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Continental AG:Strategy & Future Trends
Manfred Wennemer,Chairman of the Executive Board
ANE Congress PragueJune 27, 2007
Executive Board
2 / Manfred Wennemer / 2007-07-02 © Continental AG
Continental Corporation 2006
€ 14.9 billion
€ 1,601.9 million
€ 981.9 million
85,224
*Earnings before interest and taxes
Sales
EBIT*
Net income attributable to theshareholders of the parent
Employees
Executive Board
3 / Manfred Wennemer / 2007-07-02 © Continental AG
Continental Corporation 2006
Approx. €800 million spent on acquisitions
€630 million transferred to contractual trust arrangement
Approx. €800 million invested
Innovative strength further reinforced with some €680 millionfor research and development
Executive Board
4 / Manfred Wennemer / 2007-07-02 © Continental AG
EBITA
14,8
87.0
13,8
37.2
5,71
9.4
5,33
3.1
0
2000
4000
6000
8000
10000
12000
14000
16000
1996* 1997* 2005** 2006**
Continental Maintains Successful Long-Term Strategy
269.
3
321.
7
1,50
7.1
0
200
400
600
800
1000
1200
1400
1600
1996* 1997* 2005** 2006**
in € millions
* HGB (German Commercial Code)**IFRS
Sales
x 2,60 x 4,98
in € millions
1,60
1.9
Executive Board
5 / Manfred Wennemer / 2007-07-02 © Continental AG
TiresLeader
„where it counts“High Performance Tires Winter Tires
ContiTech5 of 7 business units arethe leaders in Europe
Leadership in ‘Fahrverhalten’
Continental Strategy – Unique Constellation of Continental
Focus Products Role
Automotive SystemsOne of the two leaders
worldwideESC / ACC
Interface
Leading intonew markets
TPMS / DDS+ TransponderActive Vibration ControlAir SpringsHybridTelematics
„Fahrverhalten“„Fahrverhalten“
Executive Board
6 / Manfred Wennemer / 2007-07-02 © Continental AG
Our Vision
We make individual mobility safer and more comfortable Performance is our passion Creating value is our driving force
Executive Board
7 / Manfred Wennemer / 2007-07-02 © Continental AG
Traffic Fatalities & Number of Passenger Vehicles in Germany
* from 1990 incl. new countries; Source: Destatis, KBA
Num
bero
f Tra
ffic
Fata
litie
sin
Tho
usan
ds
Num
ber o
f Pas
seng
er V
ehic
les
in M
illio
ns
0
5
10
15
20
25
0
10
20
30
40
50
1953
1955
1960
1965
1970
1975
1980
1985
1990
*
1995
2000
2005
Safety belt
ABS
Airbag ESC
Executive Board
8 / Manfred Wennemer / 2007-07-02 © Continental AG
Electronic Stability Control (ESC) Installation Rates
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Europe
NorthAmerica
Japan
NHTSArule making
ESC installation rate of pass. light vehicles beingproduced in the region
Executive Board
9 / Manfred Wennemer / 2007-07-02 © Continental AG
Brake AssistanceCrash Preparation
Electronic Control Units and Sensorsfor Airbags
Car-to-car Compatibility AdjustmentsCar-to-Car CommunicationMan-Machine-Interface Adaptation
Passive Safety
E-CallEmergency RescueRoadside Assistance
In-Crash Post-CrashNormal Driving
= Automotive Systems current safety competence
= Motorola’s Automotive Electronics Business currenttelematics competence
= New Automotive Systems additional safety competence
Crash
Comfort ElectronicsElectronic Brake SystemGlobal Chassis Control
Remote Door UnlockStolen Vehicle TrackTraffic InformationNavigationHands-Free PhoningMobile Device AccommodationRemote Maintenance
APIA – Active Passive Integration Approach
Pre-Crash
Enhanced Emergency Rescue
Crash Type Data (Rollover)
Car-to-Car/Car-to-Infrastructure CommunicationEnhanced Collision Avoidance
Active Safety
Executive Board
10 / Manfred Wennemer / 2007-07-02 © Continental AG
Telematics
Continental Innovation
eCallAirbagSeatbelt Pre-tensioning
Passive Safety Components
Consumer Infotainment Outside World
Active Safety Components
Sensor Assy.Cluster, F/RForce Feedback Pedal
RadarCameraStability ControlLane Change Warning Blind Spot Detection
GPS Location InfoNetworkingOTA programmingNav map, Info, Traffic2 way Communications Cell,DSRC, Mesh
Portable Devices
Executive Board
11 / Manfred Wennemer / 2007-07-02 © Continental AG
APIA Telematics - Car2X Communication
Continental is working with the Car 2 Car Communication Consortium for standardization
www.car-to-car.org
Executive Board
12 / Manfred Wennemer / 2007-07-02 © Continental AG
Continental Contributions
Reduction of CO2 emission
Saving Resources
Driving pleasure by improved dynamics
Executive Board
13 / Manfred Wennemer / 2007-07-02 © Continental AG
100% 100% 100% 100%
72,2%
60,7%
71,8% 69,4%
0%
20%
40%
60%
80%
100%
Energy Consumption Water Consumption Waste Production CO2 Emissions
2001 2005
Process Improvements (Per Ton Finished Goods)
Executive Board
14 / Manfred Wennemer / 2007-07-02 © Continental AG
EU CO2 Emission Target for 2012
* average for new cars sold today, according to NEDC** EU commission target proposal EurActiv Feb. 2nd, 2007
Motor Technologies:PowertrainHybrid DrivesChassisLow Drag
- 33 g/km
- 10 g/km
163 g/km*
130 g/km
120 g/km**
Others:TelematicsTire Pressure MonitoringTire Roll ResistanceBio Fuel blending
Executive Board
15 / Manfred Wennemer / 2007-07-02 © Continental AG
Continental Innovations Reduce CO2 Emissions by 4-5% + Hybrid
Hybrid drive incl. respective componentsExhaust gas after treatment (hoses)Timing belt in oil for chain substitution (Conti Oil Runner)
Powertrain
Brake System
Tires
Miscellaneous
Reduced weight of brake calipers, brake discs,brake actuations, ESC unitsRegenerative brake system (part of hybrid)Reduction / elimination of residual brake torque
Reduction of weight and rolling resistanceTire pressure monitoring systems (TPMS, DDS etc.)
