REGENSBURG, Germany – Continental's money-losing powertrain division is seeing signs that its turnaround plan it gaining traction.
“Our [full-year] sales will be north of 4 billion euros,” powertrain division head Jose Avila said at a press event here last week.
The powertrain division, which competes again powerhouses such as Robert Bosch GmbH, Denso Corp. and Magna International Inc., had sales of 3.4 billion ($4.2 billion) last year, down 16 percent from 2008.
Suppliers that can provide innovative and affordable powertrain components are poised to win big as automakers race to find ways to meet tougher global emissions standards without sacrificing performance. A key reason Continental purchased Siemens VDO for 11.4 billion euros in December 2007 – then the richest deal in the history of the supplier industry – was to gain access to its German rivals powertrain expertise. But Continental has struggled to turn its new knowledge into a profit.
The division had an operating loss of 943.2 million euros last year. In 2008, the operating loss was more than 1 billion euros. (See table, bottom)
The division spent more than 110 million euros last year to close plants, cut costs, pay severance packages and reduce capacity.
Following his presentation, Avila told Automotive News Europe that his division is ahead of schedule with its turnaround and promised to meet Continental CEO Elmar Degenhart's target for the unit, which is to report an operating profit by 2011.
In his speech to Continental shareholders on April 28, Degenhart said he is convinced the powertrain division “will make an important contribution for our company in the future.”
Avila agrees: “We are growing in Europe because of the new technologies we have in the powertrain area.”
The products include the company's first turbocharger, which will be built by controlling shareholder Schaeffler Group and go into production in the third quarter of 2011; a complete electric drivetrain that debuts in 2011 in an unnamed automaker's lineup of electric vehicles; and lithium ion batteries that already provide extra power as well as reduced fuel consumption in the BMW ActiveHybrid 7 and Mercedes-Benz S400 Hybrid.
Continental's powertrain division also develops and produces gasoline and diesel injection systems, engine management electronics as sensors and actuators.
“These are exciting times to be in powertrain,” said Avila, who took over the powertrain division on January 1 after spending 25 years with Delphi. His last job with the U.S. partsmaker was head of diesel systems where he spearheaded the launch of the company's new common-rail diesel technology.
Continental ranks No. 4 on the Automotive News list of the top 100 global suppliers with estimated worldwide sales to automakers of $18.74 billion in 2009.