Continental AG concerned about intervention in negotiations with banks

The Executive Board of Continental AG, Hanover, is concerned about the intervention of the Schaeffler Group in Continental's business negotiations. We have been made aware of a letter from the management of the Schaeffler Group to several of our banks. In this letter, the Schaeffler Group is obviously attempting to influence the talks being held proactively by Continental with regard to securing our long-term financing. This move is a massive encroachment upon the sovereignty and independence of Continental's management. We are irritated by this action of the Schaeffler Group, as we feel that it clearly goes against the spirit of the jointly reached investment agreement. To top it off, this intervention is at a point in time when an approval of the EU Commission has not yet been granted, said Continental Executive Board chairman Dr. Karl-Thomas Neumann on Friday in Hanover.

The vice chairman of the Executive Board and CFO Dr. Alan Hippe pointed out that Continental will continue to hold talks with the banks as planned: Our business partners in the banks have been familiar with our experience and reliability for many years. With this proactive step, we are safeguarding our financing as best as possible in a forward-looking manner, with a view to the uncertainties we are facing in the crisis year 2009. This has a positive effect for Continental, and at the same time is in the interest of all our shareholders, in particular the Schaeffler Group. This holds all the more true as Continental will continue to have a substantial free cash flow in 2008, 2009 and 2010 and thus further reduce its indebtedness steadily, as in 2008.

The open-ended investment agreement jointly reached with the Schaeffler Group in August 2008 contains extensive provisions to safeguard the interests of Continental AG, its shareholders, employees and customers. It cannot be terminated by the parties before spring 2014. In the agreement, Schaeffler has undertaken, among other things, to limit its position to a minority shareholding in Continental AG (up to 49.99%) for a period of four years. Schaeffler has also undertaken to support the ongoing strategy and business policies of the Executive Board while maintaining its current market and brand appearance, and to not demand a sale of operations or seek other significant restructuring measures. Former German Chancellor Dr. Gerhard Schröder is involved as a guarantor for ensuring the obligations specified in the investment agreement are fulfilled.

Source: Transportweekly