Continental AG, the German auto parts giant, has announced that it will phase out over 5,000 jobs across various production plants in Germany, the U.S. and Italy, citing several reasons including the industry’s accelerated transition to electric mobility and the profitability of autonomous and connected driving.
The organizational restructuring will affect manufacturing plants in Roding, Limbach-Oberfrohna and Babenhausen in Germany, Virginia in the U.S., and Pisa, Italy. Though the confirmation came on Nov. 20, the plans to close manufacturing plants – and therefore the employees at those facilities – had been discussed in its supervisory board meeting on Sept. 25.
This apart, Continental’s supervisory board will convene again with the local works council in Rubí, Spain, to discuss the future prospects of the location’s manufacturing plant. The plant primarily produces analogy displays and controls, and currently employs 760 people.
Continental will shut down its business in hydraulic components for gasoline and diesel engines in the coming years, which is in line with its Transformation 2019-29 program that was established to bolster the company’s long-term prospects in the auto market.
Though Germany has traditionally remained the epicentre of auto developments, the country’s legacy automakers and parts manufacturers like Continental, have been playing catch-up with consumer trends and cutting-edge technology that has been disrupting the industry over the last decade.
Consumers are increasingly aware of the issues surrounding carbon emissions; this is a factor in the radically increased demand for electric vehicles. German automakers, busy building efficient and powerful combustion engines, were caught off guard at the mobility disruption and had to scuttle to stay relevant.
For a parts manufacturer like Continental, this meant winding up the production of several legacy systems like display and control technologies and transferring research & development teams. In its statement, Continental said that this was “due to the industry’s abrupt switch from analog to digital technologies, as well as a rapidly deteriorating competitive situation and a corresponding sharp increase in cost pressure.”
The statement reinforces the German auto industry’s issue with trifling the electric vehicle segment and autonomous driving technology at its advent – inaction that resulted in the new-age mobility’s ground zero shifting to the U.S. and China. Until recently, German automakers largely believed that digitalization was a tool to make driving easier, rather than putting technology at the centre of mobility, as in the case of manufacturers across the U.S. and China.
German auto manufacturers are now in a state of rapid reorientation that can throw the new mobility market wide open again. Elmar Degenhart, the CEO of Continental, has expressed hopes of making good progress with its new resolutions.
“The Supervisory Board is supporting our urgently needed technological transition and thus the strengthening of our competitiveness and future viability. We are focusing on profitable growth areas, quickly and rigorously,” said Degenhart. “These include assisted, automated and connected driving; services for mobility customers; and the tire, industrial and end-customer businesses. The jobs of the future will evolve in these growth areas.”
In an effort to support the employees affected by the structural change, Continental is expanding its corporate-wide internal job market along with employee representatives. The company recently opened a technology and transformation institute that would retrain employees to improve their long-term career prospects and employment opportunities.
“We have been holding intensive, constructive talks with employee representatives for some time. The crucial question now is: how can we implement the necessary measures responsibly and with foresight so that we can emerge stronger from the current reorganization. We will be supporting those employees affected as much as possible,” said Degenhart.