Optimized traffic flow through telematics, ACC etc.Power-on-demand units (e.g. electric vacuum pump)Permeation-free hoses for passenger car A/C systems
CO2 Reduction by
CO2 Reduction by
CO2 Reduction by
CO2 Reduction by
Executive Board
16 / Manfred Wennemer / 2007-07-02 © Continental AG
Clutches, Torsion dampers functions
Engine control unitEnergy storage system functions
Regenerativebrake functions
Transmission functions
HybridSystem
Hybrid Transmission
HybridModule
Hybrid Components
Hybrid Components & Parallel Hybrid Systems - System Approach
Electric motor Power electronics functions
Executive Board
17 / Manfred Wennemer / 2007-07-02 © Continental AG
Production of all Automobile Manufacturers
Source: Global Insight
Western Europe
Germany
Asia
Eastern Europe5
10
15
20
25
30
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
in mill. units
Focus:Growing RegionEastern Europe
Focus: Growing RegionASIA
Nafta
Executive Board
18 / Manfred Wennemer / 2007-07-02 © Continental AG
Source: Global Insight
Western Europe
Germany
Asia
Eastern Europe
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
in Mill.
Focus:Growing RegionEastern Europe
Focus: Growing RegionASIA
Nafta
5
10
15
20
25
30
ConclusionConclusion::
ConsistentConsistent DevelopmentDevelopmentin in AsiaAsia and Eastern Europeand Eastern Europe
Executive Board
19 / Manfred Wennemer / 2007-07-02 © Continental AG
Definition of ‚Low Cost Car‘
€5,000
€3000
€10,000
WesternEurope
IndiaChinaEasternEurope
Japan
Low Cost CarMature Market
Low Cost CarEmerging Market
Germany: VW Fox Eastern Europe:Dacia Logan
China: Cherry QQ
India: Tata (SOP 2008)
India: Maruti 800
Executive Board
20 / Manfred Wennemer / 2007-07-02 © Continental AG
Global Light Vehicle Production
2007 2017Low Cost Cars < 10.000 €
Light Vehicle Production (in mill. units)
5
10
15
20
25
30
35
40
Asia EasternEurope
WesternEurope
NorthAmerica
SouthAmerica
Asia EasternEurope
WesternEurope
NorthAmerica
SouthAmerica
Source: Global Insight 03/2007
Executive Board
21 / Manfred Wennemer / 2007-07-02 © Continental AG
Objective 2007
5% Growth without acquisitions5% Growth without acquisitions
Executive Board
22 / Manfred Wennemer / 2007-07-02 © Continental AG
Production in Eastern Europe
Czech Republic: Otrokovice, Partizanske, Jicin (6,267 employees)
Slovakia: Puchov, Zvolen (1,802 employees)
Romania: Timisoara (50th million tires),Sibiu (5th million control units),Carei (2,754 employees)
Hungary: Budapest, Veszprem, Vac, Mako, Nyiregyhaza, Szeged(4,343 employees)
Executive Board
23 / Manfred Wennemer / 2007-07-02 © Continental AG
Production in Asia
China: Lianyungang, Shanghai, Chanchun, Changzhi, Ningbo,Ninghai, Tianjin, Zhangiiagang (3,051 employees)
Japan: Yokohama, Monbetsu, Asahi, Hamakita, Hiroshima(866 employees)
Malaysia: Petaling, Alor Setar, Kulim (3,034 employees)
India: Calcutta, Delhi, Bangalore (928 employees)
Korea: Seoul, Busan (267 employees)
Philippines: Manila, Calamba (1,488 employees)
Taiwan: Tainan (15 employees)
Executive Board
24 / Manfred Wennemer / 2007-07-02 © Continental AG
Acquisitions in the Past Months
Acquisition Focus
51% of Matador Rubber Group Eastern Europe
Automotive electronics business from Motorola North America
Roulunds Rubber Group Asia
VTI Technologies Asia, North America
Executive Board
25 / Manfred Wennemer / 2007-07-02 © Continental AG
Europe Rest of World
* Based on sales** Based on units
‘Cost Consciousness’ – Production in Low-Cost Countries
61%
52%
11%
22%
65%
54%
23%
17%18%
26%
66%
56%
AutomotiveSystems*
PLT** CVT** ContiTech*
2004 2005 2006PLT = Passenger and Light Truck TiresCVT= Commercial Vehicle Tires
18%
29%
39%
45%
15%
44%
52%
36%
41%
52%
17%
55%
AutomotiveSystems*
PLT** CVT** ContiTech*
Executive Board
26 / Manfred Wennemer / 2007-07-02 © Continental AG
Outlook 2007
We expect 2007 to see
an increase in consolidated sales of at least 5%.
a further improvement in the operating result.
a positive free cash flow – before potential acquisitions.
In 2007 we intend
to spend approximately 4.6% of sales on research and development.
to invest approximately 6% of sales.
to achieve a better balance sheet structure (acquisitions, organic growth, higher dividend).
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