(Bloomberg) -- Continental AG (OTC:CTTAY) plans to cut or transfer as many as 30,000 jobs to reduce costs by more than 1 billion euros ($1.2 billion) a year, deepening restructuring as the coronavirus adds to pressure on the auto industry.
Some 90% of the restructuring measures will be implemented by 2025, Continental said Tuesday. Its domestic German operations will be hit hard, with about 13,000 positions moved to other areas or eliminated.
The industry is facing the biggest crisis in 70 years and parts suppliers are “hit particularly hard,” Chief Executive Officer Elmar Degenhart said in the statement.
The auto industry is suffering from the fallout from Covid-19 at the same time it faces pressure to invest in new technology as the combustion era gradually draws to a close and car-sharing services gnaw at demand.
The company, which was already targeting changes that could affect 20,000 employees before the pandemic hit, aims to reach the new savings target in 2023.
The shares swung to a loss on the news, falling as much as 3.2% and trading down 2.9% at 3:13 p.m. in Frankfurt. Europe’s second biggest automotive supplier has lost more than a fifth of its value this year.
‘Severe Blow’
Signs are that a tentative rebound in car demand is losing steam. Car sales fell in France and Spain in August, erasing gains made during the previous months.
Continental has been reluctant so far to provide an outlook for the full year, citing swirling market uncertainty. The German automotive giant said on Tuesday that it doesn’t expect the global market to return to the 2017 level until the middle of the decade.
The Hanover-based company had already embarked on a far-reaching overhaul last year when the global economy softened and vehicle production started to slow. The initial plan to restore margins was rendered insufficient by the pandemic.
The manufacturer, which employs about 232,000 people worldwide, including 59,000 in Germany, said the ongoing restructuring has affected roughly 3,000 positions. The company’s employee representatives reacted angrily to the latest cuts and demanded fairer and more balanced measures.
“That’s a severe blow,” Hasan Allak, Continental’s top labor leader, said in a statement. “In combination with the management mistakes of the past years such as exaggerated growth targets, quality problems and multi-billion dollar writeoffs, a fatal picture emerges.”
(Updates with market reaction, comment from employee representative)
©2020 Bloomberg L.P.