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December 2002
Wheels of Change
By Casey Jacobus

   Charlotte-based Continental Tire North America (CTNA) has

a new man at the helm, Dr. Ulrich Wellen, who took on the mantle of president and CEO just eleven months ago. Dispatched from the headquarters of the company’s German parent Continental AG, Wellen faces a difficult mandate – to improve profitability in a troubled industry in a weak economy. His incisive intelligence combined with unwavering confidence in his strategy suggests that he is exactly the man

for the job.

     Wellen joined the North American tire operations in April 2001 as chief operating officer; he was appointed president and CEO in January 2002.

     Before coming to the United States, Wellen was head of the global original equipment business unit for Continental AG at the company’s world headquarters in Hanover, Germany. Since joining Continental AG in 1989, Wellen has held various leadership positions in sales, tire technology, research and development, and passenger and light truck divisions. Wellen holds a doctorate degree in chemistry from Aachen Technical Institute.

     Wellen admits it is unusual for a chemist to take on the responsibilities of a CEO, but he sees that as a strength. “It lets me take a fresh approach,” he says, “I like to bring together people with different backgrounds, so they can collaborate in cross-functioning teams. I want people to think out of the box.”

      Because Wellen has overseen original equipment, research and development, manufacturing and quality functions for Continental AG, he may be the ideal person to develop the necessary synergies between the North American business units and those of the European operations.

     Wellen does, however, recognize the difficulties endemic in the tire industry. “This is a very challenging industry,” he admits. “It’s one of the few industries that require both a high amount of capital and a large labor force.”

     To keep CTNA competitive, Wellen’s strategy is to make fundamental changes in the CTNA corporate culture. “You have to be flexible and responsive to change,” he says. “In a weak economy, cutting costs will only get you so far. You have to reshape the organization, so that it can move quickly both in terms of serving customers and taking advantage of opportunities.”

    Wellen describes the specifics of his plan as focusing on “the three ‘P’s — people, products and process.”

     In the “people” focus, the Continental philosophy is centered on empowerment. According to Wellen, “In order to maximize our service efficiency, it is the company’s objective to place the decision-making process as close to the customer as possible. This empowers employees to run their operations like they own them.”

     Regarding products, just this year, the company has expanded its product range with five new branded passenger car tire lines. In 2003, it will introduce nine new branded lines and three private brand lines. It is also launching major new original equipment applications. Along with its sister company, brake and chassis provider Continental Teves, Continental will supply brakes, tires and electronic systems for the Ford Expedition 2003 model. It is also introducing new products to enhance customer convenience, such as the Continental run-flat tire.

     A significant process restructuring began when Continental consolidated its tire business into two divisions with global responsibility: Passenger Car (includes light trucks and SUVs) tires and Commercial Vehicle tires.

     Wellen points out, “This consolidation and our strong emphasis on regional markets positions us to respond more quickly to customer needs.”

     Wellen is also overseeing the improvement of operational processes to reduce costs, increase efficiency, and enhance the company’s ability to meet customer needs. He is concentrating on establishing cross-functional teams to improve effectiveness by using employees’ expertise to the fullest.

      “We have decentralized manufacturing operations and commonized our quality and manufacturing operation process with those at our European plants,” Wellen explains. “Decentralization will foster improved communications with the other disciplines involved in taking a tire from concept to market. Implementing worldwide manufacturing and quality standards will optimize R&D investments, give us increased flexibility to respond to market demands and raise the quality level of our products.”

      Continental tires enjoy a reputation in Europe, Asia and Africa as a premium high quality tire, regularly ranking among the top brands in independent testing. They can be found on such luxury marques as Mercedes, BMW and Porsche.

      Wellen expands, “We have installed two dozen state-of-the-art tire-building modules at locations throughout North America. This new equipment is part of a major investment program we are implementing. With the decentralized operations, an enhanced quality control inspection process, and new manufacturing capabilities, we will significantly improve our ability to meet our customers’ needs quickly and efficiently.”

     Continental is also strengthening its multi-brand strategy. This strategy promotes Continental as the premium tire brand, building on its strong position in Europe, while General is promoted as the value brand.

      Wellen expects these measures pay off. He has already improved Continental Tire’s share of the North American market in original equipment to 15 percent and expects to see significant growth in Continental’s replacement business

over the next five years.

     “This year we have made significant progress,” says Wellen. “If we follow our business plan, we should see satisfying results.”

      The Continental AG group of companies, of which CTNA is a significant part, is a leading systems supplier to the automotive industry. Continental AG has some 66,000 employees worldwide involved in producing tires, brakes, suspension components and electronics that contribute to safer driving. CTNA, with almost 9,000 employees (2,000 in Charlotte), has annual sales of approximately $1.6 billion. Besides Charlotte, CTNA operates manufacturing plants in Bryan, Ohio; Mayfield, Kentucky; Mount Vernon, Illinois; and San Luis Potosi, Mexico.

