Management Report Corporate Profile Annual Report 2014 Continental AG 42

Transcription

1 Management Report Corporate Profile Annual Report 2014 Continental AG 42 Corporate Strategy A balanced product portfolio, technological and market leadership in the market segments relevant to us, as well as agility and customer focus constitute the core elements of our strategy. Continental is a leading global automotive supplier, tire manufacturer, and industrial partner to other key industries. The market environment is highly competitive, which means there is intense pressure to innovate and keep costs down. The needs and demands of our customers in the individual regions and market segments are changing at an increasing pace. A high level of flexibility and customer focus are therefore key to our success. Over the long term, market development is being influenced by social trends in the major regions of the world. These trends include the rapid growth of the world s population, resulting in increasing urbanization; demographic change, and in particular globalization. In this context, people are striving to achieve a higher standard of living and the need for mobility is on the rise. Four megatrends can be derived from these global developments. They form the foundation of our strategy and our business activities: Safety For safe mobility Information For intelligent driving Environment For clean power Affordable Cars For global mobility Seven strategic dimensions Based on the four megatrends, our strategy comprises seven dimensions that complement one another and are systematically geared toward sustainably creating value and ensuring the future viability of the company. 1. Value creation enhancing the value of the corporation on a long-term basis We want to achieve a lasting increase in the value of the company. This aspiration encompasses much more than just the earnings margin in relation to sales. Instead, value results from sustainable, lasting success while taking into consideration the costs of capital. We therefore manage Continental in accordance with the principles of value-oriented management (for detailed explanations, see the Corporate Management section). According to these principles, the company achieves an increase in value in a fiscal year when the return on capital employed (ROCE) exceeds the average costs of capital the minimum required rate of return. To ensure our future viability, we are striving to achieve much more than this. In the medium term, we want to increase our ROCE to exceed 20%. Three areas of activity are key to us: innovations, improvement of efficiency and productivity; and strong, profitable growth on the emerging markets. In the year under review, we achieved a ROCE of 20.0% following 19.4% the previous year. With this, 2014 saw another positive contribution toward the company s value.

2 Management Report Corporate Profile Annual Report 2014 Continental AG Regional sales balance globally balanced sales distribution To reduce our dependence on individual regional sales markets, we want to achieve a globally balanced distribution of regional sales. To this end, we are taking advantage of the above-average growth opportunities available to us on the dynamically growing markets in Asia, and North America. At the same time, we are strengthening our firm market position in Europe. With this, we want to achieve a more effective regional balance for our business model in the medium to long term. As a result, we will also be less prone to economic fluctuations in individual regions of the world. Our goal is to gradually increase the share of our consolidated sales in the Asian markets to 30%. We have already made major progress here over the past few years. In the year under review, the share of these markets was 20%. The share of our sales in the North and South American markets should be maintained at 25% or more. The share of sales held by Europe (including Germany) and the remaining countries in total was 54% in the year under review. With the acquisition of Veyance Technologies, we are strengthening our business in key overseas markets. The company complements the ContiTech division s existing activities. This improves our market position, particularly in the U.S.A. and South America. Locations in Canada, China, Australia, and South Africa offer additional opportunities. 3. Top market position among the three leading suppliers in all relevant markets Our aim is to shape our future in all product areas and markets from a leading position. This means we want to be one of the world s three leading providers in terms of customer focus, quality, and market position on a lasting basis.

3 Management Report Corporate Profile Annual Report 2014 Continental AG 44 With our products, we help to increase both road safety and ride comfort, reduce energy and fuel consumption, and make mobility affordable for everyone. We also provide other key industries with pioneering solutions made from rubber and plastic. We are able to offer our customers in established and emerging markets the right components, modules, and complete systems to suit their individual needs from our broadly diversified and scalable range of services. Quality is essential for customer satisfaction all around the world. And we are ensuring this by standardizing central quality processes throughout the corporation with our Quality First program. In terms of sales in the relevant markets, the Automotive Group divisions and ContiTech are among the leading providers for most of their products. In addition, our strong presence in the innovative, promising fields of technology in the automotive industry constitutes a key success factor and driver of future development. Around half of our portfolio is dedicated to the world s 20 fastest growing product segments of the automotive industry. We are the world s fourth largest tire manufacturer and are therefore one of the major providers in this sector. We are strengthening our global position by expanding tire production capacity in the U.S.A., Brazil, China, India, and Russia. 4. In the market for the market high degree of localization We want to ensure a high degree of localization, which is a principle that characterizes our global business model. This means that we are developing numerous applications locally in a close relationship with our customers, taking into account their specific local requirements. Furthermore, we are purchasing locally insofar as this makes sense and is possible from the perspective of global sourcing as well as producing and marketing locally. The aim is for more than eight out of ten application developments to be achieved locally, and for the percentage of local production to be just as high. In the year under review, we opened our second electronics plant in Wuhu, China. The plant comprises production facilities, an R&D center, a laboratory, and warehouses. To further strengthen localization in China, the Changshu location will be expanded by the ContiTech division s business units in We now employ roughly 1,400 engineers in China. Local activities are closely integrated into the corporation s global infrastructure and are therefore managed economically and flexibly. As a result, development and production on the economically leading markets and the high-growth future markets are interlinked at Continental. This enables us to offer worldwide solutions and products for high-quality cars and affordable vehicles, as well as customized industrial applications. Our guiding principle is Decentralized wherever possible. Centralized wherever necessary.

