The strategic realignment and its implementation were key themes of the CEO of Continental AG, Nikolai Setzer, at the 2021 Annual Shareholders’ meeting.
Held virtually in Hanover due to restriction on account of COVID-19, the meeting focused on how Continental resolutely continues its strategic realignment in the current annual period and the 150th year of its existence, despite a subdued economic recovery in the industry.
Setzer said, “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.”
He made this statement as Continental was also hit hard by the sharp 16% 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,” he said.
Realigned strategy
Continental’s realigned strategy for profitable and sustainable growth is based on three pillars:
- Operational performance
- Portfolio’s focus on either growth or value
- A culture that makes it easy to seize new opportunities
“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,” he said.
The ongoing implementation of the Transformation 2019-2029 programme aims to bolster Continental’s operational performance and secure its competitiveness. The programme focuses on reducing costs, accelerating processes, streamlining the organisation, achieving further quality improvements and implementing new, more effective forms of modern collaboration.
Growth & value
Continental’s realigned strategy divides its portfolio into businesses that focus on ‘growth’ and businesses concentrating 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,” Setzer said. 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.
New business area
Autonomous mobility will be a separate business area starting from 2022. As per the announcement made on March 9, 2021, the technology company will increase its investment in this area by €200 million to €250 million this year alone. Setzer predicts that the market will more than double in the next three years and hence the investments. He believes that more automation in the car will bring more opportunities for the company to increase its content per car.
To achieve this objective, the company employs 20,000 software and IT specialists and runs its own software academy. It is collaborating with Amazon to accelerate the communication from and into the car. The company uses 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 together
Continental has been expanding its collaboration with start-ups and technology companies to strengthen its own market position in this segment and increase the pace of development. Some of the partner companies include NVIDIA, AEye, EasyMile, AAI and Horizon Robotics. It recently acquired a stake in Recogni, a US company that specialises in chip design.
Sustainability
Referring to the company’s strategy for sustainability as a visible result of such a culture, Setzer said, “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. By 2040, we are aiming for zero CO2 in all our plants. Our big goal is to achieve 100% carbon neutrality from one end of the value chain to the other. We are targeting 2050 for this at the latest.”
Outlook for 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. He expects sales of €40.5 billion to €42.5 billion in 2021 and an adjusted EBIT margin of between 5% and 6%. 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% organically per year on average. The same goes for our adjusted profit margin. Our goal before interest and taxes is between 8 and 11% per year,” Setzer concluded.