Continental

Continental AG (short Conti) is a publicly traded German automotive supplier headquartered in Hanover. The company has evolved from a pure tire manufacturer into a significant automotive supplier. The company consists of four business sectors: Automotive, Tires, ContiTech, and Contract Manufacturing.

The Schaeffler Group holding company holds a controlling stake of 46 percent in Continental AG.

History

Founding

The nucleus of today's Continental AG was the insolvent estate of the small rubber processing company Neue Hannoversche Gummi-Warenfabrik, which was acquired in 1869 by the banker Moritz Magnus for 18,500 Thalers. Magnus grouped nine financially strong investors and experienced entrepreneurs as founding partners of the Continental-Caoutchouc- und Gutta-Percha Compagnie, which was founded on October 8, 1871, as a stock corporation with a share capital of 300,000 Thalers (equivalent to 900,000 Marks). This included the three partners of the company Hannoversche Gummikamm-Compagnie oHG. They possessed production-technical knowledge with the then-novel material and held 27% of the shares. The founding partners agreed on a clear separation of production areas: The new company was to produce soft rubber goods, while the existing Hannoversche Gummikamm-Compagnie oHG would continue to produce its traditional hard rubber goods. This agreement lasted about two decades.

Soft rubber and tire production 1871–1914

Between 1871 and 1874, new manufacturing facilities were built on the acquired factory premises and purchased areas (Vahrenwalder Straße 34, now part of ContiTech AG). Production start was delayed several times. In its first year of operation in 1874, the company had 246 employees. In these early years, there were technical and economic difficulties, which had to be compensated for by a capital increase of 147,000 Marks at the end of 1875. The banker Moritz Magnus then commissioned his young employee Siegmund Seligmann to conduct a fundamental analysis of the company, as a result of which comprehensive organizational and production-technical improvements were implemented. Production and economic results stabilized. Siegmund Seligmann received power of attorney in 1876 and became commercial director and board member from 1879 (until his death in 1925).

Special attention was paid to the technical and scientific foundations, for which the chemist Adolf Prinzhorn, hired in 1874, was responsible. He became technical director in 1876 (until 1908) and acquired manufacturing licenses for solid rubber tires in the United States. Under his leadership, experiments with hollow-chamber and cushion tires (made of foamed rubber) were carried out in the mid-1880s.

Continental AG granted its workforce social benefits with a company health insurance fund founded in 1884, with life insurances for long-term employees concluded from 1885, and a pension, widow's, and orphan's fund established in 1903. In a comparatively small housing program, some apartment blocks and a single men's home were built around 1900 and at the beginning of the 1920s. In 1905, a company library was founded, which at the beginning of the 1920s had over 10,000 volumes and was well used with 80,000 borrowings per year. In 1913, the state-recognized company school was added, which was primarily intended for workers.

From 1891, pneumatic tires for bicycles, the "Continental-Pneumatics," were produced, making the company the market leader in Germany. From the beginning of the 20th century, the production of car tires was added.

The production program in the initial decades included a variety of soft rubber products; in addition to rubber balls, hoof buffers (for horses), hoses for steam, water, and gas lines, rubber-coated fabrics for balloons, airships, and airplanes, waterproof clothing, and medical-hygiene articles were produced. The workforce grew to about 600 in 1890 and 1537 in 1899. Initially, the dividend was about 9%, grew to 16% in 1882, and was 27% of the share capital from 1884 to 1892. In these early years, the company was also briefly called Gummiball – as a distinction from the existing, larger Gummikamm (Hannoversche Gummikamm-Compagnie, see above). Later, Continental or Conti became established. The long and in everyday use cumbersome official company name was changed to Continental Gummiwerke AG in 1929.

In the innovative field of tire manufacturing, several fundamental developments were achieved in these years that led to economic success:

• 1904: a pneumatic tire with a tread
• 1908: the detachable rim

These successes were made possible by extensive research in the company's own laboratory, by production-technical development work, by its own numerous patents and protected utility models, and by the use of licenses. Further sales opportunities were opened up by technical developments in aviation: tension fabrics for wings and outer skin as "airplane fabrics" and aircraft tires, which were offered in around 25 different versions of the "Continental-Aeroplane tire" in 1911.

Around 1910, the use of synthetic rubber began to play an increasing role in tire production, particularly promoted by Dr. Albert Gerlach, chemist and board member of Continental.

From 1903, Continental Gummiwerke AG operated a branch plant in Seelze with up to 400 employees to recover rubber from old rubber (as so-called regranulate). Despite the modest economic success, these efforts played an important role in World War I, when raw rubber supplies from overseas were interrupted. The facilities were operated until 1931.

