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Continental Focused On Growth After VDO Acquisition

Chief executive of automotive components and tire maker says company will focus on growth and not cost cuts after its acquisition of Siemens AG's VDO auto unit.

REGENSBURG, Germany (AP) â€” Automotive components and tire maker Continental AG will focus on growth and not cost cuts after its acquisition of Siemens AG's VDO auto unit, the company's chief executive said Wednesday.
 
''Costs are of course one of the issues, but it's not the main priority. ... We want to shape the world's best automotive supplier together,'' CEO Manfred Wennemer told reporters at the former headquarters of the newly acquired VDO operations in Regensburg near Munich.
 
Wennemer did not elaborate on the scale of possible job cuts, noting that the company would analyze the situation in the ''next two to three months'' before coming to any decision.
 
He reiterated that the VDO operations are expected to reach a profit margin of ''10 percent or more'' by 2010 and that margin improvement should come from cross-selling opportunities between Continental and VDO, as well as cost savings, such as in purchasing and sales growth through new technologies such as hybrid systems.
 
VDO, which makes electronics that control car brakes, has annual sales of approximately euro10 billion (US$14.74 billion).
 
Wennemer said Continental still aims to generate around 40 percent of its sales outside the automotive industry.
 
''ContiTech and our tire operations remain key parts of the company,'' he said. ContiTech specializes in rubber and plastics technology.
 
Wennemer ruled out bigger takeovers in the foreseeable future, but said that ''mid-sized takeovers'' for the company's tire or ContiTech operations would still be possible. Those deals would, ostensibly, be in the euro1 billion to euro3 billion (US$1.47 billion to US$4.42 billion) range.
 
He confirmed that the company is looking into strategic options for some of VDO's operations, but declined to elaborate further.
 
''There are all sorts of scenarios; it's too early to tell you more at the moment,'' he said.
 
The euro11.4 billion (US$16.8 billion) deal in which Siemens sold its auto electronics unit to Continental closed on Monday.
 
The deal broadens Continental's product range, making it the fifth-largest electronics supplier to the global car industry behind Bosch Corp., Denso Corp., Delphi Corp. and Magna International Inc.
 
Continental manufactures brake systems, chassis components, vehicle electronics and tires and employs some 89,000 workers worldwide.
 
While many auto suppliers have struggled in recent years due to soaring raw-material costs and fierce price pressure in the auto industry, Continental has prospered by aggressively shifting manufacturing to low-cost production regions as well as significant efficiency gains.
 
Shares of Continental were up 2 percent to euro87.23 (US$128.59) in Frankfurt trading.
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