Turning change into progress and opportunity.
In 2022, Continental developed a new vision and mission together with the entire Executive Board and managers from all group sectors, which it rolled out across the company:
CREATING VALUE FOR A BETTER TOMORROW.
OUR TECHNOLOGIES. YOUR SOLUTIONS. POWERED BY THE PASSION OF OUR PEOPLE.
The vision and mission are the foundation for our daily corporate activities. They link the challenges of the present to the key questions for the future:
- What do we stand for?
- What drives us?
- Where do we want to go?
The vision and mission provide us with pioneering guiding principles in an increasingly complex and highly dynamic market environment.
What do the new vision and mission mean for Continental?
- “Creating value”: Everything we do is designed to create value. This can be financial value for our shareholders but also value for our customers, our employees and the societies in which we operate.
- Our goal is to build “a better tomorrow.” With our products and services, we contribute to making the world a little better. We develop and produce the mobility of tomorrow, making it safer, more convenient and more sustainable. At the same time, a better tomorrow means acting now and not in the distant future. Every day. Tomorrow will be better than today, because every day we get a little better.
- “Our technologies”: We will achieve these improvements with the help of technology. We are a technology company and believe that we will only be able to tackle the challenges of our time by rapidly developing the right technologies.
- “Your solutions”: Rather than being an end in itself, however, our technology should help our customers make their products even better and more useful. This is what we mean by “Our technologies. Your solutions.” Because we are customer-focused in everything we do.
- “Powered by the passion of our people”: This makes it clear that Continental stands for a certain culture. A culture of mutual respect. A culture of togetherness. And a culture of passion.
Based on this, our aim is to become the most attractive and progressive employer. Ultimately, in order to achieve our vision, we want to attract and retain the best talent at Continental.
Amid the fierce competition for this talent, we impress with our innovative technologies, our culture of mutual respect, trust and togetherness, and our pronounced passion to win. With our new vision and mission, we aim to strengthen our employees’ commitment – the most important bond they have with Continental. Their commitment, enthusiasm and motivation are an expression of our passion to win and give us a key competitive advantage, more so now than ever.
All group sectors were involved in the development of the new vision and mission. They therefore represent an important basis for our daily activities and reflect the respective business identities of our broad-based corporation and the factors decisive for its success.
With our strategy, which was realigned to address the transformation in the mobility industry in 2020, we have paved the way for profitable growth over the coming years. Our overall organizational structure and management processes are fully aligned with this strategy. We see the transformation in the mobility industry as an opportunity. Our strategy is based on three cornerstones:
- Strengthening operational performance
- Differentiating the portfolio
- Turning change into opportunity
1. Strengthening operational performance
By strengthening our operational performance, we can ensure our future viability and competitiveness. We are aligning our cost structure to global market conditions. In 2019, we introduced appropriate measures with our Transformation 2019–2029 structural program, which we expect to generate gross savings of €850 million annually from 2024 onward.
The semiconductor shortage is an ongoing challenge for the automotive industry. Delivery backlogs and delivery times for semiconductors were at record highs in 2022, and the situation is not expected to improve substantially before 2025. Continental responded to the challenge by setting up a task force in fiscal 2021 and by establishing the Integrated Business Planning (IBP) unit in 2022. Operating internationally, the IBP unit manages supply and demand planning for all Automotive business areas and oversees volume planning for semiconductors in order to achieve a balance between customer demand and supplier deliveries.
2. Differentiating the portfolio
We continue to pursue the targeted differentiation of our product portfolio with a focus on growth and value. Our focus on growth is aimed at establishing strong market positions in innovative fields featuring highly dynamic growth, while our focus on value addresses saturated markets with stable but low growth.
In our Automotive, Tires and ContiTech group sectors, our focus on growth is centered around innovations for safe, connected and automated driving, which will be a critical factor in customers’ future purchasing decisions. Vehicles require technologies from Continental, such as tires, brake systems, hoses for thermal management, digital solutions and services, as well as high-performance computers – irrespective of the vehicle’s drive technology.
We are purposefully entering into partnerships that make us better and faster, in particular with smaller specialist firms and start-up companies. In the year under review, for example, we continued to invest in collaborations for assisted and autonomous driving. Funding that we do not contribute to partnerships is used to establish and develop our in-house expertise. Examples can be found in the Research and Development section starting on page 35 of this annual report.
When it comes to “value,” our focus is on profitable product areas where we have solid competitive positions in markets with a high degree of maturity. These include, for example, display and control systems, surface materials and the European tire business. The aim here is to sustain profitability and generate sufficient funds to enable us to ensure competitive expansion geared to market and technology leadership in growth areas that as yet are unable to fully finance their ambitious growth themselves.
The portfolio strategy also includes possible acquisitions, divestments and partnerships. The business areas are regularly assessed to determine whether they are capable of creating the best possible value for Continental, and how their value can be maximized.
Strategy of the Continental Group
3. Turning change into opportunity
Our comprehensive organizational structure helps us seize market opportunities and translate them into profit even more quickly. Transparent structures and a high level of autonomy make us more flexible in an increasingly complex market environment.
Sustainability is a key area in which Continental is turning change into opportunity. Continental has set out a sustainability ambition with four focus areas: carbon neutrality, emission-free mobility and industry, circular economy, and responsible value chain. It describes how, together with our partners, we seek to shape the transformation in the relevant topic areas along the entire value chain by 2050 at the latest. This sustainability ambition provides the framework and guidelines for existing strategies, programs and processes, as well as their further development. The systematic expansion of our business in particular with zero-tailpipe-emission vehicles contributes significantly toward achieving our ambitions in the area of carbon neutrality and emission-free mobility and industries, as well as toward reducing greenhouse gas emissions in the mobility sector. Detailed information on the implementation of our sustainability ambition can be found in the Sustainability and Combined Non-Financial Statement section starting on page 37 of this annual report.
We are sticking to our medium-term business outlook:
- In the Automotive group sector, we are focusing on the growing global demand for safe, connected and convenient mobility. This means, in particular, the development of non-differentiating software, which makes up around 60% of a vehicle’s software. Such software consists of programs that are not critical for the marketing of vehicles, but that are necessary to ensure their safe operation. It is crucial to achieve cost advantages through standardization and scaling in this area. Forty percent of a vehicle’s software relates to functions that make a visible difference, such as for automated driving or infotainment systems. For Automotive overall, we anticipate an adjusted EBIT margin of around 6% to 8% in the medium term as well as a return on capital employed (ROCE) of over 15%.
- We want to further consolidate our position among the world’s top tire manufacturers, particularly in the growth markets of Asia and North America. In the passenger-car tire segment, we intend to expand our business with tires for electric mobility and ultrahigh- performance tires. We also see future growth in vehicle fleet management services. For the Tires group sector, we anticipate an adjusted EBIT margin of around 12% to 16% in the medium term as well as an ROCE of over 20%.
- For the ContiTech group sector, the main opportunities are presented by the growing demand for digital and intelligent solutions. Business continues to be based on products and systems made from rubber, plastic, metal, textiles and electronic components, which in the future we will be able to combine with customized and digital service offerings. For ContiTech overall, we anticipate an adjusted EBIT margin of around 9% to 11% in the medium term as well as an ROCE of over 20%.
- At corporate level, we aim in the medium term to achieve an adjusted EBIT margin of around 8% to 11% and an ROCE of around 15% to 20%. The cash conversion ratio is expected to exceed 70%.
