Continental and Schaeffler Group Push Cooperation Through Joint Purchasing

HANOVER/HERZOGENAURACH, GERMANY - April 3, 2009: Through a global purchasing agreement, the automotive supplier Continental and the Schaeffler Group have started the first large joint project in the history of cooperation between the two companies. The purchasing cooperation was contractually agreed as of March 27, 2009. Its goal is to optimize cost of materials and achieve an annual triple-digit million benefit through access to the steel markets and component suppliers as well as investments and non-manufacturing materials. The combined purchasing volume of Continental and Schaeffler totaled approximately €20 billion in 2008. The annual purchasing volume capable of benefiting from synergies comes to about €6.6 billion, resulting in a total savings potential of €350 to €400 million for the period between 2009 and 2011 alone.

Both partners’ purchasing expertise is complementary
In the purchasing cooperation, both companies follow the principle of acting in the market as independent entities but creating synergies through cooperative actions. Purchasing is an ideal area for this cooperation because this is where the strengths of Continental and the Schaeffler Group complement one another. While Schaeffler’s annual purchasing volume of as much as 1 million tons of steel brings it direct access to steel producers, a high level of competence in this segment and also very good purchasing conditions, Continental’s strength lies in the purchase of mechanical and electronic components. Both companies have a well established portfolio of suppliers. The joint access to the partner’s purchasing expertise makes it possible for both companies to benefit from the improved purchasing conditions.

And what is more, Continental’s suppliers will obtain far better access to global steel markets than they presently have separately. In return, the Schaeffler Group will benefit from Continental’s large supplier portfolio which will now also be available to that company.

Common strategy, equal quality standards, improved cost structures
“The purchasing cooperation will offer everyone involved – the Schaeffler Group, Continental and our suppliers – the opportunity to benefit. The mutual build up of our purchasing activities will enable us to achieve significantly improved cost structures. This is a first important step into a successful future,” pointed out Dr. Jürgen M. Geißinger, President & CEO of the Schaeffler Group. Dr. Karl-Thomas Neumann, Chairman of the Executive Board of Continental AG, underscores the potential of the cooperation: “Continental and the Schaeffler Group will now operate in the market with a single purchasing strategy, uniform quality standards and a common supplier base. This will enable us to purchase the most advanced technology with maximum quality from the best suppliers. This is an important element in maintaining the leading position of our companies in the market and transforming ourselves into a global champion of the automotive supplier industry.”

One of the goals of purchasing management is also to achieve cost advantages by exchanging technology expertise and establishing value added supply chains in the most important automobile manufacturing regions of Western and Eastern Europe, North and Central America, Asia and Brazil. At the same time, both companies are striving toward concentration in the supplier segment. Future plans are to cooperate with 2,800 suppliers of production materials rather than 5,600 as in the past. Based on the high production competence of the Schaeffler Group with its brands INA, FAG and LuK in the manufacture of precision engine, transmission and drivetrain components, both companies will pursue a new opportunities in make-or-buy decisions in the future.

High potential for savings in non-manufacturing materials
In addition to the purchasing volume for commodities and components, expenditures of up to €4 billion are generated by investments and non-manufacturing materials. These include, for example expenses for logistics services, energy, office materials, IT hardware, telephone, travel and marketing.

As these areas normally overlap to a high degree, cooperation can bring noticeable savings here as well. Joint negotiations can result in higher volume and accordingly improved conditions. The joint use and consequently more efficient planning of parts logistics will also result in significant cost benefits.

With sales exceeding €24 billion in 2008, the Continental Corporation is one of the top automotive suppliers worldwide. As a supplier of brake systems, systems and components for the powertrain and chassis, 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. The corporation employs nearly 140,000 at approximately 190 locations in 35 countries.

The Schaeffler Group - with its INA, FAG, and LuK brands - is both a leading global supplier of rolling bearings as well as a renowned supplier to the automobile industry. With 66,000 employees in over 180 locations around the world, Schaeffler manufactures and sells precision components and systems for automotive, industrial, and aerospace applications. In 2008, the Schaeffler Group’s revenues totaled €8.9 billion, 60 percent of which were generated in the Automotive division