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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

Conti Expresses Openness to MAG Clairoix Proposal

As of May 6 Continental AG reports that its talks with Dubai’s Moaffaq Al Gaddah (MAG) Group are ‘continuing’, with discussions centring on jointly defining the terms of a possible takeover proposal for Conti’s Clairoix plant. This meeting began the day after management from MAG visited the French factory, 24 hours later than originally planned – the visit was delayed for a day at the request of France’s Ministry for the Economy, Finances and Employment on safety grounds, the site having been closed temporarily following the destruction of fire prevention, alarm and surveillance systems.

7th May 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

“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

Klaus Rosenfeld New Schaeffler CFO

The Schaeffler Group has appointed Klaus Rosenfeld (42) to the company’s executive management board (effective 18 March 2009) where he will assume the post of chief financial officer (CFO). Prior to joining Schaeffler, Klaus Rosenfeld was a member of the management board of Dresdner Bank AG from 2002 and was responsible for the areas Finance/Controlling, Compliance und Corporate Investments.

According to Reuters Rosenfeld is had been expected to step down from Dresdner Bank following its takeover by Commerzbank earlier this year. Rosenfeld replaces Thomas Hetmann (46) who the company announced was stepping down on 18 February. Schaeffler Group thanked Mr. Hetmann for his “hard work and dedication to the company.”

18th March 2009/by Tyrepress Editors

Hanover Court Blocks Schaeffler’s Koerfer Appointment

A ruling by the German courts in Hanover has prevented Schaeffler from appointing its chosen chairman for Continental. The manufacturer wanted to install attorney Rolf Koerfer, a Schaeffler family adviser, as the head of the German manufacturer, a court spokesman said on 3 March. The decision was made following a complaint from a member of Germany’s corporate governance commission that Koerfler may have a conflict of interest.

The ball bearing manufacturer, which holds a direct 49.9 per cent voting stake in Continental, put forward Koerfer for the position at an extraordinary supervisory board meeting in January. In addition to Schaeffler’s holding, the group has transferred another 40 per cent block of its stake in Conti to the banks in order to remain below 50 per cent, as agreed to end a takeover conflict.

The court has given board members until 10 March to comment on the case.

3rd March 2009/by Tyrepress Editors

Merkel: Loan Guarantees are ‘Right Tool’ for Schaeffler

Various online news sources are quoting German Chancellor Angela Merkel as saying that liquidity guarantees would be the right tool to help companies asking for public aid, such as Schaeffler Group. Chancellor Merkel said she has not seen a restructuring plan from either Schaeffler or car maker Opel, which is also requesting government support, yet. “I regard [liquidity] guarantees as the tool we are eyeing,” Merkel told journalists, according to Dow Jones. “Germany has an interest in strengthening companies which have a strong foundation,” Reuters quoted Merkel as saying.

Meanwhile, Schaeffler continues to investigate the possibility of debt-for-equity swaps as a means of paying off some of the multi-billion euro loan it borrowed to buy Continental AG. According to Bloomberg, financial institutions such as government-controlled Royal Bank of Scotland Group Plc – which backed Schaeffler’s takeover of Conti – may “saddle taxpayers with distressed assets as they negotiate debt-for-equity swaps with failing corporate borrowers.”

26th February 2009/by Tyrepress Editors

Continental AG Reports 2008 Record Net Loss

Continental AG has reported a record group net loss for 2008, following what executive board chairman Dr Karl-Thomas Neumann called “an unusual year.” The net loss was the result of the company having to write down 1.23 billion euros of “goodwill impairment” due to poor performance in the automotive group’s powertrain division. This was compounded by the effects of high raw material costs and dramatic falls in OE demand during 2008. Consolidated sales came in at 24.239 billion euros, with a group margin of 7.6 per cent – a figure within the company’s “EBIT target corridor.” Nevertheless Continental was able to reduce net indebtedness by roughly 373 million euros, leaving 10.483 billion euros.

Rubber group figures for 2008 faired considerably better with sales of 9.35 billion euros and 10.5 per cent margin. Passenger and Light Truck Tire posted sales of 5.1 billion euros, adjusted pre-tax profits (EBIT) of 644.8 million euros equating to a margin of 13.1 per cent. ContiTech’s numbers totalled 3 billion euros, 327.8 million euros and 11 per cent for sales, adjusted EBIT and margin. Commercial Vehicle Tire (CVT), however, survived on a slim margin of 2.7 per cent (36.3 million euros) despite sales of over a billion. Dr Hans-Joachim Nikolin, executive board member responsible for commercial vehicle tyres, explained that the virtual collapse of OE demand and raw material prices were at the root of the division’s narrow margins. The 290 million euros of increased costs the group had to pay as a result of raw material price increases at the root of CVT’s woes as this division had to face 100 million euros of this figure alone. However, commercial vehicle tyre’s particularly dependence on OE sales is also exposed in the full-year 2008 results.

19th February 2009/by Tyrepress Editors

Pirelli Takeover Rumours Cause Conti Shares to Rise

Shares in Continental AG rose 11 per cent on February 6 in response to circulating rumours that Pirelli & C SpA may wish to acquire the company’s tyre business – a move that, should it take place, would give the erstwhile competitors a comprehensive product portfolio. Reuters quoted an unnamed trader as saying “There is a rumour that Pirelli may be interested in Conti’s tyre business.”

