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Continental Cuts Margin Target Over Tariffs Ahead of Breakup
Continental AG has adjusted its profitability expectations for the fiscal year, now forecasting an adjusted Ebit margin of up to 11%, down from a previous target of 11.5%. This revision is influenced by lower revenues in its ContiTech unit and the adverse effects of U.S. tariffs on its tires sector. CEO Nikolai Setzer highlighted the impact of increased import costs from Europe, driven by tariffs on steel and aluminum, leading to heightened production costs in the U.S.
The company's restructuring efforts include plans to spin off its Aumovio division and sell ContiTech to refocus its operations on tires, reversing a long history of acquisitions. This strategic shift reflects broader challenges in the European automotive industry, which is grappling with tariffs, stiff competition from China, and rising operational costs. Industry peers like ZF Friedrichshafen and Robert Bosch are also scaling back operations amid reduced demand in their key markets.
Aumovio aims to improve its adjusted Ebit margin from 2.5% to 8% by 2030 by pursuing cost reductions and optimizing its production footprint, planning to reduce its factories from 56 to 50 by 2027. Continental is targeting consolidated sales of up to €22 billion and a higher adjusted Ebit margin of up to 14.5% in the next few years.
As Continental concentrates on high-performance tire manufacturing and seeks expansion in Asia and North America, it is also exiting less lucrative markets, such as agricultural and truck tires in India. This move to streamline and focus its core business comes amid expectations of continued weakening in car and tire demand in Europe and uncertainties regarding the full impact of U.S. tariffs.
In the transportation industry, Continental's proactive approach to restructuring is a crucial strategy in responding to market volatility and increasing global competition. Focusing on core competencies, such as high-performance tires, will not only enhance operational efficiency but also strengthen its overall market position against emerging rivals, particularly in Asia. Additionally, such strategic pivots can enable manufacturers to allocate resources more effectively toward innovation and sustainability, which are critical for long-term growth in the evolving automotive landscape.
The company's restructuring efforts include plans to spin off its Aumovio division and sell ContiTech to refocus its operations on tires, reversing a long history of acquisitions. This strategic shift reflects broader challenges in the European automotive industry, which is grappling with tariffs, stiff competition from China, and rising operational costs. Industry peers like ZF Friedrichshafen and Robert Bosch are also scaling back operations amid reduced demand in their key markets.
Aumovio aims to improve its adjusted Ebit margin from 2.5% to 8% by 2030 by pursuing cost reductions and optimizing its production footprint, planning to reduce its factories from 56 to 50 by 2027. Continental is targeting consolidated sales of up to €22 billion and a higher adjusted Ebit margin of up to 14.5% in the next few years.
As Continental concentrates on high-performance tire manufacturing and seeks expansion in Asia and North America, it is also exiting less lucrative markets, such as agricultural and truck tires in India. This move to streamline and focus its core business comes amid expectations of continued weakening in car and tire demand in Europe and uncertainties regarding the full impact of U.S. tariffs.
In the transportation industry, Continental's proactive approach to restructuring is a crucial strategy in responding to market volatility and increasing global competition. Focusing on core competencies, such as high-performance tires, will not only enhance operational efficiency but also strengthen its overall market position against emerging rivals, particularly in Asia. Additionally, such strategic pivots can enable manufacturers to allocate resources more effectively toward innovation and sustainability, which are critical for long-term growth in the evolving automotive landscape.
Vehicle Guru