Meet the New Boss… - Tire Review Magazine

Meet the New Boss…

Thanks to Bloomberg, here’s a little look inside Conti’s new owner – Schaeffler Group – and its principle owner Maria-Elizabeth Schaeffler:

(Bloomberg) When Maria-Elisabeth Schaeffler married the owner of Schaeffler Group in 1963, she enrolled in business classes at Erlangen University in southern Germany so she could help run the ball-bearing maker.

Her husband told her not to bother.

“With me, you can learn more than in lectures,” Georg Schaeffler told his wife, according to Detlef Sieverdingbeck, a spokesman for the Herzogenaurach, Germany-based company.

Maria-Elisabeth, who took control of closely held Schaeffler after her husband died in 1996, used those lessons to more than triple the size of the company. Now she’s asking for state aid after the purchase of 90% of Continental AG, Europe’s second-biggest car-parts maker, saddled Schaeffler with 11 billion euros ($14.5 billion) of debt as the auto industry grapples with its worst crisis in more than a decade.

“Schaeffler, like everyone else, didn’t foresee the economic collapse,” Juergen Meyer, a fund manager at SEB Asset Management in Frankfurt, said yesterday. He holds automotive stocks and doesn’t own Continental shares.

Continental declined as much as 46 cents, or 3.3%, to 13.43 euros in German trading and was down 0.7% at 9:26 a.m. The stock has dropped 52% this year, valuing the company at 2.32 billion euros.

On Jan. 24, Schaeffler won control of Continental’s supervisory board, gaining the chairmanship and three other seats after accusing the previous chairman of “sabotaging” efforts to integrate the two companies.

Hostile Bid

Eight years ago, Schaeffler bought German bearing-maker FAG Kugelfischer AG after a hostile takeover bid.

“She makes the decisions,” said Uwe Loos, the former chief executive officer of FAG Kugelfischer who met with Schaeffler and CEO Juergen Geissinger in 2001. “Without her 100% agreement, the deal wouldn’t go through.”

Schaeffler, 67, didn’t plan on a career in business. Born in Prague and raised in Vienna, she was a medical student in the Austrian capital when she met Georg. They married when Maria-Elisabeth was 22 and she moved to Herzogenaurach, a Bavarian town that now has about 23,000 residents.

Georg and his brother, Wilhelm, founded Schaeffler Group, then called INA-Holding Schaeffler KG, in 1946 to make wooden handcarts. Expansion began in 1949 after Georg, an inventor, developed the needle roller cage that helped make cylindrical “needle bearings” more reliable.

By the early 1990s, Schaeffler had more than 20,000 workers at plants on three continents. In 2007, the company employed about 66,000 people and had annual sales of 8.9 billion euros.

Opera and Apprenticeship

Maria-Elisabeth Schaeffler and her son became sole owners when her husband died 15 years after his brother.

The widow, an opera fan who brings a Yorkshire terrier named Amadeus to the office, became chairman. Her son, Georg F.W. Schaeffler, continued law studies in the U.S. Both will assume seats on Continental’s supervisory board.

“I grew into it step by step,” Schaeffler said in a 2001 interview with the German newspaper Welt am Sonntag. “When my son was old enough, my husband and myself decided I should get involved professionally. That’s why I completed – I must correct myself – was privileged to complete, an apprenticeship with my husband, which was excellent.”

Schaeffler declined to be interviewed for this story.

Annemarie Schroeder, who retired after 31 years as an office worker at Schaeffler, said that at the time she was surprised that Maria-Elisabeth chose to take an active role.

Qualifications Questioned

“There were concerns that the company would be sold, and everything was up in the air,” Schroeder said in an ice cream parlor in Herzogenaurach. “Back then, many people were concerned about her qualifications.”

No longer, according to Sieverdingbeck.

“If there were any such concerns, they have clearly been refuted in the past 12 years,” he said.

One of the widow’s first decisions was to create a council of friends and industry experts to advise her. Among the members was Hubertus von Gruenberg, who agreed on Jan. 24 to step down as chairman of Continental.

Von Gruenberg initially backed the Schaeffler bid, opposing Continental’s then-CEO Manfred Wennemer. He became an adversary when tensions between the two companies flared after Schaeffler contacted Continental’s banks as the company sought to renegotiate loans.

Rolf Koerfer, a Dusseldorf-based partner at Allen & Overy, will be nominated to take von Gruenberg’s place on the board, Continental said. Koerfer performed the same role in the FAG Kugelfischer acquisition, advising Schaeffler and then serving as chairman of the target’s supervisory board. He led a team of 18 lawyers on the Continental deal.

New Chief Executive

Schaeffler named her first CEO in 1998, hiring Geissinger, an engineer who had run ITT Automotive’s electronic brakes unit.

Geissinger, 49, has tried to wring concessions from unions to reduce costs and increase efficiency. In 2006, he won a battle against the IG Metall union when employees at the Elfershausen plant agreed to work five hours more each week, without additional pay, in return for job protection.

Schaeffler’s image counters that of her CEO.

She attends birthday parties and anniversary celebrations for workers and helps plan Herzogenaurach’s annual carnival, participating in community meetings where town leaders select performers and costumes.

‘Untouchable Maiden’

“This company is being run like a medieval castle,” said Klaus Ernst, a representative of IG Metall in Schweinfurt, which represents Schaeffler workers. “Mrs. Schaeffler plays the untouchable maiden, while Geissinger is responsible for the rough work.”

Sieverdingbeck declined to comment on Ernst’s remarks.

The labor leader also said taxpayers will suffer from Schaeffler’s “really bad gamble” in acquiring Continental.

Schaeffler and Geissinger teamed up on the FAG Kugelfischer takeover, offering 673 million euros on Sept. 10, 2001. The Schweinfurt company resisted for five weeks until Schaeffler raised its offer by 9%.

The Continental acquisition hasn’t gone as smoothly. The financial crisis, which arrived in the midst of the bid, led a flood of investors to accept Schaeffler’s offer of 75 euros a share. That gave the company 90.2% of Continental, instead of the 30% to 50% stake it sought.

Schaeffler agreed to limit its stake to less than half to win the approval of Continental’s board, so it transferred 40.3% of the shares to German banks for possible sale.

Continental and Schaeffler combined owe about 22 billion euros at a time when automakers including Volkswagen AG, their biggest customer, are reducing work hours to clear lots full of cars.

Credit Rating

Standard & Poor’s lowered Continental’s credit rating yesterday by two levels to junk status, citing Schaeffler’s debt risk.

Continental “appears unlikely to achieve our debt- protection requirements,” and there is a “potentially negative impact” in Schaeffler’s majority ownership, S&P said in a statement.

Two days after Schaeffler pushed her way onto the Continental board, German authorities said they’d been persuaded to consider helping her companies.

The state of Lower Saxony, where Continental is based, and Schaeffler’s home state of Bavaria are in “advanced” talks about granting aid, Thomas Steg, a spokesman for the federal government, said Jan. 26.

Continental has some breathing room after renegotiating an 11.8 billion-euro loan on Jan. 23.

If you have comments to share, send to me at [email protected].

– Jim Smith

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