Continental AG effectively doubled the size of its automotive business last week with the $16.71 billion acquisition of German rival Siemens VDO Automotive Corp. Now the question for the world's fifth-largest parts supplier is how to get smaller — fast.
Continental executives say it will be two to three months before any key decisions are made on how to integrate VDO. They expect to complete the process by the end of 2008.
But with the antitrust curtains pulled back and VDO's books now open, Continental immediately set to work comparing cost structures, manufacturing footprints, technology and development areas, says North American CEO William Kozyra.
"We need to very quickly figure out where we can achieve efficiencies going forward, now that we can share in total detail all aspects of our businesses," Kozyra says.
Some changes are already in the pipeline. For example, Continental will trim its automotive product brands from four to possibly two, Kozyra says.
Besides the Continental brand used on tires, which will stay, the company also has the Temic brand on body and powertrain electronics and the Teves brand on braking systems and components.
Both brands are holdovers from previous acquisitions.
Adding a fourth brand into the mix with VDO not only would be confusing when it comes to electronics, but also expensive. Kozyra says that is particularly true in North America, where some of the brand names are not as well-known.
Continental also is reviewing contracts with its suppliers.