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FRANKFURT -(Dow Jones)- German automotive supplier and tire maker Continental AG (XETRA:CON) (CON.XE) expects prices for car buyers to rise because of higher raw material costs.
Until now, the Hannover-based company was able to pass on higher raw material costs to suppliers and car manufacturers, Continental technology board member Karl-Thomas Neumann told Dow Jones Newswires Friday. But they can't compensate for the rising costs any longer, he said.
"We're expecting end-customer prices to rise," he added.
The restructuring of the company's ailing drive train unit Powertrain - which includes the VDO business recently acquired from Siemens AG (NYSE:SI) (SI) - is on track, said Neumann, who is head of the unit.
Neumann earlier revealed plans for the company to reduce the number of cost- intensive plants in Western Europe and the U.S. Following the decision to close down the firm's plant in Wetzlar, other similar decisions are set to follow, he added Friday. Some plants are on the rocks, Neumann said, without elaborating.
The company, however, plans to set up new plants in Eastern Europe.
Continental sees enormous potential in the powertrain unit. Thanks to innovative products, such as injection systems and motor control, Powertrain's annual sales growth is well above the targeted 6% level, Neumann said.
"The market potential in electronics and injection systems is enormous and possibly surpasses the industry's capacity," Neumann said. Although Continental raised prices for these products, demand for environmentally friendly propulsion systems is still high, he added.
Neumann also said the company has a good chance of obtaining an order from General Motors Corp. (NYSE:GM) (GM) for the production of lithium-ion batteries for the upcoming Chevrolet Volt model. "Our expectations are high and we're confident that we made a good offer to GM," he said, adding that a decision will be made as early as this summer.
If Continental obtains the order, it will build a plant in the U.S., he added.
Continental will also next year begin producing a lithium-ion battery for a hybrid vehicle manufactured by Daimler AG's (NYSE:DAI) (DAI.XE) Mercedes-Benz. By 2010, Continental wants to generate "a considerable portion" of its volume from hybrid technology, Neumann said.
Company Web site: www.conti-online.com
By Katharina Becker, Dow Jones Newswires; +49 (0)69 29725 508; katharina.becker@dowjones.com
(END) Dow Jones Newswires 06-27-08 1046 Copyright (c) 2008 Dow Jones & Company, Inc.
