Spin-off plans Continental is considering an independent automotive division

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Struggling automotive supplier Continental is contemplating a spin-off of its Automotive business unit into a separate publicly traded company. The board is set to decide on the move in the fourth quarter of 2024, aiming to "unlock the full value potential of Continental.

The waters through which automobile supplier and tire manufacturer Continental is navigating have been uncomfortably rough for some time. Like many other companies in this industry, the mobility business in the field of e-mobility is not developing as previously expected, and at the same time, the market for traditional drive technology is steadily declining. While the tire division of Continental appears to be doing well, the automotive division is planning to cut several thousand jobs.

And now, the management team surprises with the announcement that they are considering spinning off Automotive into its own publicly traded company. This, the Conti executives state, aims to leverage the value and growth potential of Continental. Whether Automotive will actually be spun off will be decided after an in-depth review of the project in the fourth quarter of 2024.

"Our strategy is aimed at increasing our value creation. This involves systematically examining how we can best position our business divisions. In recent months, markets and our customers, particularly in the automotive industry, have developed very dynamically. For example, regional market fluctuations and the software-driven technology transformation require even more flexibility and extensive entrepreneurial leeway in the future. Against this backdrop, we are aiming for a split of Continental," said Nikolai Setzer, CEO of Continental.

The goal would therefore be to spin off Automotive and take it public, while the Tires and ContiTech divisions would remain under the Continental umbrella. "A spin-off of Automotive with stock exchange listing would— subject to the approval of the Executive Board and Supervisory Board—be presented to the Annual General Meeting of Continental AG on April 25, 2025 for resolution. In case of approval, the spin-off is planned to be completed by the end of 2025," Continental announced. In the event of a spin-off, shareholders, as already the case in the Vitesco spin-off in 2021, would then receive shares of the then independently-listed Automotive unit in proportion to their Conti holdings.

Software-defined and autonomous vehicles in focus

With currently around 100,000 employees and a turnover in the fiscal year 2023 of around 20 billion euros, the Automotive division, which has been bundled into a legal entity since 2022, will focus on the future topics of the automotive industry. "In addition to a strong market position with innovative braking and comfort systems, sensor solutions and displays, the division has made great strides in the development of software, architecture platforms and assistance systems for the rapidly growing future market of software-defined and autonomous vehicles," says Continental.

Tires and ContiTech under scrutiny

As already mentioned, the Tires and ContiTech divisions, should the Automotive division be spun off, are to remain with Continental. The Continental executives announce that this structure will also be the subject of detailed scrutiny. The divisions are jointly as large and revenue-strong as Automotive, but have proven to be resilient to economic fluctuations through regional diversification, different distribution channels and sales markets. It remains somewhat puzzling what exactly will be examined in detail. As far as Continental's future is concerned, it remains interesting. (sb)