     These plants produce one third of Continental AG’s total passenger and commercial tires. They supply passenger tires to original equipment customers including Ford (including Jaguar, Volvo, Lincoln, and so forth), BMW, General Motors, Mercedes-Benz, Nissan, and Volkswagen. Commercial vehicle tires are delivered to Caterpillar, John Deere, Freightliner, Mack, and Volvo. Continental tests its tires at Uvalde proving grounds, in the heart and sweltering heat of West Texas, and the bitter cold and driving snow of Sault Saint Marie, Michigan.

     Continental AG’s origins date back to 1871, over 130 years ago, as a joint stock company in Hanover, Germany, producing soft rubber products, rubberized fabrics, solid tires for carriages and bicycles.  In the early part of the 1900’s, it began heading into new markets, producing balloon material to seal the gas bags of German airships, the first automobile tire with a patterned tread, anti-skid tires (forerunner of steel studded tires), road atlases, and vulcanized rubber to cover airplane fuselage and wings. Mid-century the company underwent post-war reconstruction, and for the next thirty years, continued to expand its production and product lines of diverse automotive products.

     The 1980s marked the beginning of the corporation’s international progression.  It began with the takeover of the European tire operations of Uniroyal Tire Inc., USA, and was followed by various other international acquisitions including General Tire, Inc., in 1987.

     By 2000, Continental was in the midst of a strategic transformation, producing for diverse markets including vehicle electronics, brake activation components and disk brakes, and air-conditioning and power steering hose assemblies. In 2001, the company first began operating under the name Continental Tires North America, Inc. Most recently in 2002, Continental and Bridgestone are collaborating to produce a worldwide standard for run-flat tire systems installed on conventional rims.

      Wellen is also working to build an identity for Continental within the Charlotte community. While the company has had a manufacturing plant in Charlotte since 1967, it wasn’t until 1995 that the company moved its headquarters from the “Tire City” of Akron, Ohio, to the “Queen City.” Since then, CTNA has played an important role in the civic life of Charlotte.

      This year, the Mayor’s International Cabinet honored CTNA for its corporate philanthropy and volunteerism. The Cabinet was created to recognize the philanthropic giving and other forms of support that many of Mecklenburg County’s nearly 400 foreign-owned firms have given to non-profit organizations in the Charlotte area. Continental was selected as one of the top three from among nine finalists.

      It was recognized for its support of United Way, Arts & Science Council, Arosa House – the Family Center, Goodwill, A Child’s Place, Salvation Army, Charlotte Rescue Mission, Second Harvest Food Bank, Special Olympics, Charlotte-Mecklenburg Police Department and the American Red Cross.

     Now, Continental is about to make an even greater contribution to the Charlotte community. CTNA is the title sponsor for college football’s first bowl game in the Carolinas. The Continental Tire Bowl, scheduled for Saturday, December 28, 2002, in Ericsson Stadium, will pit a team from the Atlantic Coast Conference against a team from the Big East Conference. The game will be televised nationally on ESPN/ESPN2.

     “Sponsoring the bowl game provides us with a unique opportunity to give something back to Charlotte in a way that involves our employees and builds awareness of our products,” says Wellen.

     Those products include more than tires. While Continental AG is the number two manufacturer of automobile tires in Europe and number four worldwide, it also produces brakes and electronic systems. Continental Automotive Systems has been one of the fastest growing company divisions. Continental Teves is one of the largest manufacturers of conventional and electronic brake systems, such as anti-lock brakes and electronic stability control systems. Conti Temic is a top global company in automotive electronics, producing sensors that trigger vehicle airbags to window anti-pinch devices and still other electronics that add to customer safety and convenience.

     Wellen points to this integration of tire, chassis, and high-tech electronics as a differentiating strength for the company. “No one else has this kind of systematic approach,” he says. “Our competitors are focused only on tires; we take a more comprehensive perspective. Our vision is that of an intelligent, electronically unified vehicle, where an automobile’s safety and driving comfort can be vastly improved if the tires, steering, brakes, springs, dampers and all that constitutes a chassis are developed with a comprehensive strategy and interconnected. The beneficiary is the consumer.”

      Nonetheless, for CTNA, tires are still the name of the game. The company manufactures tires under three brand names: Continental, General and Euzkadi (in Mexico), as well as some private brands. Just on its own Charlotte makes tires for the Ford Taurus (one of the most popular vehicles in the United States), Ford Windstar, Ford Escape, Nissan Altima, BMW 3 series, Lincoln LS and various GM models. In total, the Charlotte plant turns out 25,000 radial passenger tires every day or 8,700,000 annually.

     In addition to passenger tires, CTNA also manufactures light truck tires, truck tires, off-road tires, bicycle and motorcycle tires, and industrial tires.

      “Continental and General are leading tire brands in America, and with our aggressive new business strategy, we intend to strengthen our position in the market,” Wellen declares emphatically.

Casey Jacobus is a Lake Norman-based freelance writer.
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