Continental to expand restructuring programme to save 1 billion euros by 2023
30,000 jobs expected to be affected by cost savings, which address both long-term trends and repercussions from the Coronavirus pandemic
Continental is expanding the restructuring programme it initiated in 2019. The company is adding further measures to cut costs and increase efficiency to its Transformation 2019-2029 programme. The tyre manufacturer wants to achieve gross annual savings of more than 1 billion euros by 2023. This is significantly more than previous targets – in fact more than doubling the initially quoted figure. In total it expects the changes to affect more than 30,000 jobs worldwide. Its workers in Conti’s domestic market in Germany will be the largest part, with 13,000 affected jobs. A further major proportion will be in countries with high labour costs. Conti says these jobs will be modified, relocated, or made redundant. Conti says the programme aims to ensure its viability and strengthen global competitiveness in the long term.
Conti said the reasons for the sharp increase in cost savings include persistently low global vehicle production and the deepening economic crisis resulting from the coronavirus pandemic. The company does not expect the vehicle production to return to the pre-crisis levels of 2017 before 2025, by which point it expects to have completed 90 per cent of its targeted adjustments.
“The entire automotive industry is currently faced with enormous challenges,” said Continental CEO Dr. Elmar Degenhart. “It has not experienced a larger, more severe crisis in the past 70 years. This crisis is hitting suppliers particularly hard. It will demand a lot from us in the short term and push us to our limits in the coming years. After roughly a decade of fast, profitable growth and workforce expansion in line with the growth model of the automotive industry at that time, we are now gearing our operations to a new kind of growth with future technologies. That is why we are in intensive discussions with employee representatives to find the most sustainably effective solutions and strike a balance with the interests of our workforce.”
Savings spread around all business units
Conti says that all central functions and business units are contributing to the targeted savings and optimisations at all locations in Germany and abroad. Subject to the approval by the Supervisory Board, Conti’s strategy would see production, research and development bundled at the most competitive locations worldwide. It could also see portfolio adjustments.
Conti plans to continue to automate processes with Industry 4.0, as well as to increase work flexibility and cutting labor costs. Persistently unprofitable operations are to be sold. The strategy will therefore likely lead to the relocation or closure of facilities and operations at locations where costs are persistently too high, where technologies are becoming obsolete, or where production capacities cannot be utilised profitably in the medium and long term, Conti adds.
Conti workforce changes in context
Continental currently employs more than 232,000 people worldwide, including about 59,000 in Germany. Between 2010 and today, following the previous financial crisis, the number of jobs at Continental grew by some 84,000 worldwide, about 13,000 of which were in Germany.
The company’s original announcement of these measures in September 2019 would have affected up to 20,000 jobs worldwide, including around 7,000 in Germany. Some of the transformation programme has already been completed, affecting 3,000 jobs worldwide since the end of September 2019. Conti adds that these figures do not take into account the number of jobs to be created due to the positive effects of the strategy in the coming years. It expects these to arise from targeted growth in the future fields of mobility. They include technologies and software for digitalisation, assisted and automated driving, and zero-emission mobility.
More room to manoeuvre
Degenhart added: “Our aim is to maintain our position among the global elite when it comes to the providers of top technologies and top software for mobility. To this end, we are focusing on maximising our competitiveness at all locations while concentrating fully on our growth areas. Our future organisational structure, our reorganised worldwide manufacturing network, and a cost structure in line with the lower level of vehicle production: taken together, this will give us sufficient room to manoeuvre and the vital resources we need to return to fast, profitable and sustainable growth with the relevant future technologies. We are now deciding upon the necessary steps,”
Dr. Ariane Reinhart, Continental’s executive board member for Human Relations, added: “The exploratory talks we have been holding for some time in Germany are now entering a decisive phase. The more we all save intelligently when it comes to costs in the long term, the more jobs we will safeguard together in the medium and long term.”
She also confirmed how Conti will proceed with the upcoming decisions and their implementation. “We are staying true to our culture. Our principle is to undertake these changes in a balanced and fair manner, in line with our values – such that the changes strengthen our long-term success and innovative prowess.”
Reinhart added that “offering employment protection in these times would not be fair to employees as we cannot guarantee it.”
In this context, Reinhart pointed out the willingness of the company to discuss innovative methods such as reduced working hours and simultaneous further training. “In our talks, we are looking for sustainable solutions that go beyond the short term. We are striving to draw up a plan together as a bridge to a successful future.”