Continental AG, one of Europe’s top car-parts makers, is studying the sale of automotive assets including its autonomous mobility business as it comes under growing pressure to shore up its profitability, people familiar with the matter said.
(Bloomberg) — Continental AG, one of Europe’s top car-parts makers, is studying the sale of automotive assets including its autonomous mobility business as it comes under growing pressure to shore up its profitability, people familiar with the matter said.
Executives and supervisory board members have been evaluating dozens of units within Continental’s automotive division, the people said. The company could reveal plans to cut some of the most unprofitable ones at its Dec. 4 capital markets day, according to the people.
Shares in Continental rose as much as 2.7% in early trading on Wednesday. The stock was up 2.2% at 9:12 a.m. in Frankfurt, giving the company a market value of about €13.1 billion ($13.9 billion).
Options being considered include divesting or inviting in partners for its autonomous mobility business, which makes sensors for driver assistance functions and requires hundreds of millions of euros in further investments. Continental may also explore a sale of part or all of its user experience unit, which provides displays for a car’s instrument panel and entertainment system, according to the people.
Supervisory board chairman Wolfgang Reitzle has been working on a plan to revamp Continental on behalf of its biggest shareholders, the billionaire Schaeffler family, the people said. Reitzle, who’s been in office since 2009, is scheduled to step down at next year’s annual general meeting but could extend his tenure if needed to oversee the turnaround, according to the people.
Buyout firms including Apollo Global Management Inc. have been studying potential deals for some of Continental’s operations, according to the people. It’s also received interest in certain businesses from rival suppliers, the people said, asking not to be identified because the information is private.
Deliberations are ongoing, and there’s no certainty they will lead to any transactions. Representatives for Continental and Apollo declined to comment.
Continental is attempting to stem sliding profitability in its automotive business that has started to fall behind peers in the accelerating transition to electric vehicles, halving the company’s share price over the past five years.
The steps being taken at Continental are part of a broader attempt by Germany’s billionaire Schaeffler clan to reshape their industrial empire. Schaeffler AG, a maker of ball bearings backed by the family, offered earlier this month to buy out the rest of Vitesco Technologies Group AG to boost its presence in the EV supply chain.
Continental has been struggling with high expenses for energy, raw materials and logistics just as it needs to overhaul its automotive division to address customers’ shift to electric vehicles. The company is exiting one of its German plants due to declining demand from automotive clients and the site’s excessive costs. It also reported negative free cash flow in five of the past six quarters.
The German company is ready to sell business units if it helps make the company “future-proof,” Chief Executive Officer Nikolai Setzer told Welt am Sonntag last month. A “best ownership review” is underway for part of the ContiTech division, a smaller unit that also makes car parts including drive belts and engine pulleys, he added.
–With assistance from Aaron Kirchfeld, Manuel Baigorri, Vinicy Chan, Kamaron Leach and Michelle F. Davis.
(Updates shares in third paragraph, adds chart)
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