A “nail eater” for the Conti point

Nikolai Setzer becomes the new head of the automotive supplier Continental. He is facing a mammoth task – and should not approach it squeamishly.

Nikolai Setzer

NIn the Continental Corporation, ikolai Setzer is seen as a manager who takes tough action. “Nail eater” calls him a colleague who has known him for a long time and who has closely followed his career. Setzer first restructured the troubled tire business in America, and later, as a member of the corporate board, made the tire division as a whole a reliable profit maker.

Since the supervisory board appointed him spokesman for the newly created Automotive Board last year, he has also been considered crown prince to succeed the chairman of the board, Elmar Degenhart. This had recently worn itself out with an austerity program for Continental and was increasingly criticized by unions and investors.

At the end of the month, Degenhart announced his resignation for health reasons. Therefore, the way for typesetters has now been cleared surprisingly quickly. The supervisory board appointed the 49-year-old family man and enthusiastic runner as the new head of the automotive supplier from Hanover on Thursday – as had previously been expected by company experts. The decision-makers knew that the industrial engineer Setzer, who had spent his entire professional life in the group, would have left Conti in the event of a defeat. Apparently they didn’t want to risk the potential loss of a top manager.

The employee representatives had made a decision days ago. The group, shaken by technological change and Corona, now needs a manager at the top who “knows the company very well and enjoys the trust of all those involved,” said chairman Hasan Allak in a message with which he responded to Degenhart’s sudden departure would have. Even if the name wasn’t mentioned, it clearly meant Setzer, whom Allak and the other works councils got to know as a tough, but fair and reliable interlocutor.

Schaeffler finally agreed

According to FAZ information, there was another exchange last week at a meeting to which the employee side on the supervisory board had invited the candidate. In addition to the unions, the chairman of the supervisory board, Wolfgang Reitzle, was apparently behind Setzer. Now the Franconian entrepreneurial family Schaeffler has apparently also given its placet, without whose support no one moves to the top management ranks of Conti. It holds 46 percent of the shares in the Dax group.

The employee side would prefer to see the new boss take back or soften some of the cuts that Degenhart had recently started. According to the current status, Conti should save more than a billion euros from 2023 onwards. The management is closing several plants or realigning them, which affects around 13,000 jobs in Germany alone and around 30,000 globally. Since the setter, who is considered to be a restructuring agent, will probably not move away from it, the unions IG Metall and IG BCE, which are represented in the group, are now shifting to at least putting a stop to a further tightening from the start.

Conti should agree to strengthen the majority of the remaining German tire and mechanical engineering business “with additional tasks and responsibilities” and also to guarantee “investments for modernization”, according to IG BCE. It is about more than 20 plants and 20,000 employees in the Federal Republic. In return, the union wants to pave the way for instruments with which Conti can, for example, collectively reduce working hours.

Does Setzer take a stand against the unions?

Whether Setzer is forced to ignore the demands of the trade unions and save even more depends on the further development of the Corona crisis. During the summer months, the pandemic had less of a dampening effect on business than feared, which is also reflected in the figures for the third quarter that the group presented in detail on Wednesday.

Since the virus is currently rampant again, the pressure on the markets is likely to increase again. In addition, Setzer has to satisfy the financial markets, which Conti increasingly see as a restructuring case and demand quick corrections. Degenhart had recognized the difficulties, but with his calm and balanced manner had not drawn the consequences quickly enough. Setzer is different. “If they say: ‘That’s how we do it’, then they implement things consistently and quickly,” says the company. “He can be tough.”

Setzer’s previous assignment was to put the automotive division back on the road to success. It bundles the business with components, electronic systems and software and is particularly hard hit by the Corona crisis. This also applies to the third quarter, in which, like the tire business and the Vitesco drive division, it again got more tailwind from the market, but its returns continued to lag behind the other parts of the business. By lowering costs and closing loss-making factories, the margin should improve.

The other construction sites in the group are numerous. After Conti has so far seen no possibility of successfully spinning off Vitesco, the new boss has to find a way to save the project, which is important for the restructuring of the company. He is to rebuild the remaining parts of the company in such a way that software and sensors play a much larger role. This requires new partnerships, including in the development of robot cars, in which Conti should make faster progress. If Setzer is elected, he will soon have to give his first answers. At the beginning of December, several rounds of talks for investors will start, the highlight of which will be Capital Markets Day on December 16. Industry observers and investors expect more clarity from this as to how Conti wants to pick up speed again after the many reports of catastrophes in recent months.