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Continental to flesh out possible overhaul by the summer - CFO


By Andreas and Jan Schwartz

BERLIN/HAMBURG (Reuters) - Germany's is in talks with banks about a possible structural overhaul of the parts and and aims to flesh out its plans within six months, its chief said.

The Hanover-based group said on Tuesday it was in "early stages" of talks about possible structural changes to become more nimble as manufacturers are spending billions of euros on electric and self-driving technologies, confirming earlier in the day.

"We are looking at the organization of in its entirety," chief said in an interview late on Tuesday after the group released core 2017 earnings.

Growing demand for electrification and drove Continental's sales about 8 percent higher last year to around 44 billion euros, and the company expects a further increase to around 47 billion this year.

But its adjusted operating margin may ease to around 10.5 percent this year amid spending on new tyre-making facilities, after the profitability benchmark rose to a higher-than-expected 10.8 percent last year, it said.

With the industry wrapped up in a strategic transition to zero-emission cars and self-driving technology, carmakers and suppliers are repositioning their businesses and spinning off operations to focus more effectively on new technologies.

has said it may split parts of its business into separate legal entities, which may allow for a partial listing to raise funds to invest in new services such as and

Parts makers such as and have spun off divisions to simplify their corporate structures and react to the changes in technology, moves cheered by investors who believe internal combustion engine cars are a sunset industry.

Combustion engines are taking a hit from regulators, particularly those in and China, who want to slash and smog forming emissions on a fast timetable. That risk was exacerbated by VW's diesel emissions scandal.

has said software and are the biggest drivers of growth at the Hanover-based firm which also makes and transmission-control units. It plans to boost total sales to more than 50 billion euros by 2020.

A possible separation of its so-called Powertrain business related to combustion engines is not on the agenda, Schaefer said.

Investment banks have presented various ideas over the last couple of months, but no specific blueprint has emerged so far, a person familiar with the matter said.

"We highlight the pent-up strategic optionality of any potential future spin-offs of individual business units which could unlock value," London-based said in a Jan. 4 note, maintaining its "Buy" recommendation on stock.

Shares in the group, which is 46 percent-controlled by the family that owns , jumped as much as 7.9 percent to a record high of 257.40 euros following the report, and closed 5.4 percent higher at 251.3 euros.

said a year ago it was reviewing its strategy for its Powertrain division after earnings at the business, whose products include transmission control units and fuel pumps, failed to meet expectations.

But it has also pledged to keep developing new products and systems for combustion-based power trains until at least 2025 when it expects demand for electric vehicles to start taking off on the back of continuing reductions in battery prices.

earlier reported was in exploratory talks with advisers on a major overhaul or even a breakup of its business, citing people familiar with the matter.

It said could create a holding company for its divisions and then list shares of the more profitable units, such as the tyre business, or combine some operations with rivals.

"As of today, it is wide open if and which changes could result from these early evaluations," said. "To date, there are no plans which could be submitted for approval."

(Reporting by Andreas and Jan Schwartz; Writing by and Maria Sheahan; Editing by Jane Merriman, Keith Weir, William Maclean)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, January 10 2018. 05:28 IST