FRANKFURT: Continental AG, one of Germany's largest and most storied manufacturers, is returning to its roots, abandoning decades of expansion into auto and industrial parts to focus on its more profitable tyre business.
The Hanover-based supplier plans to offload its ContiTech industrial unit, it said Tuesday.
A sale of the business, which makes products such as conveyor belt systems and agricultural hoses, is the most likely option, but the company isn't ruling out a listing.
The decision comes at a tough time for the auto industry. Suppliers are grappling with weak demand and the shift to electric vehicles, which require fewer parts but still need tyres.
Continental and peers ZF Friedrichshafen AG and Robert Bosch GmbH have announced plans to cut jobs in response to the downturn.
The move to sell off ContiTech, slated for next year, will follow the planned spinoff of the auto unit in September and leave the company focused on tyres, its most profitable division.
It's also planning to sell ContiTech's Original Equipment Solutions business, which supplies rubber products to carmakers.
Continental was best known for making tyres until it started building up an auto components portfolio in the late 1990s when it bought a brake maker and then in 2007 Siemens AG's auto unit for €11.4 billion (RM56.4bil).
More recently, profits have started to sag amid muted auto sales in Europe and heavy investment in new technologies.
The manufacturer is also being squeezed by higher energy and labour costs as well as tough price renegotiations with clients.
The decision to return to its roots shows that one of Europe's largest auto suppliers is taking drastic action to revive profits as US President Donald Trump's tariffs hit the industry.
Founded in 1871, the company started off making soft rubber products, rubberised fabrics and solid tyres for carriages and bicycles. By the end of the century, it was producing pneumatic tyres for bicycles and cars.
Setzer.
Investors have criticised Continental's conglomerate structure for some time as the cost synergies between its sprawling operations weren't always clear.
Slimming down will help Continental react more quickly to shifts in customer demand and allow investors to better judge it against rivals including Michelin and Goodyear, according to chief executive officer Nikolai Setzer.
"The markets are more volatile and dynamic than they've ever been, and that's precisely why pure-play, strong players that can take quick action are needed," he said on a call with reporters.
Continental could face opposition to the move. Labour representatives had warned against further carveouts, demanding that employees be given reliable prospects in the midst of global market malaise and trade tensions.
Continental's supervisory board said it favoured streamlining the group's activities even as geopolitical tensions rise.
ContiTech's sales declined to €6.4 billion (RM32bil) last year, with operating profit slumping. The business employed around 39,000 people at the end of 2024.
The tyres unit boosted margins last year on slightly lower sales. Still, it's seeing at best only muted improvement in profitability for 2025, and at worst a slight decline.
