articol bloomberg

Feb. 19 (Bloomberg) -- Continental AG, Europe�s second- largest car-parts maker, reported its first quarterly loss in seven years, burdened by 1.23 billion euros ($1.55 billion) in writedowns on an acquisition and dropping demand for vehicles.

The fourth-quarter net loss was 1.49 billion euros compared with net income of 195 million euros a year earlier, according to figures derived by subtracting nine-month from full-year numbers published today by Hanover, Germany-based Continental. The loss was wider than the 767 million-euro median loss estimate of six analysts surveyed by Bloomberg News.

Caught off guard by an abrupt drop in car sales at the end of last year, manufacturers including Volkswagen AG, General Motors Corp. and Bayerische Motoren Werke AG have slashed production, diminishing demand for parts. The economic turmoil comes as Continental digests 2007�s debt-financed, 11.4 billion- euro purchase of Siemens AG�s VDO car-parts business.

�We are making allowances for the fact that business in parts of the Automotive Group did not develop entirely as we originally expected following the acquisition of Siemens VDO� after vehicle markets collapsed, Chief Executive Officer Karl- Thomas Neumann said today at a news conference in Hanover. Continental may earn a profit in 2009 as long as it has no further goodwill costs on VDO, he said.

Fourth-quarter sales rose 8.3 percent to 5.09 billion euros from 4.7 billion euros, and full-year revenue jumped 46 percent to 24.2 billion euros, because of the addition of VDO.

Continental rose as much as 29 cents, or 2.2 percent, to 13.50 euros as of 10:27 a.m. in Frankfurt trading. That pared the stock�s 12-month decline to 80 percent.

�Deviations� From 2008

Auto-division sales are likely to drop in the first half and may lead to �very large deviations� from 2008 figures, Continental said. The company said it aims to reduce spending and suspended its dividend for 2008 to save money for paying some of its debt, which totaled 10.5 billion euros at the end of 2008.

The purchase of 90.2 percent of Continental�s shares by Schaeffler Group earlier this year has added to the parts-maker�s financial concerns. Standard & Poor�s lowered Continental�s credit rating two levels to the second-highest junk grade on Jan. 27, citing risks related to Schaeffler�s holding in the company.

Neumann has been charged with reviewing a combination of Schaeffler�s and Continental�s auto-parts units. He said today that developing an integration plan may take �several months.�

Schaeffler, based in the Bavarian hamlet of Herzogenaurach, makes transmission parts and ball bearings for cars, planes and fishing reels. The company said yesterday that Mary Jo Gresens, who was once Schaeffler�s chief financial officer, has been hired to oversee the integration project.

Full-Year Loss

Continental�s full-year loss was a record 1.12 billion euros, or 6.84 euros a share, versus net income of 1.02 billion euros, or 6.79 euros, in 2007, the company said today. The figure was almost triple analysts� 403 million-euro loss estimate.

The company, which is also the Europe�s second-largest tiremaker, faces pressure as competitors streamline. Milan-based Pirelli & C. SpA said on Feb. 11 that it�s targeting 200 million euros in savings with a 15 percent workforce reduction at its tire unit. The region�s biggest tiremaker, Clermont-Ferrand, France-based Michelin & Cie., said on Feb. 13 that it aims to scale back investment by 45 percent to 700 million euros.

Schaeffler, owned by the founder�s widow, Maria-Elisabeth Schaeffler, and their son, Georg, is straining under the burden of about 11 billion euros in debt from the Continental purchase. Schaeffler, which is a third of Continental�s size, is appealing to the German government for financial help, even as it looks for new investors.

Bid Acceptance

Schaeffler�s troubles have piled up since its July 15 hostile bid for Continental. The bearing maker expected that derivatives contracts and what was then a low-ball offer would secure a stake of 30 percent to 50 percent. Instead, investors tendered 82.4 percent of Continental�s capital, adding to Schaeffler�s 7.8 percent holding, as stock markets collapsed.

The company directly holds 49.9 percent of Continental�s capital after transferring 40.3 percent to private German banks B. Metzler seel. Sohn & Co. and Sal. Oppenheim Jr. & Cie KGaA for possible sale later.

The arrangement is the result of an August agreement between the two companies that governs the relationship. It restricts Schaeffler from boosting the direct stake to a majority or adding to Continental�s debt, and calls on Schaeffler to support management�s strategy.

Rolf Koerfer, who is Schaeffler�s lawyer, is now Continental�s supervisory board chairman. Maria-Elizabeth and Georg Schaeffler and CEO Juergen Geissinger are also members of the Continental board.

To contact the reporter on this story: Chris Reiter in Hanover, Germany, via creiter2@bloomberg.net.

Last Updated: February 19, 2009 04:34 EST