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Continental AG: From Hanover Rubber Factory to Global Automotive Titan
The 154-Year Journey of a German Industrial Giant Now Splitting in Two
Introduction: A Company at Its Most Consequential Crossroads
On September 18, 2025, a momentous scene unfolded on the Frankfurt Stock Exchange trading floor. AUMOVIO SE, formerly the Automotive group sector of Continental, successfully launched as an independent company with the start of trading. AUMOVIO is a leading global provider of hardware and software solutions for vehicles and holds a strong position in the key growth segments shaping the future of mobility.
For the executives gathered that morning, this was more than just another corporate spinoff. It was the culmination of Continental AG's most radical transformation in its 154-year history—a deliberate splitting apart of a company that had spent decades becoming one of the world's most integrated automotive suppliers. The company's shares opened trading at €35.00, representing a market capitalization of €3.5 billion.
How does a company founded the same year Germany unified as a nation—1871—reinvent itself for an era of electric vehicles, software-defined cars, and autonomous driving? The Continental story is a masterclass in corporate adaptation, near-death experiences, hostile takeovers, and the eternal tension between diversification and focus.
Continental AG, commonly known as Continental and colloquially as Conti, is a German multinational automotive parts manufacturing company. Headquartered in Hanover, Lower Saxony, it is the world's third-largest automotive supplier and the fourth-largest tire manufacturer. Continental specializes in tires, brake systems, vehicle electronics, automotive safety, powertrain, chassis components, tachographs, and other parts for the automotive and transportation industries.
In the past fiscal year, Continental achieved consolidated sales of €39.7 billion (2023: €41.4 billion, -4.1 percent). But behind these numbers lies a far more complex narrative—one involving transformational acquisitions, a hostile takeover that nearly bankrupted two companies, and a strategic pivot that is now splitting Continental into multiple independent entities.
The central question facing investors today: Can the "new" Continental—focused on its highly profitable tire business and industrial rubber products—thrive as a more focused entity? And can AUMOVIO, the spun-off automotive electronics business, compete independently against tech giants and Chinese upstarts in the race toward autonomous mobility?
Founding & Early Years: The Rubber Empire (1871–1920s)
Picture Hanover in 1871—the newly unified German Empire is just months old, Chancellor Otto von Bismarck is consolidating power in Berlin, and a group of financiers and industrialists are meeting to establish a rubber manufacturing venture. The Continental-Caoutchouc und Gutta-Percha Compagnie (Continental) was established in Hanover in 1871, and the city remained the center of the firm's operations. It was by no means the first German rubber company; several small firms had been active in Hanover in the previous decade. Continental was promoted by a group of financiers and industrialists with established interests in the rubber business. The initial capital was 900,000 marks.
The name itself—Caoutchouc und Gutta-Percha—tells the story of an era: caoutchouc referred to natural rubber from South American trees, while gutta-percha was a similar latex derived from tropical trees, used extensively for submarine telegraph cables and golf balls. The firm's product range consisted of waterproofed fabrics, footwear, and solid tires, but soon a general line of industrial rubber goods, medical supplies, and sundry consumer goods, such as balls and toys, was added.
The company's early years were modest. During the 1870s Continental developed slowly; dividends were first paid in 1875 when additional capital was raised. But the 1890s transformed the enterprise entirely, driven by two revolutionary inventions: the safety bicycle and the pneumatic tire.
The Bicycle Boom and the Automobile Revolution
In 1892, Continental began development and production of pneumatic bicycle tires, which was a major success for the brand. The bicycle craze of the 1890s created explosive demand for Continental's products. Between the pneumatic tire introduction and the turn of the century, the company experienced spectacular growth.
But the truly transformational innovation came from automotive applications. In 1904, Continental became the first company in the world to manufacture grooved vehicle tires. Another major product Continental invented was a detachable wheel tire that was made for touring vehicles (1905).
These weren't minor improvements—they were breakthroughs that fundamentally changed vehicle performance. Grooved tires improved traction on wet roads; detachable tires meant motorists could change a flat without specialized tools. Continental was establishing itself as a genuine innovator, not merely a manufacturer.
The American Connection
The company's international ambitions were evident early. American tire giant Goodrich, seeking overseas connections, took a 25% financial stake in Continental in 1920. This relationship provided Continental access to superior technology for tire designs, rubber chemistry, and manufacturing processes. The cross-pollination of American industrial methods with German engineering precision would become a template for Continental's growth strategy.
By the late 1890s, Continental's financial performance had become extraordinary. The workforce expanded from 600 to 2,200 between 1893 and 1903 as demand exploded. This was the first of many periods where Continental would ride a technological wave to rapid growth—a pattern that would repeat with radial tires, electronic brake systems, and eventually automotive electronics.
The Investor Lens
Continental's founding era established several characteristics that persist today: headquarters in Hanover (never moved in 154 years), a focus on rubber-based products, a willingness to pursue technological innovation aggressively, and comfort with international partnerships. The early Goodrich stake presaged the complex ownership structures that would later define the company—most notably the Schaeffler family's controlling position.
