Industry upheaval and Corona: the new Conti boss has big plans

Wednesday December 16, 2020

Industry upheaval and Corona
The new Conti boss has big plans

As the new head of the automotive supplier Continental, Nikolai Setzer has a lot to do. Actually, the worst of the corona pandemic seemed to be over, now the balancing act between growth and savings has to be achieved. So far, however, the communication with the employees has been more than bumpy.

The new Continental boss Nikolai Setzer has big plans for his job at the top of the group: He wants to increase the pace in several high-tech areas, while at the same time the automotive supplier and tire manufacturer should reflect on existing strengths. With this mixed strategy, the manager, who recently replaced Elmar Degenhart at the Dax company from Hanover, also wants to manage the difficult balancing act between growth in software and electronics and savings in traditional areas.

At a "capital market day", the new investor and industry experts inform about his goals. As with other corporations in the industry, the worst of the corona pandemic at Conti seems to be over, while it is getting tighter for many small supplier companies.

But now another far-reaching shutdown is pending in Germany, which is slowing down public life. As Continental’s most important customers, the carmakers were hit hard in the spring when car dealerships had to close for several weeks.

Degenhart was no longer happy

After the slump in the second quarter, things looked better again in the third quarter, at least in day-to-day business. After a drop in sales of around 40 percent in the previous quarter, it was recently around 7 percent less than a year ago. In the end, Conti came up with a new forecast for the year to come. Sales should reach 37.5 billion euros, a good 15 percent below the previous year. The profit margin adjusted for special effects such as renovation costs should still be around 3 percent, after 7.4 percent a year ago.

Ex-CEO Degenhart recently had no luck anymore. Problems have piled up in recent years, even before Corona. These include the weakness of the Chinese market due to the customs dispute, billions in write-offs due to gloomy market prospects for the coming years and the heavily controversial major renovation, which will affect up to 30,000 of the currently 234,000 jobs in the group.

Understanding with employees bumpy

The austerity course is supposed to lower the running costs and lead Conti to its old strength in terms of returns. But first of all it will devour a lot of money, for example for severance payments and early retirement arrangements – for this year and the next, a total of 1.2 billion euros. The fact that complete – and according to the employees, profitable – plants such as the tire factory in Aachen are to be shut down is causing a lot of explosive material under the corporate roof. It is said that this is also painful for management. But the goals left no choice.

Setzer now has to contain the source of the conflict after Degenhart said he had withdrawn for health reasons. So far, the communication with the employees about the exact how and when of the renovation has been more than bumpy. IG Metall, for example, broke off talks at the beginning of December. The head of IG Bergbau Chemie Energie (IG BCE), Michael Vassiliadis, threatened the end of the plant in Aachen: "These job cuts will be expensive." In Germany alone, around 13,000 jobs at Conti are on fire. Job security has not been agreed with the Hanoverians.