4 Management Report Corporate Profile Annual Report 2014 Continental AG Balanced customer portfolio balance of sales between the automotive and other industries We want to reduce dependence on the automotive industry by achieving a balanced distribution of sales across the different customer segments saw the share of sales fall as a result of weak development in the industrial sector. The acquisition of Veyance Technologies closed at the start of 2015 will enable us to increase the share of sales with industrial customers and end users to about 30%. We want to continue to grow with automotive original equipment and to systematically develop business extending beyond this on a larger scale as well as further increase its importance to the company. By 2020, we want to increase the share of sales with end users and industrial customers from other sectors toward a figure of 40%. We are pursuing three strategic approaches to achieve this goal: In the tire sector, we are investing specifically in additional production capacity geared primarily and predominantly toward generating tire replacement business that is, end customer business. We are increasing our sales with industrial customers from sectors outside the automotive industry both organically and through targeted acquisitions. The ContiTech division plays a particularly important part in this. We are strengthening the automotive replacement business (aftermarket) and are also continuing to expand our activities involving customer-specific solutions and products. In the year under review, we opened our new tire plant in the U.S.A. In India, the sales launch of two premium summer tires tailored to the growing requirements of Indian consumers was also announced in the course of the official start of production of car tires. The division intends to increase its global production capacity by some 26 million units by the year 2018 compared with To strengthen our industrial business, we took a major step toward achieving our strategic objective with the purchase of Veyance Technologies, closed early in The global specialist in the rubber and plastics industry generated sales of about 1.5 billion in 2013 about 90% of which in industrial business. On a pro forma basis that is, taking Veyance into account for the full year the ContiTech division increased its share of industrial business, which was previously less than 45%, to around 55%.

5 Management Report Corporate Profile Annual Report 2014 Continental AG Technological balance combination of established and pioneering technologies We are striving to achieve a carefully balanced combination of technologies. This means that our aim is for our portfolio to consist of a healthy, profitable, and viable mix of established and pioneering technologies. We will use innovations to strengthen our expertise, even for established business activities. What is more, innovations pave the way for new sources of sales. We invest selectively in the development of new products, systems and technologies. We set and follow new trends and standards in high-growth markets and market segments. On the established core markets we ensure that our position as one of the leading product and system suppliers keeps on developing. We actively control and structure our portfolio of products and technologies so that Continental is represented and competitive in all phases of the respective product life cycles. In line with this, we systematically invest in our own product innovations (for detailed explanations, see the Research and Development section) and specifically purchase pioneering technological expertise when an attractive opportunity presents itself. In Silicon Valley, California, U.S.A., we have started putting together an international team comprising members from the IT and automotive industries as the new Intelligent Transportation Systems (ITS) business unit of the Interior division. This process kicked off in August The team works intensively on the future-oriented field of intelligent transportation systems that is, the interconnection of means of transportation and traffic facilities. ITS and the connected car are considered key systems and technologies for future transportation. In mid-2014, we fully acquired Emitec Group, thereby strengthening our position when it comes to pioneering exhaust technologies. Its portfolio of products and technologies includes dosing modules for selective catalytic reduction (SCR). SCR technology involves injecting a urea water solution to reduce the amount of nitrogen oxide in exhaust gases. In the future, nearly all newly produced diesel vehicles will require an SCR system in order to meet the ever more stringent emissions limits.

6 Management Report Corporate Profile Annual Report 2014 Continental AG Great people culture We want to motivate people to continue developing with us within our company. The aim is for Continental to be among the top employers in the relevant markets. Committed employees are a key factor for the long-term success and future viability of the company. Our global, decentralized organizational structure enables us to reap the benefits of broad diversity, which offers us major opportunities. We attach maximum importance to the professional and social expertise of our employees as well as to our common global values culture. At Continental, all employees share four fundamental values: Trust, Passion To Win, Freedom To Act, and For One Another. These are the foundation of our corporate culture and shape the way in which we interact with each other and work together on a daily basis in all areas of the company. In order to develop our corporate culture, we implement numerous initiatives to promote and shape a working atmosphere that is characterized by Trust and mutual respect. Freedom To Act and a positive attitude are the driving forces behind new ideas and initiatives. A sense of For One Another and mutual Trust are prerequisites for an extensive exchange of knowledge and value-adding collaboration. Our success reflects our Passion To Win, which we need to achieve our further goals. By working in networks without organizational or hierarchical boundaries, we want to come up with better solutions more efficiently, and to pick up on trends and market changes more quickly. With the tagline Values Create Value, we held a Values Day for instance at our corporate headquarters in Hanover, Germany, in the year under review. The focus of this day was on considering how our values are embodied within the company, sharing experiences, and learning about the values through games and sporting activities. Ideas on how to strengthen our culture within the company were discussed with a panel that included chairman of the Executive Board Dr. Elmar Degenhart. The event served as a blueprint for further Values Days at other locations.