Industry Consolidation & Dark History (1920s–1945)
The 1920s brought a very different Continental. The post-World War I German economy was devastated by hyperinflation, reparations payments, and political chaos. Returns were poor compared to the heady prewar levels, and no dividends were paid in 1922, 1923, or 1926. The resulting competitive and financial pressures led to the amalgamation of several German rubber firms to create a new and larger Continental company.
In the late 1920s, Continental merged with several other major rubber industry companies to form the largest rubber company in Germany called Continental Gummi-Werke AG. This consolidation pattern—growing through acquisition during periods of industry distress—would become a recurring strategy.
A Dark Chapter: Nazi Era
Any honest assessment of Continental must acknowledge its role during Germany's darkest period. When the Nazis came to power in Germany in 1933, all members of the Board of Management as well as the authorized signatories and directors of the second management level were obliged to join the Nazi party, the Works Council was purged of "opponents of the regime," and all Jewish members of the Supervisory Board were forced to resign.
Continental didn't merely comply with the regime—it actively participated. German car parts maker Continental revealed that it played a key role in the Nazi war effort and used thousands of slave laborers during World War II. Continental was the world's biggest producer of rubber materials at the time, supplying the Nazi war machine as the horrors of the Holocaust unfolded. Historian Paul Erker, tasked by the company with researching its relationship with the Nazis, said it ended up as a "pillar of the National Socialist armaments and war economy."
As with many other German companies during World War II, Continental used slave labor provided by the Nazi Party in their factories in the 1940s at Hannover-Stöcken, Hannover-Limmer, Hannover-Ahlem, and others, all offshoots of the Neuengamme concentration camp.
According to the study, during World War II Continental used around 10,000 forced laborers, ranging from Italian "young fascists" to temporary workers from occupied Belgium and French and Russian prisoners of war. Some of the most horrific details emerged from the company's own commissioned historical study: The company stated that prisoners at the Sachsenhausen concentration camp were forced to walk around a large gallows until they had walked up to 25 miles each day. Prisoners who fell down or refused to walk were shot.
To Continental's credit, the company commissioned an independent academic study in 2020 to fully investigate its Nazi-era activities—a more comprehensive reckoning than many German industrial firms have undertaken. The company presented the report as a stark lesson, commenting that the corporate culture of Continental, founded in 1871 in Hanover, was gradually "deformed" as it developed from a consumer and leisure focused company into an armaments business. "This shows that corporate cultures can quickly crumble under the pressure of political regimes and opposing social influences," said Ariane Reinhart, a Continental human resources executive.
What Investors Should Understand
This history matters for contemporary investors for several reasons. First, it demonstrates how institutional pressures can corrupt even long-established corporate cultures—a reminder that ESG concerns are not merely about checkbox compliance but about fundamental organizational resilience. Second, it established patterns of government collaboration and industrial policy participation that continued in the post-war period through different mechanisms. Third, Continental's willingness to confront this history publicly (rather than suppress it) suggests a modern corporate culture capable of self-examination—a potentially valuable trait as the company navigates its current transformation.
Post-War Rebuilding & Innovation (1945–1980s)
From the rubble of World War II, Continental had to rebuild—literally and figuratively. The Hanover factories lay damaged, the workforce decimated, and the company's reputation tarnished by its Nazi collaboration. Yet within a decade, Continental would emerge as a leader of Germany's Wirtschaftswunder, the "economic miracle" that transformed West Germany into Europe's industrial powerhouse.
Deutsche Bank played a central role in Continental's reconstruction, with representatives on the board from 1953. The Opel family—who had sold their automobile business to General Motors before the war—remained the largest single shareholder, providing both capital and industrial connections.
Product Innovation Drives Recovery
The 1950s and 1960s saw Continental establish itself as a genuine technology leader. A line of mud tires and snow tires was introduced in 1951, tubeless tires in 1955, and radial tires appeared in 1960. These products kept the firm abreast of general developments, although Continental lagged behind Michelin and Pirelli with radials initially.
But the most remarkable early innovation came in autonomous driving—in 1968. On September 11, 1968, Continental's first electronically controlled driverless car took to the Contidrom, the company's proving ground. This was decades before Google, Tesla, or Waymo existed. The experiment demonstrated Continental's engineering ambition and its early recognition that electronics would transform the automobile.
Competitive Pressures Mount
By the 1970s, the competitive environment had intensified significantly. Continental's sales and profits remained good in the late 1960s, but the rate of growth slackened as competition increased. The 1970s aggravated these tendencies through recessions, oil crises, and rapid transition to radial tires—whose greater durability actually dampened replacement tire sales.
The lesson for investors: even market leaders face secular headwinds. The shift to radial tires improved consumer value but compressed industry revenues. Continental would encounter similar dynamics decades later as automotive electronics commoditized and Chinese competition emerged.
Globalization & The First Transformation: From Tires to Systems (1980s–2000s)
The Continental of 1980 was fundamentally a tire company. The Continental of 2000 was something very different—an integrated automotive systems supplier with global reach. This transformation, accomplished through aggressive M&A, would set the stage for both Continental's later triumphs and near-death experiences.
Long established as the leading tire producer in Germany, Continental AG attained international prominence through a series of major acquisitions in Europe and in the United States starting in 1979. By 1991 Continental was the fourth largest tire producer in the world. After weathering considerable economic pressures in the early 1990s, the company began making significant strides to secure a competitive position in the more lucrative arena of auto components.
