Car Industry Woes To Push Continental Into 2019 Loss

Massive German car components maker Continental said Tuesday it will make a loss in the third quarter and the full year 2019, as its assets shed value amid a car industry slowdown.

In a statement, Continental reported a 2.5 billion euro ($2.8 billion) fall in value across several business units.

The blow resulted mainly from its "assumption that there will not be a material improvement in global light vehicle production during the upcoming five-year period" from 2020-24.

Combined with almost 100 million euros of restructuring costs, "these factors will... result in a negative value for net income attributable to shareholders for the third quarter of 2019 and for fiscal 2019."

But while profits have suffered, Continental added that it was on track to hit expectations for sales and margins in the third quarter.

The Hanover-based group also said it would spin off completely its powertrain division Vitesco for a stock market listing, ditching its previous plan of a partial flotation.

If the supervisory board agrees, shareholders will be asked to sign off on the move at the company's next annual general meeting on April 30.

The powertrain refers to all parts of a car involved in producing and transmitting power, from the motor via the gearbox, driveshaft and axles to the wheels.

The spin-off decision comes after Vitesco "has continuously underperformed all other divisions" in the group, said analyst Juergen Pieper from Metzler bank.

Continental's woes come as the German car sector is buffeted by headwinds from the US-China trade war, Brexit and a broad slowdown in economic growth in part caused by such geopolitical factors.

In July, the company already lowered its 2019 financial forecasts and predicted the global car market could contract by up to five percent this year.

Shares in Continental rebounded after a sharp slump prompted by its profit warning.

The stock gained 4.1 percent to close at 124.10 euros in Frankfurt, against a DAX index of blue-chip shares up 0.05 percent.