German auto parts supplier and tire maker Continental has announced plans to cut 5,000 temporary jobs worldwide by the end of the year and throttle back production after a 99 percent plunge in third quarter profits.
Continental respond to steep slide in profits
"We have 10,000 temporary posts around the world, by the end of the year, half will have disappeared," the company CEO Karl-Thomas Neumann told AFP news agency on Thursday, Oct. 30.
He said the company would not have to cut permanent posts "at the moment."
But Neumann said production would be cut at "the majority of sites" and the Christmas break in late December would last "from one to four weeks" depending on the factory in question.
Several German automakers, including Daimler and BMW, have announced similar plans recently to deal with a slump in the automobile sector.
The Hannover-based parts company, which is being acquired by Germany's Schaeffler Group, earned 2.4 million euros ($3.06 million) in the July-September period -- its net income down from 251.5 million euros last year.
Continental particular hard hit by European slowdown
The production stops in the car industry are having a knock-on effect
The company has now cut its 2008 revenue forecast to 25 billion euros from a previous target of 26.4 billion euros. Neumann said there had been "drastic slowing in all markets" in the last quarter, but that Continental had been particularly hit by "dramatic declines" in Europe.
"This trend is likely to continue in an even more marked manner in 2009," the Continental boss said, adding that he could not predict whether the crisis would end "in the middle of next year or the year after."
"Consumers are worried," Neumann said. "And commercial clients, like bus companies for example, are delaying investments also because they can no longer find credit."
Continental had been hit hardest, however, by a drop in output by car manufacturers, in particular by "the heavy hitters," he told AFP. However, the company reiterated its profit margin goal that 2008 earnings before interest and tax and excluding costs related to last year's acquisition of Siemens' VDO car components unit will be 8.5 percent of sales this year.
The group has established a cost-cutting plan that includes the slashing of temporary jobs, a longer-than-usual year-end break and is considering the possibility of reducing the working week. Continental will also freeze non-essential investments, Neumann said.
Shares in the company leapt by 10.24 percent to 31.00 euros in midday trading on the Frankfurt stock exchange.