In advance of today’s virtual Annual Shareholders’ Meeting of Continental AG, the Supervisory Board at its meeting extended the appointment of Christian Kötz (50) as Executive Board member by five years until April 2027. Kötz was initially appointed to the company’s Executive Board for a three-year term in March 2019. Since that time, in this function he has been responsible for the Tires business area and the Continental Group’s purchasing operations.
“We are delighted to continue our successful development in the Tires business with Christian Kötz. The Supervisory Board has the utmost confidence in his ability to consolidate our position among the top tire manufacturers worldwide. On behalf of my colleagues on the Supervisory Board, I wish him continued success,” said Professor Wolfgang Reitzle, chairman of the Supervisory Board.
“On behalf of the entire Executive Board team, I would like to express my gratitude to Christian Kötz for his successful work. The Tires business area under his leadership is and remains an important source of value and a guarantor of stability in our corporate group. Christian Kötz has played a pivotal role in recent years in the promotion of new technologies, particularly digital tire solutions and the implementation of ambitious sustainability objectives. In doing so, he has made an important contribution to our future viability and has demonstrated why Continental will be one of the winners of the transformation. We look forward to continuing our successful collaboration with him,” added CEO Nikolai Setzer.
The transformation makes us stronger
The strategic realignment and its implementation was likewise a key theme of Nikolai Setzer’s speech today at the 2021 Annual Shareholders’ Meeting, which was held virtually in Hanover. Against the backdrop of a subdued economic recovery in the industry, Continental is resolutely continuing its strategic realignment in the current annual period and the 150th year of its existence. Setzer’s statement in this regard: “Continental is starting afresh. We know what we have to do, especially under the current circumstances.” He referred to the company’s eventful history by pointing out that “today we are one of the world’s key suppliers for mobility. Shaping the transformation has made us strong. And it is making us strong now.”
Continental was also hard hit by the sharp 16 percent slump in global vehicle production in the past fiscal year. “2020 was not easy for us. But we responded quickly by adjusting our costs, concentrating on growth and value, and repositioning ourselves,” said Setzer.
Three pillars of the realigned strategy
Continental’s realigned strategy for profitable and sustainable growth is based on three pillars: operational performance, the portfolio’s focus on either growth or value, and a culture that makes it easy to seize new opportunities. Setzer: “Navigating our way through the crisis, responding to the market and shaping the transformation. These are our three main tasks that, however, also offer major opportunities for us. And we are seizing them.”
The ongoing implementation of the Transformation 2019-2029 program aims to bolster Continental’s operational performance and secure its competitiveness. The program’s focus is on reducing costs, accelerating processes, streamlining the organization, achieving further quality improvements and implementing new, more effective forms of modern collaboration.
Two portfolio strategies: growth and value
Continental’s realigned strategy divides its portfolio into businesses that focus on “growth” and businesses that concentrate primarily on “value.” Two different methods for different markets. While they are different in terms of their time horizon, their technologies and their processes, they have one priority in common: creating greater value.
“In the growth-based areas, we set ourselves apart with innovative technologies. Our goal here is to outperform the market,” is how Continental’s CEO explained the concept. Take, for example, the high-performance onboard computers that Continental develops for modern vehicles. Today’s orders will meanwhile bring more than €4 billion in sales. Another growth area is the business with systems for assisted and automated driving, in which Continental has been a leader for many years.
Autonomous Mobility will be a separate business area starting from 2022. As announced on March 9, 2021, Continental will increase its investment in this area by €200 million to €250 million in this year alone. Why? “Because the market is growing. It will more than double in the next three years,” predicted Setzer, adding that “we will grow with it. Because more automation in the car means more opportunities for us to increase our share of value in the car.”
To achieve that, Continental meanwhile employs 20,000 software and IT specialists, and runs its own software academy. Continental is collaborating with Amazon to accelerate the communication from and into the car. The company is additionally using artificial intelligence with a new supercomputer located in Frankfurt am Main to make assistance systems fit for practical use. “No other computer in the world does it faster than ours. What used to take weeks can now be done in hours,” said Setzer.
