Last year, people around the world spent an average of 50 minutes each day driving to work – and this trend is still on the rise. Studies show that the car has become an important living space for more and more people, and they want it to function in the same way as their other living spaces. As a result, interiors, Internet and infotainment are becoming increasingly important in cars. Furthermore, the known requirements for better road traffic safety, reduced environmental impact, and affordable but increasingly comfortable vehicles also continue to apply.
At Continental, we have been working on all of these megatrends in mobility continuously and with strong commitment for many years. Our ambitious goals are to avoid car accidents, to minimize fuel consumption, to optimize information management in and around the vehicle, and to provide affordable mobility. Just a dream? Not at all! In this Annual Report, you will find many specific examples of what we describe in our vision: “Your Mobility. Your Freedom. Our Signature.”
These examples confirm that we are clearly on track for success. As announced, we set new records for sales and profits in the past year – despite much lower demand for cars, tires and industrial goods in Europe and particularly in Southern Europe. On behalf of the entire Executive Board, I would like to thank all of our employees and business partners for this remarkable achievement!
I am sure that you, our valued shareholders, appreciated not only our operating performance in the past year, but also our development on the stock market. In September 2012, we succeeded in being promoted back to the DAX again – on the basis of free float of just 40%. With a price increase of 82%, Continental shares showed the highest relative share price increase among the DAX stocks in 2012.
This remarkable development would not have been possible without your trust – on behalf of the Continental team, I would like to thank you for this! We are very happy with the highly successful past year and are delighted to have you share in our record result accordingly. Therefore, together with the Supervisory Board, we want to propose an increase in the dividend to €2.25 at the Annual Shareholders’ Meeting in May.
Your trust motivates us to work towards further achievements which we initiated already in 2012, launching an investment program which will open up further growth opportunities for us. Again this year we will be putting more than two billion euros into this program. Among the projects involved are our new passenger and light truck tire plants in Sumter, U.S.A., and Kaluga, Russia, and the expansion of passenger and light truck tire capacity in Hefei, China. Other projects include the new ContiTech plant for air-conditioning management and power steering lines, also in Kaluga, and a new ContiTech hose plant in Brazil. Our new research and development center for automotive electronics in Singapore is also part of the program. As you can see, we are focusing on strong, profitable growth. In doing so, we are aiming for a balanced sales portfolio worldwide and want to grow further especially in Asia and the Americas.
We secured our major investments in 2012 partly by issuing our first U.S. dollar bond. This bond amounts to $950 million with a fixed interest rate of 4.5% and a term of seven years. We see the significant oversubscription by investors as further proof of their confidence in our performance.
We were able to implement the investment program as a fundamental element of our strategy not least thanks to the support of our Supervisory Board members. They gave us strong encouragement in continuing to systematically pursue our successful path. I would therefore like to express my particular thanks to them on behalf of the Executive Board, as the decisions made are all aimed at achieving a common goal: making your Continental fit for the future and creating lasting value for all stakeholders.
Despite the current fading euphoria with respect to the topic of electromobility, we are keeping our focus firmly on our long-term innovation approach. For this reason, we are forging alliances with companies such as SK Innovation in Seoul, South Korea. The newly founded joint venture SK Continental E-motion will develop and produce first-class lithium-ion based battery technology for automobiles. We will invest a total of €270 million in this and other relevant future technologies together with our partner over the next five years.
Our 20,500 engineers in the Automotive Group are working not only on developments such as new electromobility systems but, to an increased extent, on systems for automated driving as well. We are convinced that automated driving will be a key element of future mobility. Automated systems use energy much more efficiently than human driving behavior alone does. They also increase traffic safety substantially and can save lives. And last but not least, they enhance comfort.
Automated driving will by no means lead to the disempowerment of drivers, as is often claimed. We are all familiar with this from the aviation industry. In the same way that automated systems relieve pilots when it comes to routine tasks and long distances, an interactive and optionally automated car will help drivers make their individual mobility even safer. Drivers who take the same route to work every day, for example, will no doubt embrace the opportunity of having the vehicle take charge of this task. The same applies to monotonous and tiring long-distance journeys on highways.
As a systems supplier, we are excellently equipped for this development and have drawn up a specific roadmap. We intend to offer our customers further solutions for assisted driving by as early as 2016, as there is a high level of interest in this. We will be able to develop the first applications for highly automated driving by 2020, and we intend to get fully automated driving – even at higher speeds and in more complex driving situations – ready for production together with our customers by 2025. In December 2012, we became the first automotive supplier in the world to be given authorization for road tests on public roads in the U.S. state of Nevada.
All of these investments form part of our pursuit of continuous value enhancement. This is exactly what our newly developed corporate strategy is geared towards. It comprises seven dimensions with concrete goals that we have set ourselves for the coming years. One important element, for example, is to increase our share of sales with industrial activities and consumer business (the aftermarket). In doing so, we want to become less dependent on automotive industry cycles in the medium term. In addition, we intend to grow faster in Asia and other emerging markets than the markets themselves. This should result in a more even regional distribution of our global sales.
Our strategy also encompasses further development of our corporate culture and our corporate brand. The two go hand in hand, since we know that economic success results to a large extent from a strong sense of identification, passion and trust. This applies in particular to all of our employees. Lasting value is created when our employees work for our customers not only with one another, but also for one another. This is what we aim for and how we develop a highly motivated and passionate top team. It enables us to create fascinating solutions and products for mass production in reliable, first-class quality and faster than our competitors. The combination of all these elements produces the strong Continental brand that has been inspiring our customers for over 140 years. Up till now, the brand has traditionally been associated primarily with our activities as a tire manufacturer. We now want to make greater use of it for the corporation as a whole and link it with our other areas of expertise. In this way, we wish to be perceived by our target groups as one of the world’s leading companies for individual mobility.
No doubt you have already noticed our redesigned logo. The modified, more modern and fresh design represents the corporation’s positioning, namely that our technological solutions help people to enhance their quality of life with mobility and to structure their life in a sustainable manner.
In parallel with this project, in 2012 we established our four values – Trust, Passion to Win, Freedom to Act and For One Another – throughout the company worldwide and began further developing our culture of cooperation. This is a pivotal factor in dealing with the constantly increasing volatility and complexity of the markets and our environment. Our solutions have to be available increasingly quickly and must fulfill constantly growing requirements. Our response is to focus on increased, networked use of our collective intelligence.
As a result of this, we expect above all to become an even more attractive employer for our employees around the world. We intend to rank among the top employers in our relevant markets. We have already made considerable progress recently in this respect. In our home market Germany, for example, we are one of the 20 top companies in terms of our reputation among engineers and scientists.
Our success in the past months makes us all the more determined to continue along the path we have taken. For 2013, we are aiming for sales of more than €34 billion and an adjusted operating EBIT margin of over 10% once again.
As you can see, despite the current slowdown and uncertainty in Europe, we are entering 2013 with confidence. Your trust is what drives us. Please continue to support us on our successful course!
We look forward to continuing along this path together and promise you that we are giving our all for the success of your Continental!
Dr. Elmar Degenhart
Chairman of the Executive Board
Dr. Elmar Degenhart
Chairman of the Executive Board