Tire giant Continental is preparing to spin off its billion-dollar automotive division into an independent company. The maneuver will cost a fortune in subsidies and loans.
The German tire giant Continental is under such financial pressure that the automotive department, which develops software for the automotive industry, is being separated.
The tire giant, which initially invested significant resources in establishing itself as a major supplier to the automotive industry, is not getting the returns it had hoped for from its automotive division.
In fact, Continental Automotive has cost the parent company billions of kroner in losses, without being able to keep up with the market in general.
Therefore, the whole thing must now be separated into an independent company. But it will be an expensive affair. In order to list Continental Automotive on the stock exchange, the company will receive a capital injection of one and a half billion euros right now.
This corresponds to 11.2 billion kroner. In addition, the original Continental AG will guarantee the new company a loan of 2.5 billion kroner.
This is what Handelsblatt writes.
The entire ownership stake in the Automotive division will be placed in a separate company and distributed to shareholders and listed on the stock exchange as a separate company, the media outlet writes.
Only Continental's tire and industrial business remains part of the original company. In doing so, the Germans are doing the same thing that Ford in the US is doing with its European division.
Like the Danish division, Ford Europe's German company has been sold off from the actual business in the US.
However, the Germans will receive 33 billion kroner right now. The money will be used to pay off, or at best, the mountain of debt the car brand has accumulated.
With the money, the financial guarantee that Ford in the US has provided to the European division also disappears completely. Since 2006, Ford in the US has guaranteed to cover any losses of the German business.
It shouldn't be like that anymore. Although the many billions are coming now, there is much evidence that Ford has been preparing the maneuver for several months.
As early as November last year, it was announced that 4,000 positions would be cut across Europe. At the same time, the management team was significantly reduced. The layoffs are to be phased in by 2027 at the latest.
