The German tire and technology giant Continental AG has informed employees at its tire manufacturing plant in Aachen, Germany, of plans to close the facility by the end of 2021, based on a report on September 15 in the Handelsblatt newspaper. The closure could potentially affect more than 1,800 employees, but final decisions have yet to be made.
On September 1, 2020, the company had announced plans to expand its restructuring program, with “additional measures to cut costs and increase efficiency.” According to Continental, the program is aimed at ensuring the company’s viability and strengthening its global competitiveness over the long term. The expansion to the program would see costs being cut by up to 1 billion euro ($1.18 billion) per year by 2023 - up from the cost reduction of 500 million euro ($592.5 million) which was originally planned. In order to bring about these savings, the board of Continental planned to cut 13,000 jobs in Germany instead of 7,000, as planned earlier. The number of jobs that could potentially be cut across the world has increased from 20,000 to 30,000.
The job cuts at the Aachen plant are necessary in order to reduce capacity that is no longer needed in light of the severe impact of the coronavirus crisis and structural changes in the auto industry, the Hanover-based company says. The auto supply division of the company was badly hit by the impact of plant closures during the coronavirus-shutdown earlier this year. Global auto demand remains tepid.
According to the chemical union IG BCE, which represents the employees of Continental’s rubber division, "the most modern and particularly high-margin tires" are manufactured at the Aachen facility. The union expressed its outrage that parts of production could be relocated to low-cost locations.
The Handelsblatt quoted the works council chairman, Mr. Udo Bohnhof, as saying, “This project hits us without any warning… That contradicts central Conti values ??such as trust and solidarity.”
The IG BCE alleges that the employees of Continental’s profitable tire plants are being held responsible for the comparatively-less profitable automotive business. They point out that even in the relatively challenging 2019 financial year, the company posted an operating profit margin of over 7%, which was only possible due to the tire business, which contributed with an EBIT of almost 15%. In the meanwhile, the automotive business is not performing nearly as well, with only the Chassis & Safety division (based 2020 Vehicle Networking and Information) posting an adjusted return of over 7%, while the return in the sensor and software area was less than 5% and the drive business generated next to no profit.
"The clear cut in the rubber business cannot be justified either with the transformation of the auto industry or with the corona crisis. That is simply deleting for the sake of deleting,” said Mr. Francesco Grioli, member of the executive board of IG BCE and the supervisory board of Continental. He further asserted that the company would meet with IG BCE’s resistance at all levels. “What we need in the current situation are intelligent instruments to implement changes in a socially acceptable manner and to keep as many skilled workers as possible on board - and no head count management from the past century,” Mr. Grioli said.
Over the past few months, the HR director at Continental, Ariane Reinhart, has called for a collective reduction in working hours and for further training measures to prevent job losses. She says the board of directors is seeking to have discussions with the employee representatives. However, trade union circles say there have not yet been any negotiations with the company.