Growing with partners
Continental is continuously expanding its intensive collaboration with start-ups and technology companies to strengthen its own market position in this segment and increase the pace of development. These partner companies meanwhile include NVIDIA and AEye, as well as EasyMile, AAI, the map service “here” and, as recently announced, the Chinese company Horizon Robotics, which specializes in the development of solutions based on artificial intelligence.
Continental recently also acquired a stake in Recogni, a US company that specializes in chip design. “Its processors serve as a kind of data booster for us. In this way we make automated and autonomous driving even safer, cleaner, easier and more comfortable. We are striving to become the global leader when it comes to technology,” said Setzer when highlighting the company’s future prospects and pointing to further growth opportunities: “Continental is growing its business not only with products, but also with intelligent control systems for tires that deliver data in real time and thus make driving safer and more economical. But growth also exists in certain markets, such as in China. Demand there for our premium tires was even higher in 2020 than in 2019.”
The portion of the portfolio focused on value, in contrast, targets primarily saturated markets. “While growth is limited in these areas, we have a strong position. Profits flow continuously and quickly thanks to our leading position in many product groups – for example in technologies for driving safety,” said Setzer.
Pioneer in sustainability
Continental’s culture is crucial for having the courage to seize new opportunities. It is based on four central values and therefore promotes personal responsibility, openness, trust and the awareness that each of us must keep an eye on the consequences of our own actions for everyone else. “That is why we work for each other and not just with each other – worldwide and across the entire organization,” said Setzer, referring to the company’s strategy for sustainability as a visible result of such a culture: “We continue on our path toward success and sustainability. Here, we are systematic and pioneering. We will make our business for emission-free vehicles completely carbon-neutral starting from as early as 2022 – worldwide. All plants worldwide have meanwhile been using green power and thus have been CO2-neutral since 2020. This accomplishment, which will save more than two million metric tons of CO2 every year, is one way we are improving our carbon footprint,” he pointed out. “For 2040, we are aiming for zero CO2 in all our plants. Our big goal is to achieve 100 percent carbon neutrality from one end of the value chain to the other. We are targeting 2050 for this at the latest,” he said.
Protected, ready to be vaccinated and emerging from the economic downturn with tailwind
Continental’s four company values (Trust, Freedom To Act, For One Another and Passion To Win) have proven to be invaluable in the coronavirus pandemic. They help everyone to protect themselves and others. “We have protected our employees with a comprehensive concept – right from the start and at all locations worldwide,” emphasized Setzer. “There is no elevated risk of coronavirus anywhere. We are testing and we are vaccinating. In Romania. In Lithuania. And in the US. We are cooperating closely with the authorities there. Together, we have set up vaccination centers. Our company doctors in Germany are ready as well. They will get started as soon as they are permitted.” Setzer in this respect thanked the more than 235,000 employees on behalf of the entire Executive Board. Many have given up some of their salary in 2020. Others have been tirelessly involved in crisis teams. “In the meantime, 80,000 of our staff are working remotely, which is almost 90 percent of all employees who use PCs,” said Setzer. “This is the true embodiment of our spirit of For One Another. It is stronger than the pandemic.”
Setzer in his speech also thanked Dr. Elmar Degenhart, who resigned his position for health reasons last fall after more than eleven years at the helm, and paid tribute to the services of his predecessor: “He helped significantly increase Continental’s value. Under his guidance, we returned to the DAX 30 performance index. He renewed the foundation of our culture of values, making us successful and fit for the future.”
Confident about 2021
In its 150th anniversary year Continental looks confidently to the future. “As the fourth quarter of 2020 showed, things are looking up. Progress may be slow this year because the situation is still too uncertain due to the coronavirus pandemic and its effects on supply chains, especially for semiconductors. But we feel it: demand is recovering in 2021. We’re picking up speed,” said Setzer optimistically. He expects sales of €40.5 billion to €42.5 billion in 2021 and an adjusted EBIT margin of between 5 and 6 percent. These figures also include the Powertrain business, which Continental intends to spin off completely with a subsequent listing on the stock exchange in September 2021. “We are aiming for stronger growth in sales, which means increasing it in the medium term by around 5 to 8 percent organically per year on average. The same goes for our adjusted profit margin. Our goal before interest and taxes is between 8 and 11 percent per year.”