we all thought we knew at the time. Sibur Russian Tyres’ export department head, Oleg A Kataev, for example was tight-lipped when asked about the Amtel-Vredestein/Sibur negotiations. Instead, he was much more interested in explaining how Sibur’s European service has improved since the company opened a new office in Germany.

At the moment this means increasing supply into Germany and the neighbouring markets, particular with regard to Sibur Russian Tyre’s Tyrex truck brand. This direct, concerted sales effort remains a relatively new venture for the Russian company that has (since the deal with Amtel-Vredestein was completed – see elsewhere in this issue for further details) grown from a very strong to totally dominant position in the its domestic Russian market.

7th July 2008/by Tyrepress Editors

Could Laser Tread Reader Be the Next Speed Camera?

A new laser tread depth measuring system for moving traffic could become the next speed camera. And while speed cameras have become known as the driver’s nemesis, this idea has already been recognised for its marketing value. ProContour GmbH, the German company behind the H3-D device recently won a mark of distinction in the Reifen 2008 Innovation Awards in the Service/Marketing Ideas category. In fact, Tyres & Accessories has learnt that the German police force and one or two well-known tyre manufacturers have already expressed an interest in placing significant orders.

Working on the principle of laser triangulation, the ProContour H3-D is likely to make a significant contribution to road safety if enough end up being bought and operated. The moment T&A saw the device in action in Essen, all the surveys about a third of the UK car parc running on dangerous worn tyres sprang to mind. Obviously many consumers won’t change their tyres unless they are told to, so why not tell them?

7th July 2008/by Tyrepress Editors