The workforce grew to around 8,000 by the beginning of World War I, with an additional 5,000 people in domestic and foreign participations and sales representations. The export share had already increased to 55% by 1906 and finally reached its then-peak of over 60% in 1913 – a value that would only be reached again 75 years later. Between 1897 and 1912, several capital increases were carried out, up to 12 million Marks. On this original capital, annual dividends of between 33 and 55% were distributed.

World War I 1914–1918

These production guidelines and restrictions favored efficiently operating large enterprises, leading to a significant decline in businesses due to officially ordered shutdowns and mergers with "absolutely war-critical" companies: out of 185 enterprises before the war began in the German Empire, only 32 remained in October 1917. Mobilization for military service quickly led to personnel shortages, which were compensated by an increased deployment of women.

Expansion between World War I and World War II

After the war, raw material supplies were again possible, but there was an energy supply bottleneck, which was addressed by purchasing a coal mine near Unna in 1920. Overseas branches were reopened. With the legally independent subsidiary Internationale Continental-Caoutchouc-Compagnie in Amsterdam, foreign business could be conducted in "hard" currencies (foreign exchange) during the inflation period of 1922–23.

Increasingly, technical rubber products such as conveyor belts and printing rollers were produced. Novel combination elements using rubber included "Continental-Schwingmetall", rubber-metal mounts for engines and transmissions, which reduced the transmission of noise and vibrations to the chassis. By acquiring Hannoversche Gummiwerke Excelsior AG in Limmer, Peters Union AG in Frankfurt am Main (formerly Mitteldeutsche Gummiwarenfabrik L. Peter AG) with its Korbach plant in 1928/1929, and other competitors, Continental further increased its market share, so that it supplied two-thirds of German rubber production.

However, the diversity of products revealed significant weaknesses in production processes, which showed idle times of up to one-third of working hours – combined with a considerable waste of energy and material. Through cooperation with Goodrich, the company management had become familiar with the Bedaux system, a method for analyzing, evaluating, and rationalizing work processes. Based on Scientific Management, work processes – even in the writing offices – were recorded in time and motion studies, from which a remuneration system of guaranteed basic wage and performance bonus was developed (cf. also REFA).

At the end of the 1920s, the share capital was 40 million Reichsmark, on which annual dividends of between 6 and 10% were distributed. The workforce, including the acquired plants, was almost 17,000 people in 1929 and decreased to about 10,000 people at the beginning of the 1930s due to rationalization measures and the Great Depression.

Post-war period until the 1960s

In 1946, 16 former concentration camp prisoners from Ahlem wrote a letter to the British Military Government in Germany, protesting "in the name of 850 dead comrades who were murdered at Conti by beatings, hunger, and other tortures (...) most emphatically against the reinstatement of the Nazi plant manager of Continental Gummiwerke AG, Fritz Koenecke, as well as the former Nazi board members." Koenecke had been dismissed the previous year by the new company head Pinkenburg, appointed by the Allies, who later had to serve a prison sentence for fraud.

By the mid-1950s, technological parity with US companies was achieved; cooperation with General Tire ended in 1954. In that year, extensive new office buildings, including the striking 15-story Conti-Hochhaus and two annexes, were occupied at Königsworther Platz in Hanover, built in 1952/1953 according to plans by architects Ernst Zinsser and Werner Dierschke. In 1955, Continental was the first German tire company to bring the tubeless tire to series production maturity. In 1960, the company achieved parity with the US tire industry in the new belted tire technology (textile belt with rayon cord carcass). By the end of the 1950s, Continental had regained its dominant market position (40%) with the production of 12 million tires worth almost one billion DM (in the German market ahead of Dunlop with 18%, Phoenix AG with 12%, and Michelin with 1%).

In the "economic miracle years," despite sales growth, a radical structural change was underway in the rubber industry that fundamentally altered the tire market. The German automotive market had become the second most important worldwide. Foreign manufacturers pushed into the market with low-price offers and established their own production facilities or created them through company takeovers – such as Goodyear in 1962 with the takeover of Fulda Reifen.

Plans pursued from 1969 to build a tire factory for the Italian market in Brixen (South Tyrol) fell through after fierce resistance from the local population.

Crisis in the 1970s

In tire construction, the belted tire (with its radial construction) replaced the diagonal construction, with textile and steel belts initially competing with each other. Continental favored the textile belted tire. Michelin launched the steel belted tire on the market at the beginning of the 1970s, which achieved a doubled mileage of up to 60,000 km with high load capacity. Michelin's market shares in Germany tripled in just three years from 10% (1970) to 32% (1972).

