September 26. At the meeting of the Supervisory Board of the Continental Group on September 25, 2019, the Supervisory Board and the Executive Board discussed the Continental Group's 2030 strategy and the structural adjustment plan “Change 2019-2029”. This global plan was announced by group management at the end of July 2019 and aims to strengthen the group's long-term competitiveness and ensure its profitability. Continental is actively responding to the current decline in global automotive production and growing customer demand for digital solutions. The plan takes into account several current developments: an increasingly digital work environment, an emerging crisis in the automotive industry, and accelerated changes in powertrain technology due to more stringent emissions regulations
Structural adjustment plan "Transformation 2019-2029" has two main goals: to improve efficiency and productivity by adjusting the organizational structure and product technology mix, so as to focus on future core growth areas. As a result, Continental plans to reduce its total costs by approximately 500 million euros per year starting in 2023. The company estimates that the plan will require a budget of approximately € 1.1 billion over the next 10 years. These costs will be incurred mainly between 2019 and 2022. If the current plan fails to achieve the desired results, Continental does not rule out the implementation of additional plans.
20,000 jobs globally will be affected by 2029 and new jobs will be added
According to preliminary analysis, 20,000 out of more than 244,000 jobs worldwide are expected to be affected by the restructuring plan in the next 10 years, including 7,000 jobs in Germany (currently, Germany has 62,000 employees). By the end of 2023, 15,000 jobs are expected to be affected, including about 5,000 in Germany. At the same time, the software-based product portfolio will increase. In the coming years, a lot of jobs will be added in software and other major growth areas.
This change will have varying degrees of impact on the jobs involved. These impacts include layoffs due to different reasons, such as market downturns that reduce business volume or business closures and suspension of operations; they also include job changes caused by the company's possible sale of some businesses and (sub) divisions, and Changes to better serve the customer's market and / or increase competitiveness and transfer to other bases in the group; in addition, future technological developments will also lead to changes in job positions, such as electric mobility. Finally, due to the increasingly digital work environment and the adjustments to the architecture of Industry 4.0, the demand for traditional jobs will also decline.
"As we did ten years ago, we will become stronger in this crisis"
Chief Executive Officer Dr. Elmar Degenhart emphasized the company's execution in this regard: "Our organizational changes, our robust balance sheet structure and our 2030 strategy have prepared us for the challenges ahead. First we Think of technological change in the industry as a huge opportunity for growth. Through our structural adjustment plan, we will actively respond to the crisis of the automotive industry, just as we did ten years ago, we will become stronger. "
He added: "In the future, travel will be more environmentally friendly, more economical and beneficial to social development. This is what we call healthy travel, and it is the direction we are working on. The technology required for healthy travel is changing our industry and sometimes even subverting it We have consolidated our position in the core technology field. Through our strategic and structural adjustment planning, we will lay a solid foundation for future development and benefit our employees, customers, investors, business partners and other interests Stakeholders provide clear development paths. "
Overview of European and American organizational structure adjustment
At the September 25th meeting, the board of directors and the board of supervisors decided to evaluate the organizational structure adjustments of the following production bases.
The Instrumentation and Human-Machine Interface Division plans to phase out large-scale production in Babenhausen, Germany by the end of 2025. In addition, in order to better reduce costs and increase efficiency, the division plans to transfer some research and development projects from Babenhausen to other bases by the end of 2021. According to preliminary planning, the two measures are expected to affect more than 2,200 jobs.
In accelerating the transformation of future-oriented electric mobility technology, the following four production bases will be affected to varying degrees:
1. The German Roding production base currently has about 540 employees. The base will stop production and development of gasoline and diesel engine (high-pressure pump) hydraulic components in 2024. At that time, it is expected that about 320 production-related jobs will be affected. The remaining 220 jobs are planned to be transferred to other similar functional areas.
2. The Limbach-Oberfrohna production base in Germany currently has approximately 1,230 employees. The base will stop the diesel engine (injector) hydraulic component business in 2028. At that time, approximately 860 production-related jobs will be affected. The remaining 370 jobs are planned to be transferred to other similar functional areas.
3. Italy's Pisa production base currently has about 940 employees. The base will gradually stop producing gasoline engine (injector) hydraulic components from 2023 to 2028. About 500 jobs are expected to be affected by that time. The remaining 440 jobs are planned to be transferred to other similar functional areas.
4. In addition, discussions on closing the Newport News production site in Virginia, USA, by the end of 2024, will soon be on the agenda. The plant currently has about 740 employees and mainly produces hydraulic components for gasoline engines (injectors).
The adjustment plan of the above production base will not affect existing customer orders.
The Supervisory Board approved the proposal to close the Henderson manufacturing facility in North Carolina, which currently employs about 650 people, primarily to produce hydraulic brake systems. The factory has been unable to secure new customer orders in recent years.
Group management also reported to the Supervisory Board that it plans to stop producing truck tires at the Petaling Jaya plant in Malaysia by the end of 2019, which currently has 270 employees.
