Continental Plans Further Cost Cutting Amidst Decline in German Auto Industry

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Continental Plans Further Cost Cutting Amidst Decline in German Auto Industry

Continental, a German tyre and car parts manufacturer, is poised to implement substantial cost-cutting measures, aiming to achieve annual savings of €400 million ($428 million) starting from 2025. The company's focus on the Automotive division, particularly software, safety features, and autonomous driving technology, is expected to result in job cuts in the "mid-four-digit range" globally.

This announcement follows Continental's previous restructuring program, "Transformation," initiated in 2019 and slated to run until 2029. The program aims to enhance efficiency and realize gross annual savings exceeding €1 billion by 2023. Initially targeting over 20,000 jobs worldwide, the ongoing restructuring has already affected approximately 3,000 positions globally by 2020.

The recent cost-saving initiative builds upon existing plans and is anticipated to impact at least 5,500 jobs worldwide, including over 1,100 positions in Germany. However, specific details regarding the exact number of affected employees among the company's 200,000 global workforce have not been disclosed.

In response, the works council of Continental's Automotive division has urged the adoption of alternative measures such as part-time retirement and retraining to mitigate layoffs. Lorenz Pfau, deputy chairman of the Conti Works Council, emphasised the need for guarantees for employees and stressed the importance of collaborative decision-making with management.

The challenges faced by Continental reflect broader trends within the German auto industry, once a stalwart of the European economy. Factors contributing to the industry's decline include market saturation across the Eurozone, a slowdown in emerging markets, and the disruptive impact of the Covid-19 pandemic.

Moreover, the rise of alternative automotive manufacturing centres and the German auto industry's lag in electric vehicle (EV) adoption have further eroded its competitiveness. The industry's energy-intensive nature has also been exacerbated by rising energy costs, diminishing its cost advantage in global markets.

Consequently, several high-profile exits and scaling down of operations have been observed, including Michelin's gradual cessation of production in Karlsruhe, Trier, and Homburg, affecting over 1,500 jobs. Ford's factory closure in Saarlouis and Autoliv's potential factory closure in Elmshorn underscore the sector's challenges.

This downturn underscores the imperative for industry stakeholders to prioritise innovation, policy adaptation, and demand forecasting. While unforeseen events like COVID-19 pose challenges, the German auto industry's failure to seize the EV opportunity highlights the need for reinvention to ensure long-term sustainability and economic resilience.