By Dominic Chopping

Auto-parts maker Continental will begin exploring a separation of its ContiTech business, with a sale of the unit the most likely option.

Continental said Tuesday that it will assess how to proceed with making ContiTech--a unit that manufactures products such as hoses and conveyer belts as well as materials for vehicle interiors--independent.

"As things stand, Continental considers a sale of ContiTech to be the most likely option," it said.

The German company is currently spinning-off its automotive unit, which it plans to list on the Frankfurt stock exchange by the end of this year. At the same time, it is trying to sell ContiTech's original equipment solutions business that supplies rubber products to automotive manufacturers to increase the unit's focus on industrial customers.

The company seeks to boost earnings and sales by carving out its individual businesses to give them greater flexibility in responding to market trends.

Following the separation of ContiTech and the automotive units, Continental will only manufacture tires.

"We are creating three strong, independent champions that will achieve their full growth and value creation potential as independent companies," Continental Chief Executive Nikolai Setzer said Tuesday.

The auto industry as whole is facing mounting challenges amid sluggish global economic growth and a stuttering transition to electric vehicles, while U.S. President Trump's tariffs on automobile imports and his planned levies on auto parts creates further market pressures.

The company has flagged higher levels of uncertainty due to the U.S. import costs, which will impact its strategic planning and market predictions. Global light-vehicle production volumes in its automotive business are expected fall by mid-single-digit percentages in the first quarter.

Ahead of the tariffs, the company had already been busy implementing cost-cutting measures, price adjustments and efficiency improvements to align its cost structure to global market conditions.

The company recently announced the end of production at three ContiTech factories in Germany as well as a halt to toolmaking in two other locations, mainly due to a severe decline in demand from the automotive and mining industry in particular. The decision will affect around 580 ContiTech jobs this year, from the units total German workforce of around 11,000.

It said the separation of ContiTech will be implemented after the automotive spinoff and sale of the original equipment solutions business, with ContiTech potentially becoming independent during 2026.

With the creation of three independent companies, Continental said it will make changes to the executive board. Board member for HR and sustainability and director of labor relations Ariane Reinhart will step down on June 30, with Ulrike Hintze taking over labor relations and HR.

Write to Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

April 08, 2025 06:12 ET (10:12 GMT)

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