Continental to close tyre plants

Publication date: 12 March 2009

Continental to close tyre plants

Continental, the German car parts maker, on Wednesday announced the closure of two European tyre plants, underscoring the depth of the slump in the global car and truck industries. Continental wants to shut down its 1.4m-unit-a-year truck tyre facility in Hanover by the end of the year, affecting 780 employees.

It aims to end production at Clairoix in France three months later. The plant has capacity of 8m car tyres a year.

Hans-Joachim Nikolin, a Continental executive board member, said: “The competitiveness of the tyre division can be maintained only by closing the two plants with the highest costs.”

He said that the original equipment business – selling tyres to carmakers and truckmakers – fell 20 per cent in the fourth quarter and more than 30 per cent in the first two months of 2009, highlighting the drop in vehicle production worldwide.

Continental said it was assuming that the market would not recover enough in the short and medium term to sustain existing overcapacity.

The company is reeling from the impact of the economic crisis, a large debt load piled up after the acquisition of Siemens’ VDO auto electronics business, and troubles at Schaeffler, its leading shareholder.

Schaeffler's family owners are set to lose control of the company to their banks after a drop in Continental’s value. This has created a €4bn ($5bn) equity gap at the engineering company.

Source: Financial Times