FRANKFURT — Parts and tire supplier Continental could create a holding company for its divisions and then list shares of the more profitable units, such as the tire business, or combine some operations with rivals, sources told Bloomberg.
Speculation about such scenarios comes after Continental confirmed that it is in “early stages” of talks about a structural overhaul amid the auto industry’s transition to self-driving and electric vehicles.
“As of today it is wide open, if and which changes could result from these early evaluations,” Rolf Woller, Continental’s head of investor relations, said in a written statement. “To date there are no plans which could be submitted for approval.”
Continental’s shares jumped as much as 8 percent after reports of the talks.
A reorganization at the German company would come as the industry faces a momentous shift to self-driving vehicles and EVs. Last year, suppliers Delphi Automotive, of suburban Detroit, and Autoliv, of Stockholm, said they would split in two parts to give their electronics and self-driving car activities more flexibility.
Any move by Continental will need the blessing of the Schaeffler family, the largest shareholder with a roughly 45 percent stake. At the height of the financial crisis in 2008, Schaeffler, a ball-bearing and powertrain-parts supplier controlled by the family, nearly went bankrupt when its €17 billion ($20 billion) takeover approach for Continental backfired.
Continental ranks No. 5 on Automotive News’ list of the top 100 global suppliers with worldwide parts sales to automakers of $32.68 billion in 2016.
Continental has two main businesses: automotive and rubber. The automotive operations are divided into powertrain, chassis and safety, and interiors. The rubber operations include tires and ContiTech. ContiTech makes conveyor belts for off-road vehicles and for the mining industry, printing equipment and automotive and industrial sealing systems, suspension and anti-vibration parts, among others.
Continental is a leader in autonomous driving systems. Its tire business is not as exciting as self-driving vehicles but far more profitable. On the other hand, the company’s exposure to making mechanical systems for combustion engines generates cash now, but faces an uncertain future as more automakers commit to a switch to EVs.
Delphi early last year held talks with Continental on a potential tie-up of their powertrain divisions, people familiar with the matter told Bloomberg at the time.
Investors generally embrace breakups such as those at Delphi and Autoliv, Sanford Bernstein analyst Max Warburton said in a note in November, adding that Continental’s shareholders should push for a similar change.
“We’ve previously made calls for Conti to split itself up, arguing that its numerous divisions do not sit well together,” he wrote.
Reuters contributed to this report.