Slowdown hastens Continental AG’s roll-ins

Continental AG, the world’s third largest auto component manufacturer, plans to bring more work into India. The $24 billion German major is also looking to expand its revenue base in the country which at present forms a minuscule portion of its overall sales.

“We have a twin-pronged strategy in India. To save on operational costs, while servicing our international markets and develop our expertise to cater to the burgeoning Indian markets,” Rajendra Singh, associate vice-president & head, engineering, Continental India, said.

The Indian subsidiary has 700 employees in R&D and over 1,300 in manufacturing.  It has technical and engineering centres for R&D based in Bangalore, and manufacturing facilities in Pune and Gurgaon.

The company plans to increase R&D employee base in India by 20% year-on-year for the next few years at a time when 16,000 people from its US and European locations were recently laid off.

This is part of its effort to rationalise its processes after the recession dented its business owing to over-reliance on the Western markets. It is currently present in 35 countries.
The parent company is strapped by €11 billion ($15.6 billion) in debt, and has just restored profit last quarter after two consecutive losses in earlier quarters by pursuing spending cuts. It reported a second-quarter operating profit of €39 million.

The company will invest over Rs 400 crore in its Indian operations by December 2010.
According to Singh, Continental expects India and China to increase Asia’s revenue contribution to 33% in 2012 from the current 10%.

Industry insiders said that domestic sales for auto components sector in the last five years were around $14.4 billion, while export revenues stood at $3.6 billion. For its international markets, the Indian subsidiary is involved in business units like chassis components and passive safety. New verticals like multimedia and connectivity will be added shortly.

For the domestic markets it offers instrument clusters, sensors, power steering, for the likes of Tata Motors and TVS Motors. Singh said that though the nature of work done in India is not all high end the new work being doled out is of greater complexity.  

For instance, last week the company kicked off a new fuel components team in India.
This team was initially planned to have been an extension of the team working on fuel components in Germany.