BERLIN -- Continental is fighting for price increases in negotiations with customers and seeking ways to further cut inventory to improve its automotive business performance.
The German supplier is betting on higher pricing and a focus on premium products to compensate for a declining market in its tires sector in North America and Europe, which together make up around 70 percent of its total sales.
Chief Financial Officer Katja Duerrfeld said she did not expect Continental to return to pre-COVID levels of working capital, adding on Wednesday's earnings call that she forecasts it will fall by around 10 percent from current levels.
"We are working hard to determine the right level of inventory for the different parts and components we have."
"We are fighting for our new price negotiations ... to make sure we get what we deserve for the products and services we provide," Duerrfeld added.
Asked about Continental's position on ongoing negotiations over improved pay and benefits with the United Auto Workers in the U.S., Deurrfeld said their demands were "strong" and would lead to a "new category" of cost inflation.
Continental said it currently expects increased costs of 1.4 billion euros ($1.54 billion) from wages, salaries, energy and logistics.
The supplier said it had struggled with higher logistics costs as well as currency change effects primarily from the Chinese yuan and Mexican peso in the second quarter but expected normalization in the second half.
Continental lowered its tire sales outlook on Wednesday to 14-15 billion euros from 14.5-15.5 billion previously but kept its margin outlook unchanged as higher pricing and a focus on premium products boosted second quarter revenue.
It needed to "make up considerable ground" in its automotive segment, which fell short of expectations in the second quarter partly because of currency exchange effects and freight costs.
The company confirmed its lower-than-expected adjusted earnings margin 4.8 percent on sales of 10.4 billion euros, as reported in preliminary results in July.
The automotive division's loss on its earnings margin of 0.6 percent was below the consensus of a 1 percent rise, despite meeting expectations for sales at 5.1 billion euros.
Continental said it expects passenger car and light commercial vehicle production to rise 3-5 percent this year from a previous forecast of a 2-4 percent rise but expects the global tire replacement business to remain unchanged or decline by up to 2 percent.
Preliminary figures showed Continental's global passenger car and light commercial vehicle production grew by around 16 percent in the second quarter compared to last year.
Continental ranks No. 9 on Automotive News Europe's 2023 list of the world's top suppliers, with annual parts sales to automakers of $25.40 billion in 2022.