Continental Cuts Margin Target Over Tariffs Ahead of Breakup
[Stay on top of transportation news: .]
Continental AG lowered a profitability target for the year due to rising costs from U.S. President Donald Trump’s tariffs as the German automotive supplier forges ahead with a plan to dismantle itself.
Continental now sees an adjusted Ebit margin of as much as 11% for this fiscal year, from as high as 11.5% previously. The change reflects lower revenue at its ContiTech industrial unit and the impact of U.S. levies on the tires business. The Aumovio car-parts division, which isn’t included in the outlook because of its planned spinoff in September, on June 24 unveiled plans to improve its margin.
“We have imports from Europe hit by tariffs since the beginning of May, and also need to consider steel and aluminum duties,” Continental CEO Nikolai Setzer said during a call with reporters. “That leads to higher production costs in the US.”
Continental is tempering its earnings ambitions as it prepares to list Aumovio in Frankfurt and sell ContiTech next year to focus solely on tires. The plan reverses decades of acquisitions and is one of several strategic shakeups reordering Europe’s automotive industry, which is contending with tariffs, intensifying competition from China and high labor and energy costs in Europe.
Matt Silver, CEO of Cargado, discusses how AI, data and smarter platforms are reshaping cross-border shipping.Tune in above or by going to .
Its peers ZF Friedrichshafen AG and Robert Bosch GmbH are cutting jobs and closing factories, while automakers including Porsche AG and its parent Volkswagen AG are reducing production capacity to deal with muted demand in their home region.
Aumovio, which makes products including sensors, brake systems and displays, in past years struggled with high investment needs and stiff competition. As a stand-alone company, it targets an adjusted Ebit margin of as high as 8% by the end of the decade, from 2.5% last year. Aumovio wants to achieve that in part with cost reductions, and is in the process of cutting six factories by 2027 to end up with 50 globally.
Aumovio will continue to pursue “clever portfolio management,” its CEO Philipp von Hirschheydt said in an interview.
Continental said earlier June 24 it may use proceeds from the ContiTech sale for special dividends and share buybacks, and also announced new sales and profit ambitions for the combined tires and ContiTech operations. In the next three to five years, Continental sees potential for consolidated sales of as much as €22 billion and a consolidated adjusted Ebit margin of as high as 14.5%.
Continental’s most recent midterm targets, announced in 2023, forecast that sales at the tires unit could reach 18 billion euros, and 9 billion euros at ContiTech. Those figures still included the contribution from OESL, a business that generated 1.9 billion euros in revenue last year and will be sold in the second half.
Want more news? Listen to today's daily briefing above or go here for more info
“The markets are weaker than what we expected back then,” Setzer said, citing slowing demand for cars and tires in Europe. “In America we need to see how the tariffs play out.”
As a smaller and more nimble manufacturer, Continental intends to grow its business selling high-performance tires while expanding in Asia and North America and leaving less promising sectors. It has already announced it’s exiting agricultural tires and ending truck tire production in India.
ContiTech employs almost 40,000 people globally and makes an array of rubber and plastics products. The tires business — Continental’s most profitable division — generates most of its sales supplying passenger cars.
