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Two US Plants To Become Victims Of Continental's Transformation

Two US Plants To Become Victims Of Continental's Transformation

A new name for its Powertrain division and a new vision for its future are among the changes taking place at Continental AG. The global technology supplier perhaps best known for its tire division, is making rapid investments in its mobility business as part of its Transformation 2019-2029 structural program and its Strategy 2030 initiative.

"Thanks to our organizational realignment, our solid balance sheet structure and our Strategy 2030, we are well prepared for the challenges ahead," Continental CEO Dr. Elmar Degenhart said. "We see the technological upheaval in our industries first and foremost as a huge growth opportunity."

The Powertrain division has been renamed Vitesco Technologies.

Degenhart made the initial announcement on Sept. 25, 2019. At the time, Continental said some 20,000 jobs "are expected to be affected," but the company did not say how many of those would result in layoffs or reassignment to new jobs.

The Transformation 2019-2029 structural program seeks to realign Continental for future growth areas, including technology-focused business lines. The company will exit some lines of business, although it did not specify which ones. The realignment is expected to result in about €500 million ($547.78 million) in savings annually from 2023. The company expects the program to cost around €1.1 billion ($1.205 billion) over its 10-year term, with most of these costs incurring in 2019 and 2022.

Plant Closings

As part of the plan, Continental will shutter a number of manufacturing facilities, mostly in Europe, but also in Newport News, Virginia, and Henderson, North Carolina. The facility in Newport News produces hydraulic components for gasoline engines and employs 740. The facility in Henderson makes hydraulic brake systems and employs 650. Continental said the Henderson plant has not been able to onboard any new customer projects in recent years. Newport News will close by 2024; no timetable for Henderson was announced.

Remaining plant closures include Roding, Germany by 2024; Limbach-Oberfrohna, Germany, by 2028; Pisa, Italy, sometime between 2023 and 2028; and Petaling Jaya, Malaysia, by the end of this year.

Most of the plants produce diesel and gas engine pumps or injectors. Petaling Jaya manufactures truck tires.

Continental said some jobs would be eliminated at these plants while others will be transferred to work on future technologies such as electric mobility. Additional job cuts across the company will occur due to the "transition to a digital working world" that allows Continental to align with the requirements necessary to succeed in Industry 4.0.

Building a Mobile Future

"The mobility of the future will help protect the climate in three ways – environmentally, economically and socially. This is what we call healthy mobility and is what we are striving for," Degenhart said. "The technologies it requires are changing our industries – sometimes disruptively so. We are already very well-positioned in the key technological areas. With our strategy and our structural program, we are laying the next decisive groundwork and bringing clarity for everyone involved – employees, customers, investors, business partners and other stakeholders."

Continental said that about 15,000 of the 20,000 jobs will be affected by 2023. As its software-based portfolio grows, additional jobs will be created.

Email requests to Continental for comment were not returned by publication.

Among the near-term changes, research and development activities of the Instrumentation & Driver HMI business at the company's Babenhausen, Germany, plant will be transferred to other locations by the end of 2021. Babenhausen will be completely shuttered by the end of 2025.

"Our structural program is designed to have a rapid impact, so that we can successfully head into the future of healthy mobility at full speed," Degenhart said. "Like our industries, we need to adapt extremely quickly. The program will require our full concentration and its decisive implementation will push us to the limit and sometimes even beyond."

Employee Transitioning

For affected employees, Continental is promising a transparent process and training programs to enhance their employability, either at Continental in other positions, or in the general workforce.

"As social partners at Continental, Continental in Motion will see us take on responsibility with a view to the future. We will actively shape the transformation rather than simply let it happen," said Dr. Ariane Reinhart, executive board member for human relations. "As of now, we will be investing a double-digit-million-euro amount in this standardized training format each year. In this way, we will maintain the employability of our staff in the workplace across the globe. This is an extremely important initiative, especially at a time of severe skills shortages and in view of our future growth in new digital areas."

The changes are part of the broader Continental Strategy 2030, which will guide the future sustainability of Continental as a company. The future Continental plans to focus on the following structural areas: 

  1. Functional solutions for assisted and automated driving.
  2. Functional solutions for connected driving.
  3. Integrated software-based system solutions.
  4. Organic growth within its tire business
  5. An expansion of its industrial business beyond automotive to include agriculture, railway engineering, mining and construction.

Continental's Powertrain division, now named Vitesco Technologies, will focus on electric mobility. The division produces electronics, sensors and actuators, and Continental is among the few companies that provide high-voltage components and hybridization solutions for electric mobility. Those solutions contributed about €2 billion ($2.19 billion) of the division's €11 billion ($12.049 billion) in annual revenue.

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Posted-In: Continental AG Freight Freightwaves LogisticsEarnings News Markets General


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