The Europeans Do Love a Good Opera

Unfortunately the ongoing Schaeffler-Continental situation has slipped to that point. The story – smaller company buying out global industry giant – has captivated us tire trade media folks since last spring, with every twist and turn bringing another round of analysis and “what will this mean” speculation.

True, most of the soap opera quality of the story can be laid squarely on the European media, which parse every hiccup escaping the mouth of any company executive and turn it into a two-page story. If a guy doesn’t say A, he must mean B, the Euro media think, a position that has helped build the mountain of weirdness this story has become.

So now, it is being bantered about, the bankers that helped finance Schaeffler’s run at Conti are trying to figure out how to “unwind” the entire deal, even as Schaeffler is strongly denying that its CEO Juergen Geissinger is headed for the door, and Schaeffler family members are scrambling to maintain control of the business. Is any of this true? Who knows.

What we know is this: Schaeffler faces a big pile of debt – $20 billion at least – and doesn’t have too many ways (given the terminally deflated automotive market) to work it off. It is seeking German government bailout euros, and may be looking to either spin off or sell the square peg in its auto component round hole – its tire and rubber division.

Are there any legit buyers out there? Looking at tiremaker financials, I don’t see a white knight out there. A company from outside the tire and auto biz is certainly possible, as are other avenues too nasty to mention. But no one really knows where this story is going to end up.

We’ll keep our eyes on this “story” as it unwinds – they all do, at some point – and hope for the best for our industry.

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

– Jim Smith

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