The Strategic Pivot
In 1995 the Automotive Systems division was established to intensify the systems business with the automotive industry. This wasn't merely adding another product line—it represented a fundamental strategic reorientation. Continental's leadership recognized that the tire business, while profitable, offered limited growth potential and faced intensifying global competition. Automotive electronics and systems, by contrast, were growing rapidly as vehicles became more sophisticated.
The Teves Acquisition: A Fateful Deal
In 1998, Continental made a transformational acquisition that would have consequences reverberating for decades. When Continental decided to purchase ITT Industries' brake and chassis business for US$1.93 billion in 1998, the head of ITT's brake division, Juergen M. Geissinger, was hired as the CEO of the family-owned bearing and auto parts manufacturer Schaeffler Group. Ten years later, Geissinger returned to Continental with mother-and-son owners Maria-Elisabeth and Georg Schaeffler and a consortium of banks.
This detail is crucial: the executive who lost his position when Continental acquired ITT Teves would later orchestrate Schaeffler's hostile takeover of Continental. Corporate history is often driven by such personal dynamics.
Building the Automotive Systems Empire
In 2001, Continental acquired a controlling interest in Temic, DaimlerChrysler's automotive-electronics business, which is now part of Continental Automotive Systems. The company also purchased German automotive rubber and plastics company Phoenix AG in 2004, and the automotive electronics unit of Motorola in 2006.
Each acquisition added capabilities: Teves brought brake systems, Temic contributed automotive electronics, Phoenix strengthened industrial rubber products, and Motorola's unit provided telematics and infotainment technology. By 2006, Continental had assembled most of the building blocks for an integrated automotive systems supplier.
But the company wasn't finished. The biggest deal was yet to come.
The Siemens VDO Megadeal: Betting the Company (2007)
In the history of automotive supplier M&A, few deals loom as large as Continental's 2007 acquisition of Siemens VDO. In the largest acquisition in the history of auto suppliers, Siemens AG said it will sell its Siemens VDO Automotive parts unit to German rival Continental AG for $15.66 billion, or 11.4 billion euros.
On July 25, 2007, after almost half a year of weighing strategic and financial alternatives, the technology conglomerate Siemens AG agreed to sell its automotive supply division ("Siemens VDO Automotive") to the German-based automotive supplier Continental AG. At a value of EUR 11.4 billion (USD 15.7 billion), this acquisition represented the largest in Continental's corporate history as well as in the automotive supply industry up to that date. The combined firm ranked among the five largest automotive suppliers in the world, within reach of the few industry leaders.
The Strategic Logic
Why bet the company on Siemens VDO? The rationale was compelling: On the basis of 2006, Continental and Siemens VDO realize aggregate annual sales of around 25 billion euros with a workforce of close to 140,000. Thus, Continental advances to a position among the top five worldwide in the automotive supply industry.
Continental's leadership saw the automotive industry consolidating rapidly. Only the largest, most technologically sophisticated suppliers would survive as automakers demanded integrated systems rather than discrete components. Siemens VDO brought exactly what Continental needed: powertrain electronics, infotainment systems, telematics, and a massive global footprint.
"In buying Siemens VDO Automotive AG, Continental is taking the logical next step in its evolution to full-range, integrated systems supplier," said Dr. Karl-Thomas Neumann, an Executive Board member responsible for the Automotive Systems division. He noted that the purchase was the latest in a string that began with the purchase of Teves in 1998.
The Financing Gamble
The deal required Continental to take on massive debt, fundamentally changing its capital structure. Four days after the EU Commission issued its go-ahead without conditions, the company remitted payment for the purchase, in the amount of €11.4 billion, including tax benefits of around €1 billion, to Siemens AG.
With sales of more than €25 billion (2006), the new Continental Corporation is now among the top five in the automotive supplier industry and is organized into six divisions: The new Chassis & Safety division (more than €5 billion in sales) offers brake and chassis systems. The new Powertrain division (more than €5 billion in sales) offers products for powertrain, engine management, injection technology, sensors, actuators and hybrid technology. The new Interior division (more than €6 billion in sales) offers information management with systems for the vehicle interior.
Continental expected annual synergies of approximately €170 million by 2010—a reasonable target given the businesses' complementary nature. The integration was scheduled for completion by the end of 2009.
The deal made Continental a genuine automotive systems powerhouse. What no one anticipated was that within 12 months, the company would be fighting for its survival—not because the acquisition failed, but because a financial crisis and a determined family would turn the hunter into prey.
The Schaeffler Hostile Takeover: David vs. Goliath (2008)
July 2008. Continental's integration of Siemens VDO is underway but incomplete. The company is heavily leveraged from the acquisition. And then, seemingly from nowhere, comes the announcement that shook German industry: the family-owned Schaeffler Group is launching a hostile bid for Continental.
In 2007 the company was the world's second-largest manufacturer of ball bearings. In order to become the world leader in the automotive components industry, on 15 July 2008, Schaeffler launched a bid to acquire publicly-held Continental AG, the world's sixth-largest automotive components supplier. After fiercely opposing the bid, Continental ultimately accepted Schaeffler's offer, but compelled Schaeffler to sign an investment agreement which was largely in its favor. Schaeffler's bid was a bold move, considering the fact that it was nearly three times smaller than Continental. Also, financing the acquisition and taking over Continental's businesses during times of severe global financial and economic crises was a big challenge.