Italian magazine Il Mondo has reported that banks have approached the Italian company about buying the Conti business, however neither Pirelli nor Continental have confirmed or denied any such activity. The Il Mondo article claims that Pirelli executives have conducted, on separate occasions, meetings with JP Morgan, Deutsche Bank, Mediobanca and a number of advisers.

6th February 2009/by Tyrepress Editors

Schaeffler Employees to Start Short-Time Working

German news sources are reporting that Schaeffler Group is planning seems for most of its 25 German locations to work on short-time schedules for half a year. According to Tyres & Accessories’ German sister publication, Neue ReifenZeitung, the reports were confirmed by Schaeffler spokesman Detlef Sieverdingbeck on 2 February. The specific terms reportedly differ depending on location. The news mainly affects employees in the Automotive division, according to the Financial Times.

Meanwhile, at the end of last week Chancellor Angela Merkel reportedly turned down Schaeffler Group’s application for federal loan support. Schaeffler, the majority shareholder of Continental AG, is currently carrying around 22 billion euros of debt after taking over Conti. In an interview with Germany’s Bild newspaper, Merkel said: “We won’t pay the bill for risky company decisions.” For his part, Christian Wulff, prime minister of Lower Saxony, said the Schaeffler family and banks need to act before the government does anything. So while the chances of federal loan support are slim, the possibility of the regional government guaranteeing the 3 to 5 billion euros of new capital the company is said to be asking for, is not completely out of the question.

2nd February 2009/by Tyrepress Editors

Is Schaeffler Seeking Complete Control of Conti?

Speculation is mounting that Schaeffler Group executives are positioning themselves for a complete takeover of Continental AG. Following the ball-bearing maker’s successful bid for just under half the company, Schaeffler Group, is now responsible for 11 billion euros ($14.3 billion) of debt relating to the deal. However, the increasing negative global economic climate, especially with relation to the automotive supply business has led some observers to characterise Schaeffler as being backed into a corner. According to Bloomberg, “Schaeffler has one way out: gaining full control of Europe’s second-largest car-parts maker.”

Continental will now hold an emergency supervisory board meeting on 24 January (tomorrow), a gathering that has been arranged in the wake of Schaeffler’s reported demands for the resignation of Continental supervisory board chairman Hubertus von Gruenberg. According to the Financial Times this threat was delivered alongside an ultimatum – either Continental forces out von Gruenberg and gives Schaeffler representatives four seats on the board or the ball bearing member will push for the replacement of all 20 investor representatives on the 20-member board.

23rd January 2009/by Tyrepress Editors

Reports: Schaeffler Wants Conti Chairman Out or New Board

The ongoing struggle between Continental AG and its major shareholder, Schaeffler Group, took a new twist yesterday when the Financial Times (FT) reported that Schaeffler wanted to force our Conti’s supervisory board chairman, Hubertus von Grünberg. According to FT, Schaeffler executives have fallen out with von Grünberg over his “systematic sabotage” of their plans.

FT reported that von Grünberg was told he should resign and make way for Schaeffler to be given four board seats, or the ball bearing maker would force an extraordinary shareholders’ meeting to replace all 10 members. Neither side has commented publicly about the reports.

21st January 2009/by Tyrepress Editors

Continental to Increase Share Capital by 1 Billion Euros

Continental AG executives are reportedly planning to increase the company’s share capital by around 1 billion euros. Alan Hippe, Conti CFO and head of the group’s tyre and non-tyre products division told Reuters that the move was designed to secure the company’s financial position: “In view of the difficulty to predict how things will develop over the course of this year, it’s completely logical to think about strengthening your equity capital…”

Hartmut Meine, a member of Continental’s supervisory board told the news agency that the automotive supplier is already in preliminary talks with potential subscribers, which could include “industrial companies, family-held groups or financial investors.” Reuters reported that Continental shares fell up to a fifth following news of the capital increase plan. At the time of going to press, Continental’s share price was around 20.90 euros. The fact that the current share price is so low may mean that Continental will use the maximum third of its existing equity to raise the funds, Reuters reported.

15th January 2009/by Tyrepress Editors

Schaeffler Concludes Takeover of Continental AG

The Schaeffler Group has completed its planned takeover of Continental AG, paying 75 euros per share to the depositary banks of those who tendered their shares to Schaeffler. As a result of all the recent share trading, Schaeffler Group holds 49.90 per cent of the voting stock of Continental AG and is therefore the company’s largest shareholder. At the peak of the complicated transaction Schaeffler Group held up to 90 per cent of Conti stock, although Schaeffler has now transferred the additional shares tendered to financial institutions. The European Commission gave clearance for Schaeffler to go ahead with its plans to buy into Continental AG on 19 December 2008.

“The conclusion of the takeover clears the way for integrating the companies quickly and in a pragmatic manner. Against the backdrop of the financial crisis and the market changes in the automotive industry, both companies are facing great challenges and have no time to lose. Constructive cooperation and concentration on factual issues and business matters is all important now. This is also what our staff and customers expect from us”, explained Dr. Juergen M. Geissinger, Schaeffler Group president and CEO.

In the company’s completion statement Dr Geissinger again failed to define Continental AG’s highly profitable tyre and rubber businesses as “strengths.” While he did remark that the combined companies will bring together “Schaeffler’s strengths in mechanical, mechatronic and precision components for engines, transmissions and chassis and Continental’s strengths in electronics and software systems for engines, chassis and vehicle interiors” the fact that he did not mention tyres or rubber products means there are still question marks over the future of these parts of the business.

8th January 2009/by Tyrepress Editors