Domestic dispute
July 31, 2009
Continental's chief executive officer, Karl-Thomas Neumann, is expected to step aside within the fortnight, following a dramatic supervisory board meeting on Thursday.
The company's chief investor, Schaeffler, tried to oust Neumann over his plan to rescue Conti from its debts with a 1.5-billion euro ($2.1 billion) capital increase.
Schaeffler-appointed board members were unable to muster the two thirds of votes required to dismiss Neumann, after delegates representing employees at Conti voted to back their boss.
However, the leadership of the company will be put to a second meeting scheduled for August 12, at which a simple majority will suffice to force Neumann's removal.
The head of Schaeffler Automotive, Elmar Degenhart, is then expected to be elected as Neumann's successor.
On Friday, the state government in Hanover criticized the attempt to oust Neumann. "There can be no deadlocks and no personnel blood-letting," an Economics Ministry spokesperson said.
Germany's main blue collar union also came down heavily in favor of Neumann, who is well respected in the automotive sector.
"The Schaeffler family and other investors are committing a big mistake by trying to dismiss Neumann," IG Metall's regional head, Hartmut Meine, told dpa.
"Neumann is one of the best automotive managers in Germany. He has the full trust of workers representatives at the company."
Neumann would be the second boss within a year to leave Continental due to a struggle with Scheffler. Former CEO Manfred Wennemer left the company last year following Schaeffler's takeover.
Refinancing plan approved
Yet Neumann appears to have got his way on the subject that made him especially unpopular with Schaeffler.
A Continental statement said the supervisory board accepted a proposal "to prepare a capital increase of up to 1.5 billion euros," to strengthen the company's financial structure.
The capital increase would dilute Schaeffler's influence at Continental, as it is under pressure from its creditors and would be unable to purchase any more shares in the company.
Schaeffler, a family-owned ball-bearings manufacturer, acquired 90 percent of the much larger Continental in July of last year, but the hostile takeover proved poorly timed.
The financial crisis sent Continental's shares plummeting at the time of the deal, leaving Schaeffler forced to acquire more of the company than it intended, and at an over-valued price.
The takeover, which was initially regarded as a coup within the automotive industry, has left Schaeffler straddled with an 11-billion-euro debt.
The two companies began investigating the possibility of a merger earlier this year, but negotiations recently degenerated into acrimonious accusations, with the two companies and creditors unable to agree on Continental's true value, or the debt burden that Schaeffler could still take on.
nw/dpa/AFP/AP/Reuters
Editor: Chuck Penfold