Cooperation Bandag-Continental
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Hannover-based Continental AG is a leading automotive supplier and – according to the company – is “the choice of leading car manufacturers, offering award-winning tyres that deliver responsive braking in all weather conditions.”
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Continental has published its financial results for the first nine months, and initial reactions by financial analysts are very positive. Sales rose 3 per cent over the same period last year to 8.48 billion Euros. Net income increased by 173 million Euros to 217 million Euros and debt was reduced by 516 million Euros to 2.4 billion Euros. Passenger tyre sales fell 5.2 per cent to 2.76 bn Euros, due largely to the sale of the National Tyre Service chain and sluggish sales in the USA. Commercial vehicle tyre sales were flat.
For their 2003 racing programme, Michelin will become Bentley’s exclusive supplier in competition. This partnership involves the development and supply of tyres for preliminary testing at Sebring and the Le Mans 24 hour race. On the production car side, Michelin will become the supply partner for the new Bentley Continental GT.
Continental has said that it plans to improve profitability by utilising cheap eastern European labour. CEO Manfred Wennemer told reporters in Moscow that the company would not invest in fully automated plants in the west, but would shift production to factories in countries with low labour costs. “The 50 per cent target is not magical, neither would 60 or 70 percent represent a limit.” Labour in the Czech republic is 25 per cent of that in Hanover, and Romanian labour is only 10 per cent of that in Germany.
Continental says it is looking at the possibility of introducing a range of tyres, incorporating colourful designs such as denim and leopard print. The concept is aimed at encouraging people to view their tyres as fashion accessories. The new product, which is a long way from production, is called “Personalityres”.We know the item reads like an April Fool’s Day joke, but it is true, although we don’t know when (if ever) we will see such tyres, as the technical difficulties have been ignored. It has been featured on TV, radio and national press, so if Conti was trying to get publicity, it succeeded!
Michelin’s Edouard Michelin and Continental’s CEO Manfred Wennemer have both spoken to analysts at the Paris Motor Show regarding the prospects for their companies. Michelin says that raw material increases (15 per cent in the first months of the year) will have an adverse effect on 2nd half business. Michelin’s strategy is “to get more value out of the tyre”, which Edouard Michelin says should not be regarded as a commodity. The company will also add production in low labour-cost countries.Continental’s European restructuring is bearing fruit with good economies of scale from concentrating truck tyre production at Puchov. However, the US market “remains difficult”. The current brand mix in the US aftermarket is 80 per cent General Tire, 20 per cent Conti. The aim is to make this nearer 50/50. Wennemer said that the forthcoming “tread act” in the US has great potential for the company in the field of tyre deflation sensors.
Indian company Metro Tyres has signed an agreement with Continental to manufacture two-wheeler tyres for the German company. Said Metro Tyres Managing Director Rummy Chhabra: “We will be shortly producing motorcycle, scooter and moped tyres for Continental under the ‘Continental’ brand name. The move will give us access to manufacturers like Yamaha, Honda and Kawasaki among others.”
Viborg local dealers who ordered new tyres from Continental today got a surprise. They were told to call their management headquarters for advice. Conti had stopped delivery. It seemsthat Viborg has not only been slow to pay the bills but also underpaid them without reason; initiating a quarrel which has seen Continental respond by putting a stop on deliveries. Last year there may have been similar problems between Viborg and another important tyre manufacturer. Jescow von Puttkammer was not available for comment to T&A, but passed the message, “we don’t speak in public about dealer and client relationships”.
In a joint venture with Moscow Tyre Plant, Continental has signed an agreement to build a new production facility in Moscow. Continental is the majority shareholder and will produce tyres for passenger cars and light trucks. The predicted investment will be in the region of 30 million Euros over three years. The plant is expected to produce 1.5 million tyres per year when it opens in 2003 and will generate 3.4 million tyres for Continental and Barum, largely destined for the local market. The new plant in Moscow will help Continental avoid the 70 per cent import tax on new tyres.
Analysts at Deutsche Bank believe that this year Continental could achieve an EBITA of 600 million Euros. The management had forecast 530 million Euro. Although Temic was acquired, indebtedness has been reduced by 300 million Euros. Business in the USA is still bad, with losses of 100 million Euros (and more) expected. The objective of the chairman of Continental USA, Dr. Ulrich Wellen – to break even – seems not likely to be realised, at least in the near future.
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