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German Regional Leader Expresses Openness to Conti Solution

In an interview with German news magazine Focus, prime minister of the Lower Saxony region Christian Wulff stated the German federal government and the regions involved may support a solution to the Continental/Schaeffler situation and offer government backed bond guarantees. Wulff, in charge of the federal region where Continental is headquartered, indicated that a solution could involve Continental acquiring parts of Schaeffler and the Schaeffler group ending up owning substantially less than its current share. It would “not retain its 90 per cent share in Conti, but considerably less,” he said.

8th June 2009/by Tyrepress Editors

Continental Stock Falls 2.4%

Continental AG share fell 2.4 per cent today after a Reuters report suggested Conti’s banks oppose a the reverse takeover plan of current owner Schaeffler discussed in the press. According to the news, the biggest problem for the banks is the “significant increase in debt and therefore higher risks” for lending banks. Meanwhile Financial Times Deutschland reported that Continental’s banks are planning to set up a steering committee to represent their interests.

28th May 2009/by Tyrepress Editors

Are We Witnessing a Conti/Schaeffler U-turn?

Inside 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.

27th May 2009/by Tyrepress Editors

Kwik-Fit’s German Branch for Sale

Kwik-Fits German business Pit-Stop Autoservice is for sale, according to a report on Tyrepress.com’s German sister website Reifenpresse.de. The Pit-Stop chain (which comprises of about 410 outlets in Germany) reportedly has an average turnover of around 300,000 euros per branch and not in the best shape. Certain parties are said to have stated their interest in a purchase, however, so far the bids have only been described as ‘disillusioning.’

26th May 2009/by Tyrepress Editors

Schaeffler Signs Employment Security Agreement With Union

The Schaeffler Group and Germany’s IG Metall trade union have reached an agreement regarding employment security. The agreement, signed by IG Metall first chairman Berthold Huber and Schaeffler chief executive Jürgen Geißinger, represents the first practical result of the future agreement between the two parties outlined on February 23, 2009.

According to the terms of the agreement, the threat of redundancies occurring before June 30, 2010 has been eliminated on the proviso that a jointly agreed upon package of staff cost reduction measures are reached. Due to the impact of the economic crisis and its resultant diminished orders and sales, the Schaeffler Group says it must lower staff costs by approximately 250 million euros.

26th May 2009/by Tyrepress Editors

Conti to Buy Parts of Schaeffler?

It appears the tables have turned for Continental and Schaeffler. According to Reuters, sources with “knowledge of the matter” report Schaeffler is considering a plan to sell a large piece of its business to Conti in order to address its sizable debt. The ball bearing manufacturer is struggling with debts of close to 11 billion euros and has announced plans to reduce annual labour costs by 250 million euros – a sum equivalent to the laying off of 4,500 employees.

20th May 2009/by Tyrepress Editors

Schaeffler Group to Make 250 million euros of Savings

Schaeffler Group has announced that is to implement further cost adjustments, while trying to prevent layoffs. In the first quarter of 2009, the company’s Automotive division recorded a downturn of 33 per cent compared to the previous year, which has now stabilized at a level 25 per cent below last year’s. The Schaeffler Group’s Industrial division, which accounts for 40 percent of total sales, sustained losses of 12 per cent in the first quarter. At 7.5 billion euros, current sales expectations for 2009 are significantly below 2008 levels. In a statement the company said it does not expect the markets to return to 2008 levels until 2012 or 2013.

13th May 2009/by Tyrepress Editors

Auto Industry Slump “Left Scars” on Conti’s Performance

Upon announcing its first quarter 2009 results, Continental AG stated that the slump in worldwide vehicle production has “left scars” on the company’s performance, with consolidated sales dropping “sharply.” The company reports its Automotive Group sales decreased in tandem with market developments, while the decline in Rubber Group sales was much less severe as to aftermarket sector sales account for a larger percentage of business. Despite the recent undertaking of the largest cost reduction programme in the company’s history, the highly negative sales trend helped push EBIT performance into the red.

29th April 2009/by Tyrepress Editors

Conti Announces New Supervisory Board Members

A number of new Supervisory Board members were named at the April 23 Continental AG Annual General Meeting. These are Dr. Gunter Dunkel, chairman of the board of management of Norddeutsche Landesbank Girozentrale; Dr. Michael Frenzel, chairman of the executive board of TUI AG; Dr. Jürgen M. Geißinger, president and CEO of INA-Holding Schaeffler KG; Prof. Dr.-Ing. E. h. Hans-Olaf Henkel, honorary professor at the University of Mannheim; Rolf Koerfer, lawyer; Dr. Klaus Mangold, chairman of the supervisory board of Rothschild GmbH; Klaus Rosenfeld, CFO of the Schaeffler Group, Georg F. W. Schaeffler, partner in the Schaeffler Group; Maria-Elisabeth Schaeffler, partner in the Schaeffler Group; Dr. Bernd W. Voss, member of various supervisory boards. Substitute members are: Dr. h. c. Manfred Bodin, member of various supervisory boards, and Prof. Dr. Hans Heinrich Peters, chairman of the supervisory board of BÖAG Finanzdienst Aktiengesellschaft.

