Continental Rethinks 2009 Strategy

Even though car makers were massively affected by the global economic crisis, an indirect consequence is that various suppliers also experience difficult times, with lowered demand and reduced interest in most emerging markets. Continental makes no exception from this rule and, according to Autonews, the tire manufacturer may reconsider its 2009 market strategy, just to be sure it manages to remain on the floating line.

One of the measures it prepares concerns the dividends paid to shareholders which are said to total approximately 338 million euros. According to figures provided by the same source, Continental paid a 2.00 euro per share dividend. However, the German company intends to preserve its cash reserves by delaying payments to shareholders, just in case the times get even tougher.

"We assume that free cash flow will remain in the three-digit millions range despite the very difficult market environment predicted for 2009," Chief Financial officer Alan Hippe told Autonews.

Beside all of these, Continental prepares unprecedented cost-cutting measures, such as reorganized investment plans (reduced by 500 million euros) or lowered developments costs (reduced by 200 million euros).

Continental is not the only car part supplier which is currently experiencing difficult times as a consequence of the financial recession and analysts predict even tougher times in the next few months. Moreover, even if they receive Government financial aid, the Detroit 3, probably the most popular name in the automotive industry in the recent period, may get closer to bankruptcy as soon as mid-2009, according to reports coming from consulting firms.

"To have it all stop tomorrow isn't what the industry wants or needs. They need some lead time to work this through the system,” Michael Robinette, vice president of forecast services with consulting firm CSM Worldwide, commented on the continuously deepening crisis of the automotive industry.