Continental AG’s Leadership Shift Signals Strategic Shift Toward Tire Dominance and Tech Innovation

Continental AG (CONG.F), a global leader in automotive components and tire manufacturing, has embarked on a sweeping leadership and operational overhaul. The appointment of Roland Welzbacher as CFO, alongside the spin-off of its Automotive and ContiTech divisions, marks a pivotal moment for the company’s future. These moves signal a strategic pivot toward greater focus on its core tire business and cutting-edge automotive technologies.

The Leadership Transition: A Dual Focus on Tires and Spin-offs

Roland Welzbacher, a 22-year Continental veteran with deep ties to its tire division, will assume the CFO role on October 1, 2025. His appointment follows a transition period with outgoing CFO Olaf Schick, who will join Mercedes-Benz (MBG.GR) after overseeing preparations for the Automotive spin-off. Welzbacher’s dual role as CFO and head of finance for the Tires division underscores Continental’s priority to dominate the tire market, which now accounts for its entire remaining operations post-spin-off.

Meanwhile, Karin Dohm, former CFO of the Hornbach Group, will lead the Automotive division’s financial strategy as it prepares for independence. Her expertise in global finance and investor relations will be critical as the division seeks a stock market listing by late 2025. Dohm succeeds Claudia Holtkemper, who streamlined the division’s profitability before stepping down in May _2025.

Strategic Overhaul: Cost Cuts, Spin-offs, and Tech Innovation

Continental’s restructuring plan includes aggressive cost-cutting measures, with 3,000 global job reductions targeting R&D and administrative roles. The Automotive division alone has slashed 10,000 jobs since 2024, aiming to reduce R&D spending to below 10% of revenue by 2027. These cuts, paired with spin-offs of Automotive and ContiTech, will allow Continental to focus on its tire business, which reported a robust 13.7% EBIT margin in 2024.

The company also aims to capitalize on emerging technologies. Its Automotive division, now a standalone entity, will focus on software-defined vehicles, sensors, and autonomous systems. For instance, Continental’s Zone Control Units (ZCUs)—critical for server-based vehicle architectures—are already deployed in over 277 million sensors globally.

Financial Targets and Risks

Continental’s 2025 financial outlook includes:
- Sales: €38.0–41.0 billion (down 4% from 2023 due to market headwinds).
- Adjusted EBIT margin: 6.5–7.5%, up from 6.1% in 2023.
- Free cash flow: €0.8–1.2 billion, supporting a 13.6% dividend hike to €2.50 per share.

However, risks remain. Unions have criticized job cuts, warning they could undermine long-term competitiveness. Additionally, global automotive production is projected to stagnate in 2025, with flat growth (-1% to +1%), squeezing margins further.

Investment Implications

Continental’s stock has underperformed peers like Daimler and Volkswagen over the past five years, reflecting market skepticism about its restructuring challenges. However, the strategic focus on tires—a stable, high-margin business—and the spin-off of loss-making divisions could reposition the company as a leaner, tech-driven player.

Investors should monitor execution risks: the success of the spin-offs, cost-cutting adherence, and the Automotive division’s ability to secure listings. Positive outcomes could lift Continental’s valuation, currently trading at 6.2x 2024 EBITDA, below the industry average of 8.5x.

Conclusion

Continental AG’s leadership shift and strategic overhaul are bold steps toward long-term resilience. By focusing on its tire business and cutting-edge automotive tech, the company aims to capitalize on growing demand for EVs and software-driven vehicles. While near-term risks like labor disputes and weak market conditions loom, the financial discipline and expertise of new CFOs Welzbacher and Dohm provide a solid foundation. For investors, the restructuring presents a compelling opportunity to bet on a reimagined Continental—positioned to thrive in a rapidly evolving automotive landscape.

With a projected EBIT margin expansion to 7.5% and a dividend yield of 2.3%, Continental’s stock could rebound if execution aligns with its ambitious targets. The next critical milestone will be the April 25 shareholder vote on the Automotive spin-off, which, if approved, will mark the start of a new chapter for the company.