The Setup: A Perfect Storm
In 2008, Continental appeared overextended with its integration of VDO and had since lost almost half of its market capitalisation when it found itself to be the hostile takeover target of the family-owned Schaeffler AG.
The timing was audacious—and disastrous for all parties. Schaeffler accumulated a significant stake in Continental through derivatives and equity purchases before announcing its intentions, catching Continental's management completely off-guard. Continental's board fiercely opposed the bid, arguing that Schaeffler lacked the resources to acquire and integrate a company three times its size.
The Financial Crisis Twist
What happened next is one of the most dramatic chapters in German corporate history. Private company Schaeffler AG, owned by a German family Scheffler, gained control of Continental AG – the second largest European producer of auto parts and tires – in 2008 at the height of the global financial crisis.
Due to the lucrative offer to Continental shareholders, they tendered a total of 82.41% of their shares to Schaeffler, combined with the 7.78% stake Schaeffler already held. The new owner of Continental AG, Schaeffler Group, has announced that it now holds a total of 90.19% of the tyre and automotive system supplier.
Schaeffler had intended a "reverse takeover"—gaining control of Continental while keeping its own family ownership structure intact. But with 90% of Continental shares tendered at €75 per share, and markets collapsing amid the 2008 financial crisis, Schaeffler suddenly faced a debt crisis that threatened both companies' survival.
Political Intervention and Resolution
In August 2008 and after a protracted standoff, Continental agreed to be taken over by the Schaeffler Group in a deal that valued the company at approximately €12 billion. Schaeffler in return agreed to limit its position to less than 50% for a period of four years and support Continental's ongoing strategy. This arrangement was overseen by former German Chancellor Gerhard Schroeder. Continental's CEO Manfred Wennemer, who had opposed Schaeffler's offer, resigned and was succeeded by Karl-Thomas Neumann on 1 September 2008. Less than one year later, Schaeffler's CEO Juergen Geissinger succeeded in installing his longtime confidant Elmar Degenhart, the head of his automotive division, as the new chief executive of Continental, ousting Neumann.
The boardroom machinations were brutal. Wennemer, who had built Continental into an automotive powerhouse through a decade of acquisitions, was forced out. His successor, Neumann—brought in partly to appease Schaeffler—lasted less than a year before being replaced by Schaeffler's chosen candidate, Degenhart. Remember: Degenhart had worked for Geissinger at Schaeffler's automotive division after Geissinger lost his position when Continental acquired ITT Teves in 1998. The wheel had come full circle.
Near-Death and Recovery
At one point its indirect and direct holding was 90%, but these excess shares have now been partially sold off. For its part Continental incurred around EUR10 billion during an earlier takeover of the VDO automotive components unit of Siemens VDO. During the height of the financial crisis it looked as though the combined debt burden of both companies could lead to the potential for the banks taking control of both firms. But both firms have subsequently enjoyed robust financial results and their liquidity has improved, with Continental's net indebtedness declining to a far more manageable EUR5.3 billion by the end of 2012.
Schaeffler had to transfer excess shares to banks as collateral, reducing its stake to just under 50%. Both companies embarked on aggressive debt reduction programs. The relationship between Schaeffler and Continental, initially hostile, gradually became more collaborative.
The Ownership Structure Today
IHO Group holds 79% of the voting rights in Schaeffler AG and a 46% stake in Continental AG. The Schaeffler family, through its holding company structure, remains Continental's largest shareholder—a position it has maintained since the tumultuous takeover. Currently Schaeffler continues to be the largest shareholder of Continental AG to 49.9%.
What Investors Should Learn
The Schaeffler episode teaches several lessons. First, aggressive M&A strategies (like Continental's purchase of Siemens VDO) can leave companies vulnerable to opportunistic acquirers. Second, determined family-owned businesses can outmaneuver larger public companies—Maria-Elisabeth and Georg Schaeffler were willing to stake their entire family fortune on the Continental acquisition in ways no public company board would approve. Third, financial crises create both risks and opportunities; Schaeffler nearly bankrupted itself but ultimately gained control of a much larger competitor. Fourth, corporate control battles often come down to personalities and past grievances as much as strategic logic.
Recovery & The Software-Defined Vehicle Era (2010–2020)
The decade following the Schaeffler takeover saw Continental transform from a near-bankruptcy case into one of the world's most profitable and technologically advanced automotive suppliers. Under Elmar Degenhart's leadership, the company paid down debt, expanded globally, and positioned itself for the automotive industry's technology revolution.
Unwinding and Stabilizing
Schaeffler gradually reduced its direct involvement in Continental's operations while maintaining its shareholder position. Schaeffler AG has formally abandoned its attempt to create a fully merged automotive components group out of its shareholding in Continental. Schaeffler has announced that it will officially terminate its shareholder's agreement with Continental in May 2014 and has therefore abandoned plans for a full merger between the two organisations. According to a company press release, the agreement which was put in place on 20 August 2008 was terminated because the "investment agreement no longer has any practical relevance for either company."