Other adjustment projects other than the above are still in preparation. The Group will gradually announce during the adjustment of the structure. These adjustments include certain items that have been identified and related to other strategic initiatives, such as the sale of potential individual business units and subunits . Due to negotiations and other reasons, the Group is currently unable to provide any further details.
Group management and employee representatives will announce the results of the joint discussions later in 2019.
Dr Elmar Degenhart, CEO, said: "We want this architecture adjustment plan to have a rapid impact so that we can move at full speed and successfully move towards a healthy mobility future. Like our industry, we need to make adjustments very quickly. This plan requires us to go all out and implement it decisively, which will push us to the limit, even beyond it. "
He added: "We will do our best to protect the affected employees and provide them with some future opportunities. For our architectural changes, we will take advantage of natural fluctuations and demographic changes in the coming years. We will also Take other measures to ensure the employability of employees.
The layoffs due to the company's operating status will be the last move, but we cannot rule out this possibility at this time. If it turns out that this move will be unavoidable, we will also help as many employees as possible. "
Key initiatives: training programs and expanding internal job opportunities
Regarding future job adjustments, Continental has developed a comprehensive training plan for affected employees. The framework agreement for the Continental in Motion project signed by the company and employee representatives in April 2018 laid the foundation for this. The Group is furthering the development of the project to work with employees to cope with the upcoming changes. At present, the Continental in Motion project mainly includes three major modules: the newly established Continental Technology and Change Institute (CITT), the improvement of the training process within the group and the increase of job opportunities within the company. The program will continuously update project modules based on specific employee groups.
With CITT, Continental will provide customized training for its employees, starting with semi-skilled and unskilled workers in Germany.
Group-wide training processes should ensure that all employees are prepared for future needs and increase their employability. Based on some basic requirements and development directions in strategic personnel planning, the key points of the project have reached consensus.
Companies and trade unions have established a standard and transparent process for internal job opportunities to provide employees with job opportunities in other subsidiaries, a move that goes beyond the basic requirements set by law.
"Continental is a socially responsible company. The Continental in Motion project will enable us to better take responsibility for the future. We will actively promote this transformation rather than let it develop," said the head of personnel relations and the executive board. Member Dr. Ariane Reinhart added: "So far, we have invested tens of millions of euros for this standard training program each year. This way we will keep our global employees competitive in the workplace. Especially in the case of severe skills shortages and the future This is especially important as the new digital realm grows. "
Strategy 2030: Maximize profitable growth while focusing on environmental protection
The structural adjustment plan "Change 2019-2029" is part of Continental's 2030 strategy. The strategy is designed to help companies achieve leadership positions in quality, finance and innovation. To this end, Continental will systematically strengthen its core growth areas to achieve long-term value creation above the market average.
Dr. Elmar Degenhart, Chief Executive Officer, said: "Our solutions enable safe, clean, intelligent driving and personal mobility. As a result, we make an important contribution to climate protection in three environmental, social and economic areas."
Continental's core growth areas include the following:
1. Assistive and autonomous driving solutions. Continental is already a market leader in this area. The group estimates that the size of the assisted and autonomous driving market doubles approximately every five years and is expected to reach approximately 30 billion euros by 2025. In 2018 and 2019 alone, Continental's average order value for assistive and autonomous driving technologies has reached 3 billion euros. Continental expects a strong growth in driver assistance systems, with sales in 2019 alone reaching around € 2 billion.
2. Connected driving solutions. Continental has more than 20 years of industry experience and empowers more than 33 million connected cars. Continental provides technologies in this area, including antennas, displays, safety-related software and electronic control units.
3. Software-based integrated system solutions. This includes the growing number of services provided to mobile service providers. This market can currently generate approximately $ 30 billion in sales, and it is more likely to reach nearly $ 1.5 billion in sales by 2030.
4. In addition, technology companies have been enhancing the natural growth of their tire business to achieve their goal of becoming the top three global tire suppliers. During 2011-2018, Continental invested nearly 1 billion euros in the expansion of production capacity.
5. In addition to the original supporting business of automobile OEMs, Continental Group is also expanding industrial customers and terminal businesses (including conveyor belts, hoses, spare tires and automotive aftermarket parts and other products). These businesses include industries such as agriculture, railway engineering, mining and construction. The future goal of the industrial sector and terminal business is to achieve 40% of consolidated sales (currently approximately 30%). Since the OEMs will be affected by cyclical economic trends, the company hopes to use this to reduce their reliance on the original supporting business of auto OEMs.
Continental has also been preparing for the profitable growth of the powertrain business group (future name Vitesco Technologies) in the field of electric mobility. Based on its extensive expertise in electronic components, sensors and actuators, Continental is one of the few system suppliers that provides high-voltage components and hybrid solutions. Last year, the total new orders for the powertrain business group reached about 11 billion euros, of which about 2 billion euros came from the electric mobility business.