Continental AG aims to tap burgeoning autonomous self-driving vehicle markets, hires JPMorgan for potential break-up

Across the supply chain of the auto industry, investors are cheering firms who break away from the mold of the combustion engine centered model, which they see as a sunset industry, to that of new age self-driving, autonomous, automated vehicles.

As per sources familiar with the matter at hand, German auto parts maker, Continental AG, has hired U.S. investment bank JP Morgan on a possible break-up as it intends to increase its focus on the burgeoning self-driving vehicles.

As per 3 people familiar with the discussions at hand, JPMorgan has been given the mandate to work on strategic options which includes the break-up of its current businesses.

Continental and JP Morgan both declined to comment on the bank’s role.

“We are drawing on external expertise but are still pretty much at the start of the process,” said Elmar Degenhart, Continental’s Chief Executive in an interview at the Detroit auto show.

Last week, Continental had said it was in talks about a possible structural overhaul which confirming media reports on the topic.

With the auto industry in the midst of a strategic transition to autonomous and zero-emission cars, auto part makers, suppliers and carmakers have begun adjusting their businesses and have spun off operations to focus more effectively on the new technologies.

On its part, Daimler stated it may split into two legal entities which could allow it for a partial listing to raise funds for future mobility technologies and services.

Cheered by investors, auto parts makers, including Delphi and Autoliv have either spun off divisions or have announced plans to do so.

Continental has identified electronics and software as the biggest growth drivers for the group and plans on boosting sales to more than $61 billion (50 billion euros) by 2020.

During an interview, Degenhart disclosed structural change are likely to be required to deliver on Continental’s goal of exceeding global auto production growth by 4-5 percentage points.

“We can’t expect that structures that were successful and appropriate over the past 10 years will also be the right ones in 10 years from now,” said Degenhart.

As per a source familiar with the matter at hand, a specific plan has yet been drawn out.

Although investment banks had earlier presented ideas on spinning-off of Continental’s tyre operations, its Chief Financial Officer Wolfgang Schaefer has ruled out spinning-off of the firm’s combustion engine assets.

The firm has pledged to keep developing new products and systems for combustion-engined vehicles for at least 2025 when it expects demand for EVs to accelerate on the back of continuing reductions in battery prices.

($1 = 0.8151 euros)


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