24th April 2009/by Tyrepress Editors

Conti Cuts 6,000 Jobs in 2009 Q1

German news sources have reported that Continental cut 6,000 jobs from its worldwide operations during this year’s first quarter. Karl-Thomas Neumann, the manufacturer’s chief executive, told shareholders at the annual meeting in Hanover that an additional 25,000 workers will be working shorter hours by the end of April. Both actions are at least partially related to the “major challenge” facing the company as a result of the mingling of loan agreements, deflated auto markets and ongoing global financial turmoil, if it is to meet debt and earnings conditions agreed when the company bought Siemens’ VDO automotive-electronics division in 2007. Conti is facing up to a 3.5 billion-euro payment in August 2010 as a result of that purchase, which has necessitated the forthcoming change of strategy, to be announced within 100 days according to Neumann.

23rd April 2009/by Tyrepress Editors

Schaeffler Has Eye on Another Conti Board Seat

It appears Schaeffler’s representation on the Continental AG supervisory board will be strengthened with the addition of a fifth representative. Reuters reported on April 20 that Hans-Jörg Bullinger, president of the Fraunhofer-Gesellschaft, will not, as originally planned, stand as a supervisory board candidate at the April 23 Annual General Meeting. Bullinger’s comment to Reuters was that “Schaeffler would like it if the company is well represented.”

22nd April 2009/by Tyrepress Editors

Schaeffler Negotiates 1 billion euros of Credit

On 7 April Schaeffler Group finalised a 1 billion euro loan agreement with its banks. “With the 1 billion euro credit line we have gained further flexibility for Schaeffler Group,” said Klaus Rosenfeld, group CFO at the automotive supplier, adding: “The conclusion of the loan agreement is an important sign of trust from our banks.” According to a statement issued by Schaeffler’s press office, all parties involved have agreed on strict confidentiality regarding further details of the loan agreement.

While the new financing is likely to help the company shore up its financial position, last year Schaeffler borrowed 16 billion euros to finance the takeover of Continental AG, but when the automotive markets spirally and the company’s share price nosedived Schaeffler was left with high debt service payments in the midst of an automotive industry crisis. This led the company to request support from the German state and federal government. In February co-owner Georg Schaeffler said the group needed up to 6 billion euros in fresh financing.

8th April 2009/by Tyrepress Editors

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.

6th April 2009/by Tyrepress Editors

“It’s Time for Us to Stay the Course:” Maria-Elisabeth Schaeffler

In an interview with the German newspaper, Spiegel, Maria-Elisabeth and Georg Schaeffler – the owners of 20 and 80 per cent respectively of the automotive supplier – have answered a variety of questions relating to the current status of the business, considering the financial difficulties it is facing due to the timing of its takeover of Continental and the ongoing financial crisis. They insist that accusations of irresponsibility on the Group’s part in the takeover ignore the conditions in summer 2008 and use hindsight, which is in Georg’s words “the key to the debate,” to criticise their actions after the fact. In addition, the owners have referred to the banks’ and the government’s “responsibility” in the crisis and the differentiation between “the assistance benefiting a company that is fundamentally healthy and one that was already ailing before the crisis.”

26th March 2009/by Tyrepress Editors

Reports: Schaeffler Has Restructuring Plan

In an interview with German news magazine Der Spiegel, Schaeffler Group co-owner, Georg Schaeffler, indicated that the company has already submitted a restructuring plan to creditor banks. Pressure has been mounting for Schaeffler to release it plans to both the government and its creditors after the automotive supplier borrowed 16 billion euros to finance last year’s takeover of Continental AG. It is now struggling to make the high debt service payments it committed to, as a result of the credit crunch’s effect on vehicle manufacturers, and so has reportedly been considering a wide variety of refinancing and restructuring, including a debt-for-equity swap that could see the family owned business barter a significant stake with the banks.

However, despite suggestions that the plan had been circulated to the appropriate parties, and hopes that the government “will respond quickly…to avoid being drawn into the election campaigns,” some banking sources told Financial Times Deutschland that the plans are as yet incomplete: “There are several short papers with fragmentary statements, but as a basis for decision making these papers are not suitable.”

24th March 2009/by Tyrepress Editors