Nobody is about to deny Schaeffler Group CEO Juergen Geissingers recent statement that, both companies are facing great challenges and have no time to lose, in referring to Schaefflers merger with Continental.
This is especially true for Continentals money-losing powertrain division, a long-term problem child. Industry insiders believe that the powertrain division needs to push ahead with future products.
But Continental insiders fear that CEO Karl-Thomas Neumann has too many important tasks facing him at the same time. Along with being Continental CEO and chief technical officer, he also is head of the powertrain division.
The powertrain unit lost 73.5 million euros in 2007. A source within Continental said the 2008 results will be even worse. But who can turn the powertrain division around, while Neumann has to hold Schaeffler owner Maria-Elisabeth Schaeffler at bay?
Neumann was looking for someone to succeed him as head of the powertrain division, but sources say he stopped the search because outside executives are skeptical about how the unified Continental and Schaeffler business would work. The possibility of luring a big-name executive will be limited until all the kinks in the merger are worked out. But there may not be time to wait.
The powertrain division needs much more management attention soon, a Continental source told Automotive News Europe.
The powertrain unit has been losing key contracts from loyal customers to its supplier rivals.
General Motors announced that it has chosen South Koreas LG Chem as its partner to make lithium-ion battery packs for its Chevrolet Volt electric car. Even though it was a key candidate for the business, Continental failed to win the contract. Perhaps more tellingly, Continental did not know it had lost the bid until the announcement was made.
Daimler will also rely on a Continental rival in the future. The German carmaker recently bought a 90 percent stake in lithium-ion battery specialist Evonik. Daimler said that Evoniks unit Li-Tec will power electric versions of Daimler's Mercedes-Benz and Smart cars from 2010 on.
Thats a big blow to Continental, which was the first supplier to work on Daimlers first hybrid sedan, the Mercedes-Benz S400. It will be the first car on the market with a lithium-ion battery and is scheduled for summer of 2009. Continental already has started series production of lithium-ion batteries at Nuremberg, Germany, and invested more than 3 million euros to build up manufacturing capacity of up to 15,000 batteries a year.
That Daimler is sourcing its lithium-ion batteries from somewhere else should have Continental worried.
Meanwhile, Neumann has to report to Volkswagen CEO Martin Winterkorn about the status of a small diesel engine, according to reports in the German press. The engine is scheduled to arrive in the new Polo this year. But insiders say that Continental is late on the development.
Decisions have to be made urgently, but are missing so far. Continental said in April last year it plans to open its first turbocharger plant by 2011 and said it would decide last summer where it will build the plant. But there has been no recent announcement about that promising business.
If Schaeffler and Continental combine their automotive businesses, there will be even more distraction. Hopefully, somebody will take care of powertrain operations in the future.