Global Expansion: The China Push
Continental recognized early that China would become the world's largest automotive market. The company opened a new Asian headquarters and research and development center in Shanghai, representing another major milestone of the company's growth in China and Asia.
Autonomous Driving: The Big Bet
Continental began comprehensive testing of automated driving in the U.S. state of Nevada. By the mid-2010s, a highly automated Continental test vehicle had covered 15,000 miles of public roads without any accidents. The company was positioning itself not merely as a component supplier but as a technology partner for the autonomous future.
"Continental is one of the world's market leaders in this area. We are benefiting from steadily increasing fitment rates in new vehicles. And in the future, too, we are anticipating major growth opportunities," explains Frank Jourdan, member of the Continental Executive Board responsible for the business area 'Autonomous Mobility and Safety'. "Over the next five years, we are planning further investments in the high triple-digit million Euro range in the areas of assisted and automated driving."
The Veyance Acquisition
Continental AG has acquired the American rubber company Veyance Technologies, Inc. based in Fairlawn, Ohio. Veyance will be integrated into the company's ContiTech division, and will serve as the regional home office for ContiTech in North America. The Brazilian antitrust authority Council for Economic Defence (CADE) made it official on 29 January 2015. The total transition was US$1.6 billion.
By the end of the decade, Continental had emerged transformed: €44 billion in revenue, nearly 250,000 employees, and technology positions spanning tires, brakes, powertrain systems, autonomous driving, infotainment, and industrial rubber products. But this conglomerate structure would soon be questioned.
The Great Restructuring: Vitesco Spinoff & Breaking Apart (2020–2025)
The 2020s brought Continental's most consequential strategic decisions since the Siemens VDO acquisition. Facing a dramatically changing automotive industry—with EV transition, Chinese competition, and software increasingly defining vehicle value—Continental's leadership concluded that its conglomerate structure had become a liability.
The Vitesco Spinoff
In view of the fundamental changes taking place in the automotive industry, the executive board of Continental AG resolved in 2018 on a strategic realignment which included the operational and organizational separation of the business of the former Powertrain division. In 2019, Continental's Executive Board then took the strategic decision to spin-off the business activities of the Powertrain business area and transfer the business to Vitesco Technologies.
The annual general meeting of Continental AG approved the spin-off on April 29, 2021. As consideration for the spin-off, the Continental shareholders will be allocated shares in Vitesco Technologies proportionately to their participation in Continental AG. Continental AG will retain 20,000 shares in Vitesco Technologies Group AG.
Shares in German auto parts manufacturer Vitesco Technologies rose 12% in their market debut on Thursday, which marked the company's long-awaited spinoff from former parent Continental. Vitesco shares started trading at 59.80 euros per share and rose to as much as at 66.88 euros, giving the group a market valuation of 2.68 billion euros ($3.2 billion).
Notably, Vitesco was subsequently acquired by Schaeffler in October 2024. The Schaeffler Group and Vitesco have completed their merger on 1st of October 2024 to become a Leading Motion Technology company.
The Automotive Spinoff Decision
Subject to the approval of the Supervisory Board in March 2025, the spin-off will be presented for resolution to the Annual Shareholders' Meeting of Continental AG on April 25, 2025. The preparations for it are to be completed by the end of the third quarter of 2025. Philipp von Hirschheydt, Continental Executive Board member and head of the Automotive group sector: "Our continuous performance improvements form the crucial foundation for making Automotive fit for the future and ready for the capital market."
The rationale was clear: Wolfgang Reitzle, chairman of Continental's Supervisory Board, emphasized the move's significance: "Focused companies are significantly more agile and can create more value, especially in a challenging environment."
"Our strategy aims to increase our value creation. This involves systematically analyzing how we can best position our group sectors for success," Continental CEO Nikolai Setzer said. "Looking ahead, sharply fluctuating regional developments in the markets as well as the software-driven technology transformation will require even greater flexibility and entrepreneurial freedom."
AUMOVIO: The New Independent Company
Continental unveils the name of its automotive spin-off at Auto Shanghai 2025. Aumovio stands for innovation, software-defined vehicles and the future of mobility. Following the planned spin-off from the Continental Group and the IPO scheduled for September 2025, the future independent company will operate under the name Aumovio in future.
The spin-off of Automotive as a European company (Societas Europaea, SE) was completed with the listing on the Frankfurt stock exchange September 18, 2025. The independent company is operating under the new brand AUMOVIO.
Supervisory Board approves spin-off of Automotive and recommends it be approved by Annual Shareholders' Meeting. Automotive to have cash funds of €1.5 billion, supplemented by a credit facility of €2.5 billion.
The listing of Automotive on the Frankfurt Stock Exchange is currently scheduled for September 2025. The allocation ratio is expected to be 2:1, which means that each Continental shareholder will receive one share in the then listed Automotive company for every two Continental shares held when the spin-off takes effect.
The Market's Verdict
Auto supplier Aumovio started trading on the Frankfurt Stock Exchange on Thursday following a split from Continental AG, leaving the newly independent company to grapple with rising pressures for car parts makers as the German manufacturer refocuses on its tires division. Aumovio shares traded at €36.60 as of 3:15 p.m. in Frankfurt, giving the new stock a market valuation of about €3.7 billion. The opening price was slightly disappointing, Bernstein analyst Harry Martin said.
