Asset Hive-off

Continental, mulling a split-up, could ease Schaeffler's modernization

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Future vision: Continental's assets could be worth more if split up. Source: Continental

With nearly 90,000 employees and €14 billion ($17.16 billion) in revenue, German auto and industrial parts supplier Schaeffler appears to be in good shape. Behind the numbers, however, the picture is anything but perfect: Schaeffler is struggling to get fit for the digital age. “We have to be faster,” said Klaus Rosenfeld, Schaeffler’s boss. “That also means that we have to do some things earlier than we’d planned.”

If this restructuring succeeds, the company will rely less on revenue from machine parts and more on money made selling applications and solutions for electric and hybrid cars. Compared to the competition, however, Schaeffler has plenty of catching up to do. To close the gap, it will need to double down on investment — but there’s still the question of where that money would come from.

Car-parts supplier Continental could be the answer. Maria-Elisabeth Schaeffler and her son Georg hold a 46 percent share worth €22.5 billion in Continental. (A few years ago, Schaeffler briefly held 75 percent of the company.) Those assets could be worth even more if Continental’s board decides to break up the business and put certain segments, such as its lucrative tire division, up for sale. In similar instances, investors have valued these units higher individually than combined. If that’s true in Continental’s case, the Schaeffler family would make a considerable profit.

Observers predict that Schaefflers, one of Germany’s richest families, would channel that extra money into the company’s operations. “The larger the family’s fortune, the more financial leeway the company has,” said Jürgen Pieper, an analyst with Metzler Bank. A source close to Continental said that while the Schaefflers did not initiate the deliberations over the company’s fate, they have been “kept informed at all times.”

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