Continental Strongly Refutes Allegations

HANOVER, GERMANY – March 17, 2009: March 16, 2009. Continental AG, Hanover, is defending itself from unjustified criticism of its decision to adjust production in the European tire plants to the dramatic market development. “We are respecting the laws and collective bargaining agreements and are keeping promises we made to employee representative groups,” the Executive Board of the company explained on Monday in Hanover. “The allegations that have been made against us are unfounded. Therefore we view any court action with equanimity.”

The company explicitly refutes the allegations of breach of law made by the works council of the Hanover-Stöcken plant: “We are fully understanding of the fact that the decision, which was indeed very difficult for us to make, gives rise to reactions and concern. However, we are not understanding of the fact that unfounded assertions are made against better knowledge,” said Executive Board member for human resources Heinz-Gerhard Wente. He pointed out the facts:

Triggered by the precursor to the market crisis, the Stöcken production plan for 2009 already had to be reduced at the end of 2008 from 1.28 million tires to 930,000 tires, resulting in a staff surplus of 168 employees.

To keep from laying off these 168 employees for operational reasons, a paper was drawn up listing key measures as a letter of intent in cooperation with the works council, and it was signed on January 20.

This paper did not affect a possible restructuring of the plant in the future.

The further disastrous development of the market nullified the basis of the paper: Instead of producing 930,000 tires, now only 380,000 tires are planned.

If the paper were to be implemented, employees would have financial drawbacks due to the specified reduction in remuneration in view of the upcoming termination of employment. For that reason, the management decided against implementation.

The implementation of the paper, which is being demanded despite these drawbacks, would be possible only with the consent of the collective agreement partners, as it would require that the collective agreement be opted out. The IG BCE has, however, not yet consented to this.

At the Stöcken plant, shorter working hours will continue to be utilized with the approval of the German Federal Employment Office as agreed and conforming to the law wherever Continental views the work reduction to be temporary.

Continental’s Executive Board member responsible for the Tires divisions, Dr. Hans-Joachim Nikolin, also rejected demands to extend the shorter working hours in Stöcken’s commercial vehicle tire production to the maximum possible period of 18 months. “That would just postpone, but not prevent the closure of the plant.” Dr. Nikolin specified the following reasons:

Even a significant double-digit market recovery in 2010 – from a substantially lower level – would lead to under-utilization of capacities in Stöcken by far more than 50% and by as much as 70% at the end of the shorter working time period.

The uniform distribution of the production quantities that could be sold in the market to the two key plants in Stöcken and Puchov (Slovakia) would result in additional costs of €30 million to €40 million per year, even if capacities in Stöcken were fully utilized and there were layoffs in Puchov. The company cannot bear this.

In view of the market situation, it is not possible to increase prices to offset these costs fully, and such increases would automatically result in market share losses and thus further decrease volumes.

“A closure of the commercial vehicle tire production in Stöcken is therefore unfortunately inevitable. Extending the shorter working time period to 18 months would cost the company far more than €20 million and Germany’s solidarity-based Federal Employment Office as much as €18 million.

One and a half years of shorter working hours would also eat up as much as €40 million, which however would unfortunately not prevent the plant closure, but just put it off. To top that off, there would be the costs of closure,” explained Wente and Dr. Nikolin. “We therefore explicitly and urgently ask all those involved to bear these facts in mind. The time has now come for an objective exchange.”

With sales exceeding €24 billion in 2008, the Continental Corporation is one of the top automotive suppliers worldwide. As a supplier of brake systems, powertrain and chassis systems and components, instrumentation, infotainment solutions, vehicle electronics, tires and technical elastomers, the corporation contributes towards enhanced driving safety and protection of the global climate. Continental is also a competent partner in networked automobile communication. Today, the corporation employs nearly 140,000 at approximately 190 locations in 35 countries.

As one of the largest manufacturers of premium tires for commercial vehicles, Continental carries a broad range of high-performance products finely tailored to specific application areas for heavy-duty and light trucks, buses and off-road vehicles. Continental AG produces truck and bus tires under the Continental, Uniroyal, Semperit and Barum brand names. The ContiBreakdownService, in existence since 1978, is a quick-response network of authorized dealerships providing additional security in the case of a flat tire.