Far Reaching Agreement
The whole story began only six weeks earlier, with Conti’s confirmation that it had on July 11 participated in “one brief conversation” about a possible engagement by the Schaeffler Group. As would be expected, Continental answered strongly when any suggestion was made of breaking up its numerous businesses. A company spokesperson commented that “those who might want to launch a hostile takeover would need all the luck available because we will fight against it.” Schaeffler’s subsequent bids to gain control of Conti have been amply reported, so it suffice to say that the weeks leading up to August 21 contained a degree of controversy. What matters now is the direction Continental will take under the influence of this significant investor, and whether the company can retain its current shape and form. Early on Schaeffler promised, as T&A reported in August, that it will not break up Continental AG; instead it claims to view the share acquisition as a mutually beneficial arrangement, as this statement the company released attests: “The two companies fit each other well. Schaeffler’s strengths are in the fields of mechanical, mechatronic and precision components for engines (powertrain), transmissions and chassis. Continental’s strengths are in the fields of electronic and software systems for engines, chassis and interiors. The two companies are thus ideal complements to one another. In particular, the coordination of the development and innovation expertise of the two technology leaders offers greater market opportunities. Together, Schaeffler and Continental will be in an even better position to offer solutions for the technological challenges facing the automobile industry.” It is then little wonder that the bearings and linear systems manufacturer from Herzogenaurach, Germany announced on September 2 it would “support Continental’s management with the rapid integration of VDO, which is in both companies’ interests.” Schaeffler also stated that “no jobs will be lost in conjunction with the transaction.”
This of course excludes Manfred Wennemer, who handed back his entry card to the corporate car park on August 31. Following the takeover, Mr. Wennemer asked Conti’s Supervisory Board for a release from his responsibilities, and on September 1 Dr. Karl-Thomas Neumann stepped into the role of Executive Board chairman. Neumann, a member of the Executive Board since October 2004, holds a doctor’s degree in electrical engineering. His career has taken him to Volkswagen AG, starting in 1999, following a role at the Fraunhofer Institute for Integrated Circuits and Systems between 1989 and 1993 and at Motorola GmbH in Germany and the US between 1993 and 1999. Neumann is also chairman of the management board of Continental Teves AG & Co. oHG., and since December 2007, he has been responsible for the company’s Chassis & Safety and Powertrain divisions. Mr. Wennemer leaves Continental following more than ten years with the company. He was appointed to the Executive Board on May 1, 1998 and became its chairman on September 11, 2001. Between May 2005 and March 2008 he also held responsibility for the Passenger and Light Truck Tires division, and since December 2007 for the Interior division. Wennemer’s plans following his departure from Continental have not been announced. The former Executive Board chairman turns 61 in September, and the agreed upon terms of his exit may well restrict the nature of employment he can engage in until the time his former contract with Conti would have expired, which is not for another three years. The newly created position of deputy chairman of the Executive Board has been filled by Dr. Alan Hippe, who is also responsible for the Passenger and Light Truck Tires division and CFO of Continental AG.
In addition, as of October 1 he will take over headship of the ContiTech division from Gerhard Lerch, who is retiring. Dr. Hippe has been a member of the Continental AG Executive Board since June 2002 and is responsible for the areas of finance, controlling, and law. Since May 2005, he has also been the president of Continental Tire North America, Inc. In addition, he has headed the company’s Passenger and Light Truck Tires division since April 2008. As for those employees further down Conti’s seniority ladder, a measure of job security has been assured by way of an agreement signed between Schaeffler and two German trade unions. The joint statement, signed by Schaeffler, IG Metall and IG BCE representatives, includes the proviso that the Schaeffler shareholding “will not put any jobs at risk at Continental AG”. Further pledges are made to acknowledge existing regulations and collective agreements made between Continental and union bodies, and to continue operating Continental according to its current business models. The divestiture of divisions or closure of locations cannot, the agreement states, take place without the approval of Continental’s Executive Board. In terms of Conti boards, Reuters news service reported on August 21, quoting ‘sources familiar with the situation’, that Schaeffler had its eyes on four Supervisory Board seats, including the chairmanship.
As of early September no official word of such maneouvers has been disclosed, however these are still early days. With the takeover offer acceptance period now over, and the Schaeffler Group now controlling just under half of Continental AG, the bearing maker is already talking of partnership pitches to vehicle manufacturers; however no specific word has been given on what exact long-term future, if any, Conti’s tyre divisions can look forward to. “This result is a great success for us,” said Schaeffler Group president and CEO Dr. Jürgen M. Geißinger. “We have reached our target of gaining a strategic shareholding of more than 30 per cent in Continental AG. This means that talks can begin with Continental as soon as possible about cooperation projects to realise market opportunities for both companies by consolidating expertise in development and innovation. Together Schaeffler and Continental can now develop solutions for the technological challenges of the cars of the future.”