Continental's Automotive group sector, which is due to begin operating as the independent listed company AUMOVIO in September, today announced its objectives and strategy as part of its Capital Market Day. Specifically, AUMOVIO plans to boost its sales to over €24 billion in the long term (2024: €19.6 billion). To do this, the company will build on its global positioning in development and production, established customer relationships worldwide as well as its clear focus on high-growth and value-accretive technologies for the software-defined vehicle.
AUMOVIO is set to start its independence with a strong balance sheet and no financial debt. As of June 30, 2025, the company has cash funds of €1.5 billion and a credit facility of €2.5 billion and remains committed to maintaining solid capital resources and improving cash flow. In the medium term, AUMOVIO aims to generate sales of €20 billion to €22 billion, an adjusted EBIT margin of around 4.0 to 6.0 percent.
Current Business & Financials
Today's Continental—post-AUMOVIO spinoff—is a fundamentally different company from even a few years ago. Understanding its current structure is essential for investors evaluating both the remaining Continental AG and the newly independent AUMOVIO.
2024 Financial Performance
Continental posted good results for 2024 as a whole and initiated the realignment of the company. Against the backdrop of a weak macroeconomic environment – especially in our core market of Europe – and a global downturn in automotive production, our value-creation strategy is proving effective. Our results in 2024 show that we achieved our annual targets for the Continental Group: We increased our adjusted EBIT margin from 6.1 percent in the previous year to 6.8 percent.
"Weak economic development, particularly in Europe, coupled with a decline in automotive production caused major headwinds last year. Our priority is to create value. By rigorously implementing this strategy, we further improved our earnings in this challenging environment and achieved our annual targets for the Continental Group," said Continental CEO Nikolai Setzer.
2025 Outlook
Expectations for fiscal 2025: consolidated sales of around €38.0 billion to €41.0 billion; adjusted EBIT margin of around 6.5 to 7.5 percent.
The Tale of Two Businesses
The contrast between Continental's segments tells the strategic story:
Tires – The cash cow with strong margins around 13-14%. Hanover, Germany-based Continental was solid at No. 4 in the rankings with a slight increase in sales over the previous year with $12.5 billion generated last year. The tire business benefits from brand recognition, replacement demand, and relatively stable economics.
Automotive – Higher revenue but challenged margins around 2.5-3%. This business, now operating as AUMOVIO, faces intense competition, rapid technological change, and pricing pressure from automakers.
Faced with a weak automotive and industrial environment, ContiTech saw a decline in earnings but nonetheless achieved its annual target thanks to a strong fourth quarter. It posted sales of €6.4 billion (2023: €6.8 billion, -6.7 percent) and an adjusted EBIT margin of 6.2 percent (2023: 6.7 percent).
Dividend Policy
Based on the company's adjusted free cash flow and improved net income, Continental's Executive Board will propose a €0.30 increase in the dividend to €2.50 per share for the past fiscal year. This would amount to a distribution of around €500 million. At around 43 percent, the distribution to shareholders is slightly above the defined range of 20 to 40 percent.
Dividend Shift: Continental targets 40-60% net income payout; Automotive aims for 10-30%, reflecting competitive norms. Post-spin-off, Continental's dividend policy will rise to 40-60% of net income, up from 20-40%, while Automotive sets a 10-30% range, contingent on earnings.
Competitive Position
Continental's main competitors in the tire manufacturing industry include Japan-based Bridgestone, France-based Michelin, and U.S.-based Goodyear. Regarding the broader automotive supplier market, Continental competes with Germany-based Robert Bosch GmbH and ZF Friedrichshafen AG, as well as with Denso Corporation, Magna International, Michelin, and Goodyear.
Group Michelin, Bridgestone Corp., Goodyear and Continental A.G. remained the four largest tire makers in the world.
Playbook: Business & Investing Lessons
Continental's 154-year journey offers profound lessons for business strategists and investors alike.
Lesson 1: Transformation Through M&A Can Work—But Timing Is Everything
The Siemens VDO acquisition was strategically brilliant—it transformed Continental from a tire company into an integrated automotive systems supplier, positioning it perfectly for the industry's technological evolution. But the timing was catastrophic. Completing a €11.4 billion debt-financed deal months before the 2008 financial crisis left Continental vulnerable to Schaeffler's hostile takeover.
The lesson isn't to avoid transformational M&A—Continental would likely not exist as a major player today without its acquisition strategy. Rather, it's to maintain balance sheet flexibility and be prepared for unexpected events. Companies that lever up aggressively often succeed spectacularly or fail spectacularly, with little in between.
Lesson 2: The Hunter Can Become the Hunted
Continental's aggressive acquisition strategy paradoxically left it vulnerable. The same debt that funded growth became the weapon that enabled Schaeffler—a much smaller company—to gain control. This is a classic pattern in corporate history: companies focused intensely on external growth often neglect defensive considerations.