Due to the advantages of the new steel belted tires, the market share of German tire manufacturers plummeted within a short time from about 75% to less than 30%. In 1969, Continental was still the market leader with 45% of passenger car and about 40% of truck tires, but by 1972 it lost half of this market share – initially in the replacement market, and subsequently also in original equipment, especially for cars increasingly manufactured with front-wheel drive and higher performance.

As a result, in 1972, for the first time after the war, a negative operating result with a loss of 68 million DM was recorded. In a letter to the supervisory board in September 1973, the new CEO Carl Horst Hahn clarified his analysis: Continental's factories were largely incorrectly structured both in terms of product range and production processes, and working conditions in many areas were no longer up to date. Therefore, labor productivity was low and quality was poor. In a first step, quality assurance was organizationally anchored directly with the CEO as a central function. "We must master the technology so that all tires are so round that we can throw away the non-round tires," was Hahn's new directive, thereby eliminating the previously common practice of producing five times the number of tires for original equipment orders, then selecting the highest quality ones, and selling the rest at dumping prices in the replacement business. Continental tires were marked with a yellow banderole and identified as a quality and brand product in the replacement business; Continental also eventually returned to the original equipment business in the long term.

Again, attempts were made to compensate for the technical backlog through extensive license acquisitions or technology purchases, accompanied by an expansion and restructuring of internal research and development work. This also applied to vibration dampening and molded articles. In the V-belt sector, for example, the technology of the US-American world market leader Dayco could be exploited, leading to a regaining of shares in the V-belt business.

1980s and 1990s

In October 1982, the company again signed a cooperation agreement with the US tire manufacturer General Tire, which in 1981 had a global market share of 2.9% and produced 500,000 tires annually in the USA. In 1987, GenCorp sold its subsidiary General Tire entirely to Continental AG.

From 1990 to 1993, the Italian tire manufacturer Pirelli attempted to take over Continental AG. This would have been one of the first cases in which a large German company was taken over by a foreign competitor. Accordingly, there was extensive media coverage. Continental AG tried to prevent the hostile takeover. This succeeded because a defense front led by Deutsche Bank acquired a blocking minority and Pirelli ran out of liquidity after a long struggle.

Restructuring and plant closures

Germany

In 2005, passenger car tire production experienced unexpectedly low growth. As a result, CEO Manfred Wennemer announced on November 22, 2005, the discontinuation of passenger car tire production at the Hanover-Stöcken main plant by the end of 2006, despite its profitability. This led to 320 job losses. This prompted protests from the workforce. On December 6, 2005, for the first time in the history of Continental AG, a full employee assembly of all employees in Germany took place at 26 locations. Here, employee representatives demanded the withdrawal of the announced plant closure. On January 23, 2006, another employee action day took place with a demonstration in front of the company's headquarters in Hanover. One day later, a compromise (closure only at the end of 2007) was reached at a meeting between management, the works council, and the union, which resulted in the dismissal of around 400 employees.

During his tenure as CEO of Continental AG, Wennemer consistently oriented production towards cost considerations, promoting not only cost reductions in administration but also the relocation of production to low-wage countries. Fierce criticism was leveled at the premature termination of an agreement with the union and works council regarding the preservation of jobs in exchange for unpaid overtime at the Hanover main plant at the end of 2005.

In March 2009, it was announced that the remaining truck tire production in Hanover-Stöcken would be shut down. This meant the closure of the last remaining tire production at the Hanover headquarters. Nearly 800 employees were affected.

In November 2013, Continental opened a new ContiLifeCycle plant in Hanover-Stöcken, a combination of hot and cold retreading plant for truck and bus tires with a rubber recycling facility, which at full capacity has an annual capacity of 180,000 tires.

The former Powertrain division, with recent revenues of 7 billion euros and approximately 40,100 employees, was spun off on September 15, 2021, and has been listed on the Frankfurt Stock Exchange as Vitesco Technologies since September 16, 2021.

A few days after the local elections in North Rhine-Westphalia in 2020, the group management announced the closure plans for the Uniroyal tire plant in Aachen-Rothe Erde, which had existed since the late 1920s, on September 30, 2020. Despite the profitable tire division, 1800 employees were affected by the closure at the end of 2021. In April 2021, Continental AG announced that the complete closure would be postponed by one year to the end of 2022. In early June 2022, it was announced that fuel tanks would be produced in Alsdorf starting in the first quarter of 2023. A new plant was to be built there by Continental Fuel Storage Systems GmbH.

In July 2023, Continental announced its intention to close its plant in Gifhorn, which is responsible for assembling air supply systems, among other things, by the end of 2027 due to excessive cost pressure. The closure affects around 450 jobs.