Automotive News Europe - February 2, 2009 - 4

PAGE 4 · www.autonewseurope.com Commentary February 2 , 2009 Problems at powertrain foil Neumann Bettina Mayer Automotive News Europe Continental’s money-losing powertrain division is a long-term problem child. Industry insiders believe that the division needs to push ahead with future products. But Continental insiders fear that CEO KarlThomas Neumann has too many important tasks facing him to be able to fix the powertrain unit. Along with being Continental CEO and chief technical officer, Neumann also heads the powertrain division, which lost ¤73.5 million in 2007. A Continental source said the 2008 results will be even worse. Who can Bettina Mayer turn the powertrain division around, while Neumann holds Schaeffler Group owner Maria-Elisabeth Schaeffler at bay? Neumann was looking for a successor at the head of the powertrain division, but sources say he stopped the search because outsiders were skeptical about the future of a unified Schaeffler and Continental. But there may not be time to wait. “The powertrain division needs much more management attention soon,” a Continental source said. The unit has been losing key contracts from loyal customers to its rivals. Both GM and Daimler have gone outside for their supply of lithium-ion batteries, even though Continental was a leading candidate. Meanwhile, Neumann has to report to Volkswagen CEO Martin Winterkorn on the status of the companies’ cooperation on a small diesel engine for the upcoming Polo. Insiders say that Continental is late on the development. If Schaeffler and Continental combine their automotive businesses, there will be even more work for Neumann. He’ll need to quickly find someone to take care of the important ANE powertrain operations. Photo: W. Schüring Maria-Elisabeth Schaeffler (above) and her son Georg acquired 90.2 percent of Continental’s stock, plus four board seats and the chairmanship. But at what price? Can Conti-Schaeffler get out from under its debt? Bettina Mayer Automotive News Europe MUNICH Maria-Elisabeth Schaeffler’s success in winning control of Continental’s supervisory board leaves her with an even tougher challenge: Can the new entity get out from under its mountain of debt? In principle, Continental and Schaeffler Group will integrate their automotive businesses and create a “global champion” that threatens No. 1 supplier Robert Bosch. The combined supplier giant would have automotive group sales of about ¤22 billion, which would put it among the top five suppliers in Europe. But the acquisition by MariaElisabeth Schaeffler and her son Georg of 90.2 percent of Continental’s stock, the chairmanship and four supervisory board seats has come at a big price. As the automotive industry passes through its worst crisis in 15 years, the combined Continental and Schaeffler companies owe banks ¤22.8 billion. The annual interest payments come to about ¤1.2 billion, according to a source familiar with the matter. Schaeffler accumulated ¤11 billion in debt from the Continental purchase, an amount which exceeds its 2007 sales of ¤ 8.9 billion. Continental still has a large debt from its ¤11.4 billion acquisition of German supplier Siemens VDO in 2007. After analyzing the combined Continental and Schaeffler unit, Continental chief financial officer Alan Hippe recently said that the operation lacks sufficient equity capital. Shortly thereafter, he resigned to take the top finance post at diversified steelmaker ThyssenKrupp. It does not help that Continental’s share price has plummeted since the Schaeffler acquisition. When Schaeffler announced its intention to buy up Continental shares at ¤75 a share, the share price was around ¤ 30 a share. As of January 28, the price had plummeted to ¤14.08 a share. Schaeffler and Continental could get ¤1 billion in aid from the German states of Bavaria and Lower Saxony, where the two companies are based. But Lower Saxony Prime Minister Christian Wulff demanded to see details of the business plan of the future enterprise as a condition for any aid, a source close to Continental said. Selling off tire and rubber To overcome Schaeffler’s financial crisis, Continental’s new supervisory board has agreed to spin off the tire and rubber-parts division, one of the world’s largest tire makers. “Mostly that’s the first step in disposing of a part of a company,” said Christian Mueller, consultant at IHS Global Insight. Standard and Poor’s warned investors that Continental would default on its debt by August 2010 