Lesson 3: Family Capitalism vs. Public Markets
The Schaeffler saga illustrates how determined family-owned businesses can outmaneuver larger public companies. Maria-Elisabeth and Georg Schaeffler were willing to stake their entire family fortune on the Continental acquisition—a level of commitment no public company board would approve. Family capitalism brings different incentives, risk tolerances, and time horizons than public market capitalism.
For investors, the presence of a controlling family shareholder creates both risks (limited governance influence, potential conflicts) and benefits (long-term orientation, willingness to make bold bets).
Lesson 4: The Conglomerate Discount Is Real
Continental's decision to spin off both Vitesco and AUMOVIO reflects a hard-won realization: investors generally prefer focused businesses to diversified conglomerates. The reasoning is straightforward—investors can diversify their own portfolios and prefer to understand clearly what they're buying.
Continental's tire business (high margins, stable demand, strong brands) and automotive electronics business (lower margins, rapid technological change, intense competition) require fundamentally different strategies, capital allocation approaches, and investor bases.
Lesson 5: Technology Leadership Requires Continuous Reinvention
Continental's 1968 autonomous vehicle experiment demonstrates that being early doesn't guarantee lasting advantage. The company pioneered concepts that others later commercialized more successfully. Sustained technology leadership requires not just innovation but commercialization, manufacturing excellence, and customer relationships.
Competitive Analysis: Continental's Strategic Position
Porter's Five Forces Analysis
Supplier Power: Moderate Raw materials (rubber, chemicals, electronics components) are relatively commoditized, but specialized semiconductor shortages in recent years have demonstrated supplier concentration risks. Continental's scale provides some bargaining power.
Buyer Power: High Continental's customers—major automakers like Volkswagen, BMW, Toyota, and Ford—are large, sophisticated, and consolidating. They demand price concessions, particularly during industry downturns. The shift toward EVs has empowered new customers (Chinese EV makers, Tesla) with different purchasing patterns.
Threat of New Entrants: Moderate to High In tires, scale economies and brand recognition create significant barriers. In automotive electronics, Chinese competitors (CATL, BYD's supply chain) and tech companies (NVIDIA, Qualcomm) increasingly compete for the same customers.
Threat of Substitutes: Low to Moderate Vehicles still need tires and brake systems—no substitute exists. However, the shift toward software-defined vehicles means that hardware suppliers like Continental compete increasingly with software platforms for margin share.
Competitive Rivalry: Intense Both tire and automotive supplier markets feature strong competitors with global scale. Michelin, Bridgestone, and Goodyear compete fiercely in tires; Bosch, Denso, ZF, and Magna battle in automotive systems.
Hamilton Helmer's 7 Powers Framework
Scale Economies: Continental benefits from scale in manufacturing, R&D, and global distribution—though competitors have comparable scale.
Network Effects: Limited in Continental's core businesses. Unlike platform businesses, selling more tires doesn't make each tire more valuable.
Counter-Positioning: Continental's strategy of integrated automotive systems initially represented counter-positioning against pure-play component suppliers. However, competitors have now replicated this model.
Switching Costs: Moderate. Automakers incur costs to qualify new suppliers and integrate different systems, creating some stickiness. However, these switching costs are not insurmountable.
Branding: Strong in tires (Continental brand recognized globally for quality and performance), weaker in automotive electronics where business-to-business relationships matter more than brand equity.
Cornered Resource: Not evident. Continental's talent, technology, and manufacturing capabilities are replicable.
Process Power: Continental's manufacturing excellence and quality systems represent process advantages, though these are difficult to sustain indefinitely against well-resourced competitors.
Assessment: Continental possesses moderate competitive advantages primarily through scale, brand (in tires), and accumulated integration capabilities. However, these advantages are eroding as automotive industry transformation enables new competitors and shifts value toward software and platforms.
Bull Case vs. Bear Case
The Bull Case
Tire Business Excellence: Continental's tire business generates strong margins (~14%) and benefits from replacement demand, brand strength, and global scale. As a more focused company post-AUMOVIO spinoff, Continental can allocate capital more efficiently and potentially expand margins further.
Sustainability Leadership: In the sustainable tire market, Continental leads with eco-friendly innovations such as its Conti GreenConcept and tires made with dandelion-derived rubber (Taraxagum), which reduce reliance on traditional rubber. The company is committed to sustainable practices, targeting full carbon neutrality across its value chain by 2050. Continental has been recognized for pioneering initiatives like the ContiRe.Tex technology, which uses recycled PET bottles in tire production.
Valuation Opportunity: With automotive complexity removed, Continental as a tire-focused company may command a higher multiple as investors appreciate the predictable cash flows and growth profile.
Industrial Applications: ContiTech serves diverse industrial markets (mining, agriculture, transportation) less exposed to automotive cycles.
The Bear Case
Margin Pressure: Even the tire business faces competition from Chinese manufacturers and commoditization pressures.
European Exposure: Europe, where Continental mainly operates, is the most profitable market for the company. European automotive production weakness directly impacts Continental.
Job Cuts Signal Structural Challenges: German auto supplier Continental AG announced that it would eliminate nearly 7,150 jobs worldwide by 2025. The group said in a statement it would lay off 1,750 jobs in research and development, including 380 at software subsidiary Elektrobit. The company would also shed around 5,400 posts as part of a previously announced cost-cutting program aimed at saving the group 400 million euros by 2025.
