Continental rules out deeper job cuts over electric car shake-up

The new boss of Continental, one of the world’s largest car parts makers, has ruled out deeper job cuts even if the EU tightens carbon emissions targets and forces the industry to quicken its electric transformation.

Nikolai Setzer said on Wednesday the German group would not add to the 30,000 jobs already at risk in a wide-ranging restructuring plan, introduced last year to adjust to the upheaval in the auto industry.

The chief executive added that the Hanover-based company would emerge as a “winner” in the shift to battery-powered cars and would target a profit margin of up to 11 per cent, despite shifting from its traditional tyres and engine businesses to building software and high-tech components.

This month, Continental board member Ariane Reinhart told the Financial Times that the transition to electric vehicles was happening too rapidly and at the expense of people’s livelihoods.

But Mr Setzer, a Continental lifer who took over as chief executive this month after his predecessor stepped down citing health reasons, said tighter CO2 targets would “offer more opportunities than risk” for Continental.

While stricter rules from Brussels would “definitely shift our portfolio”, and lead to greater investments in components for electric cars, it would have “no effect on autonomous mobility, on autonomous driving, on the need for tyres,” he told the Financial Times.

“I don’t see any direct effect, and if so, then rather a positive effect on [Continental’s] automotive technologies business,” he added.

Mr Setzer’s predecessor had warned that Continental, whose parts are found in four out of five cars worldwide, did not expect the global car market to reach its 2017 peak again until at least 2025.

But Mr Setzer said the company, which plans to spin-off its engine-making unit, Vitesco, would focus instead on increasing the amount of profit it could eke out per part.

“The question is not the number of vehicles,” he said “The question is how much value can the automotive industry bring to the consumer?”

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If Continental could “focus on growth and execute it in the right way, manage our value in the right way, we are a winner out of the transformation”, he added.

Suppliers such as Continental, Bosch and ZF have been among the hardest hit by the shift to emissions-free cars, as their largest clients produce more electronic components and software in-house in an attempt to bring down costs.

“We expect carmakers to further standardise components and systems,” analysts at rating agency Fitch wrote this month.

“Furthermore, [electric] models require less maintenance and undercut suppliers’ spare part businesses, as a full [electric vehicle] has fewer moving parts,” they added, hitting suppliers’ profit margins just as they have to invest more to keep up with the rapid technological change.

But Mr Setzer insisted that manufacturers would require Continental’s help to tackle the increased “complexity” of autonomous and electrified cars.

“Nobody can do this fully on their own,” he said, adding that even large carmakers such as VW and Daimler, who wanted to develop their own bespoke software, would rely on suppliers for more standardised “middleware”.

As a result, the Dax-listed company, which already employs 20,000 software engineers, “would focus on what is under the waterline, non-differentiating parts”, he added.

Additional reporting by Alexander Vladkov in Frankfurt

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