DETROIT -- Continental AG CEO Karl-Thomas Neumann said today that supplier consolidation will accelerate in the current industry crisis, with Continental itself possibly being in that mix.
About 90 percent of Continentals publicly traded shares have been tendered for purchase by another German supplier -- Schaeffler Group -- Neumann said at a keynote speech here this morning at the Converence 2008 conference.
He said he didnt know how that offer will turn out. Schaeffler initially said it would buy only a minority share of Continental -- up to 49.9 percent. At the time, the offer was valued at about 12 billion euros ($16.3 billion).
But it is unclear how much Schaeffler can raise in the tough credit environment. Schaeffler also must decide how many tendered shares it will acquire.
However the investment turns out, Neumann said, the relationship will make Continental stronger.
This is a new chapter, he said.
Continental is a world leader in tires, fuel systems, telematics and safety systems. With its acquisition last year of Siemens VDO Automotive, the combined companies estimated 2007 sales to automakers totaled about $25 billion, ranking it No. 4 on the Automotive News list of the top 100 global suppliers. Combining with Schaeffler likely would make it No. 3.
Size will be important in weathering the current downturn, Neumann said. He said Continental needs resources not only to manufacture across the globe but also to put engineering teams in key markets around the world. Those teams must understand and develop parts for the different needs of customers, ranging from developed regions to emerging countries such as India and China.
The current market downturn is taking a toll on suppliers. Neumann said that this year, between 200 and 300 suppliers will be bought or disappear. A credit crisis is bound to accelerate the losses, he said.
That would continue a trend. In 1988, there were nearly 30,000 suppliers globally. Today, Neumann said, the number is about 4,500.