Additional cuts followed in 2025: Continental AG, a leading global auto parts supplier, has announced plans to cut an additional 3,000 jobs as part of its ongoing restructuring efforts aimed at stabilizing its struggling automotive division. This follows the company's previous announcement to cut 7,150 jobs last year, primarily from administrative and development departments. With these new reductions, total job losses within the automotive division have now surpassed 10,000.
Conglomerate Unwinding Execution Risk: Spinning off major businesses creates transition risks, management distraction, and potential stranded costs.
Schaeffler Influence: The controlling shareholder's interests may not always align with minority shareholders, particularly regarding capital allocation decisions.
Key Performance Indicators to Monitor
For investors tracking Continental's ongoing performance, three metrics deserve particular attention:
1. Tire Segment Adjusted EBIT Margin
Target: Above 13%. This metric captures pricing power, cost efficiency, and competitive positioning in Continental's most valuable business. Margin compression would signal competitive deterioration; margin expansion would validate the focused-company thesis.
2. Free Cash Flow Conversion
The ratio of adjusted free cash flow to net income indicates capital efficiency and earnings quality. Continental's ability to generate cash—rather than merely accounting profits—determines dividend sustainability and strategic flexibility.
3. Revenue per Employee (Post-Restructuring)
As Continental executes significant workforce reductions, this productivity metric will reveal whether cuts are value-destructive (talented employees leaving) or efficiency-enhancing (eliminating redundancy while preserving capabilities).
Regulatory and Risk Considerations
Trade Policy Exposure: Continental's global manufacturing footprint creates exposure to tariffs and trade restrictions. The company has noted that at least 92% of US-bound products are made in the US or Mexico, mitigating North American tariff risks.
China Political Risk: Continental's significant presence in China creates geopolitical exposure. In December 2021, as a result of a diplomatic spat between Lithuania and China over Taiwan and human rights, China pressured Continental AG to stop doing business with Lithuania.
Russia Exposure: In April 2022, Continental resumed production of tires in Russia despite International sanctions during the Russo-Ukrainian War. This decision generated controversy and reputational risk.
Pension Obligations: Like many European industrials, Continental carries significant pension liabilities that require monitoring.
Management & Governance
CEO Nikolai Setzer
Supervisory Board appoints Nikolai Setzer (49) as new Executive Board chairman effective December 1, 2020. Setzer has worked at Continental since finishing his studies in engineering management in Germany and France in 1997.
Setzer has worked at Continental since finishing his studies in engineering management in Germany and France in 1997. In his 23-year career at the company to date, he has held various positions in development and sales in Germany and abroad, assuming the position of head of the Hanover-based passenger-car tire business in March 2009. He has been a member of the Executive Board of Continental AG since August 2009. He assumed responsibility for the Tires business area in August 2011 and for Corporate Purchasing in May 2015. In April 2019, Setzer switched to Continental's Automotive Group.
If he were a footballer, Nikolai Setzer would have undoubtedly been a striker and team captain. He had worked at Continental for just twelve years, before he "stormed" into the company's executive suite at the age of 38. In 2009, the Darmstadt native became a board member of the global company.
Setzer represents the "Continental lifer" model of leadership—deep institutional knowledge, relationships across the organization, and personal investment in the company's culture. His background in the tire business (Continental's strongest segment) informs his strategic emphasis on operational excellence and margin improvement.
At its meeting today, the Supervisory Board of Continental AG extended the appointment of CEO and chairman of the Executive Board Nikolai Setzer (52). Having been due to expire in March 2024, his contract will now run for a further five years until March 31, 2029.
Supervisory Board Chairman Wolfgang Reitzle
Reitzle brings extensive automotive industry experience, having held senior positions at BMW and Ford. His board tenure provides continuity through Continental's transformation.
Schaeffler Family Influence
46.00% of the voting rights in Continental AG are attributed to Mrs. Maria-Elisabeth Schaeffler-Thumann. Georg F.W. Schaeffler also sits on Continental's Supervisory Board, ensuring direct family involvement in governance.
Conclusion: A Company Redefined
Continental AG in November 2025 bears little resemblance to the diversified conglomerate of even three years ago. The Vitesco spinoff (subsequently acquired by Schaeffler) and the AUMOVIO separation have created a more focused company centered on its profitable tire business and industrial rubber products.
For 154 years, Continental has demonstrated remarkable adaptability—surviving world wars, hostile takeovers, financial crises, and multiple industry transformations. The current restructuring represents the latest chapter in this history of reinvention.
The strategic logic is clear: focused companies outperform conglomerates, and Continental's tire and automotive businesses require fundamentally different strategies. Whether this logic translates into value creation for shareholders depends on execution—maintaining tire margins, completing the ContiTech transformation, and navigating the Schaeffler family's continued influence.
Continental's story is ultimately one of German industrial resilience: a company founded in the year of German unification, surviving two world wars, multiple economic catastrophes, and hostile takeovers, emerging each time transformed but still headquartered in Hanover, still making rubber products, still adapting to whatever the future brings.
For investors, the key question is whether this resilience and adaptability justify current valuations—and whether the post-spinoff Continental can deliver the focused, high-margin performance that management promises. The next chapter remains unwritten.
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