Stephan Kessel, who, as Continental chairman, wanted to sell the ContiTech rubber and industrial products group to raise money to fund acquisitions, was replaced Tuesday, Sept. 11, by Manfred Wennemer, head of ContiTech. Company officials said the change was made because of differences related to execution of strategy.
Continental said it plans to keep ContiTech. A deal to sell ContiTech to U.S. investment buyer Carlyle Group fell through in early September.
Carlyle wanted parts of ContiTech that Continental wanted to keep, such as the air springs business, said Wolfgang Ziebart, new deputy chairman of Continental and head of the automotive systems business. The price offered for ContiTech also was too low, said Ziebart, formerly chief engineer for BMW AG.
Continental, which supplies tires, stability management systems and chassis components, ranks No. 16 on the Automotive News list of top 100 global auto parts suppliers with sales of $5.56 billion in 2000.
Strategy unchangedDespite last week's shakeup, Continental's core strategy will not change, Ziebart said.
"It's a change in executing the strategy," he said. "This means instead of looking for major future acquisitions, we might rather concentrate on the existing business, growing the existing business."
Continental strengthened its ability to link chassis systems together earlier this year with a partial acquisition of the Temic Automotive electronics business from DaimlerChrysler AG.
But one reason more acquisitions do not make sense is that automakers still want the flexibility to choose specific suppliers of certain components, such as shocks, Ziebart said.
"I am totally convinced in the chassis, at least in Europe, somebody who supplies a (full) front axle or a rear axle, as a rule, will not develop," Ziebart said.
"The chassis itself is so much interrelated with the car that no car manufacturer will abandon the influence on the chassis, and they will, for instance, determine the manufacturer of the shock absorber … or the brake system."
Less reliance on tiresThe chassis systems growth strategy predated Kessel, though he was credited for reducing Continental's reliance on its tire business.
But Continental has been troubled this year by profit shortfalls through the first half, much of it related to the tire business in North America and the global truck tire market.
First-half operating earnings dropped by $46.8 million to $198.5 billion before nonrecurring reorganization charges of $53.3 million.