if management had not sold its tire business, a key cash flow generator for the group. “Meeting this target would only be achievable if the company were to sell its rubber activities,” the ratings agency said in a statement. A Continental source said that the business was worth about ¤7 billion before the crisis. “Now Continental will get only ¤3.5 to ¤4 billion for it,” this source said. The company already has tried to sell the division to reduce its debt burden but could not find a buyer in the current poor economic climate. Hubertus Von Grünberg, the Continental chairman who gave up that post in an emergency board meeting on Jan. 24, will continue to be in charge of finding a buyer. His vast network of contacts is seen as key in this divestment. “After (former Continental CEO) Manfred Wennemer and Alan Hippe, he is the only remaining person who could be able to interest companies in the rubber group,” a source said. Wennemer left the company last year. Continental’s new chairman is expected to be Schaeffler lawyer Rolf Koerfer, a Dusseldorf-based partner ANE at law firm Allen & Overy. Transmissions drove Hub van Doorne’s innovative spirit Dutchman’s determination drove invention of CVT now used by many automakers Wim Oude Weernink Automotive News Europe If there is one automotive technology for which Dutchman Hub van Doorne became world famous, it is the continuously variable transmission. The creation of the CVT is one of the reasons that van Doorne has earned a place in the European Automotive Hall of Fame. In March, he will join three other Class of 2009 inductees in the Hall: Sports car and tractor maker Ferruccio Lamborghini; prolific independent sports car designer Giovanni Michelotti; and former MercedesBenz CEO Werner Breitschwerdt. Shortly after the foundation of his machine shop and trailer-making plant in the southern Dutch town of Eindhoven in 1928, Van Doorne started working on innovative transmission systems. His Trado allwheel-drive system for military vehicles was patented in 1937. It was used for more than 30 years on DAF artillery trucks. The system was well known for its off- Hub van Doorne’s road capabilities, belief in the merits even under the of continuously most severe con- variable transmisditions. It was of- sions have been ficially certified fully justified. by NATO for use in its vehicles in the 1950’s. But even while focusing on the foundation of his heavy truck manufacturing activities under the name of DAF (Van Doorne’s Automobielfabrieken), from 1948 onwards Hub van Doorne’s dream was to build a fully automatic small car. This ambition led to his first CVT application, a rubber-belt transmission that he was able to use in the DAF 600, a compact four-seat car, in 1958. Hall of Fame induction event Date: Tuesday, March 3, 2009 Where: Hotel InterContinental, Geneva, Switzerland Dress Code: Business attire Tickets: €185 each; €1,850 table of 10 7:00pm: Cocktail Reception 7:45pm: Dinner and 2009 member inductions First used in the DAF 600, (left) the continuously variable transmission is now part of a wide variety of cars, including the Nissan Murano. Van Doorne’s determination to overcome any hurdle to achieve his goal became legendary inside his small factory. His first CVT-equipped prototype car would go no faster than 36kph during early test drives in 1956. But 20 years later, Van Doorne had proven his system’s worth. By then almost 1 million DAF passengers cars with the Variomatic rubber-belt CVT had been sold, and DAFs had won races and rallies. But Hub van Doorne did not rest on his laurels, and initiated research on his second generation CVT after his retirement in 1965, working from a small shed behind his house. When he died in 1979, his innovative CVT with a flexible steel push belt was still a prototype. But in 1985 mass production started at Van Doorne’s Transmissie, or VDT, a dedicated CVT production facility in the For more information go to: www.autohalloffame.org Netherlands. Ford, with the Fiesta, and Fiat, with the Uno, were early adopters of the system. VDT was taken over by German supplier Robert Bosch in 1995. In 2007, the company produced its 10 millionth CVT belt. The system is now applied to models ranging from the Toyota iQ minicar to the Mercedes-Benz Aclass entry premium model and the ANE Nissan Murano large SUV.

http://www.autonewseurope.com http://www.autohalloffame.org

Automotive News Europe - February 2, 2009

Table of Contents for the Digital Edition of Automotive News Europe - February 2, 2009