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'We are on track to break even by the end of 2002:' Continental's Wellen strengthens OE ties on his way to profitability

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'We are on track to break even by the end of 2002:' Continental's Wellen strengthens OE ties on his way to profitability

In January, Dr. Ulrich Wellen, the new CEO and president of Continental Tire North America Inc., said business basics will return the company to profitability. With more than half the year completed, his bottom-line approach, coupled with some aggressive moves in the marketplace, already is bearing fruit.

Continental recently secured a major original equipment contract with Ford Motor Co. to supply nearly 50% of the 2002 Ford Ranger pickups now being assembled with Conti-Trac tires. The company also announced the creation of the Continental Tire Bowl, a college football game to be played in Charlotte, N.C., on Dec. 28.

MTD: In January, you announced a new, ambitious approach to marketing in the U.S. that has included new products and a reorganization at Continental Tire North America. At the year's halfway point, how would you rate the company's performance? Have you done what you said you were going to do?

Wellen: Yes, we are on track for profitable growth in (the) OE and replacement businesses. We have a solid business plan in place that is working very well. We are on track to break even by the end of 2002.

We have significant initiatives underway in the areas of product, process, people and position in the marketplace. This plan will strengthen our role as a global, product-oriented organization and position us to quickly meet the needs of customers. This plan is improving our ability to deliver technology and products people want.

As I said, this strengthens our role as a global, market-oriented organization and positions us to quickly meet the needs of our customers. Business units have full P&L responsibility. Business units include all core functions: R&D, manufacturing and sales and marketing. R&D optimization and production efficiencies will be improved and customer service will be strengthened.

MTD: What is your forecast for the year in terms of profits and sales compared to 2001?

Wellen: For competitive reasons, we do not disclose our North American numbers separately. However, we see a trend in the consumer buying criteria demanding higher-quality tires. As a premium tire manufacturer with a leading position in OE, this results in increased market share for Continental overall.

In 2002, Continental projects to grow its North American OE market share from 12% to more than 15%. Currently, 60% of Continental's tire business is in the replacement market; 40% of our tire business is OE. We are expecting to grow our OE and replacement business over the next five years significantly.

MTD: Please explain your multi-brand strategy at Continental Tire North America.

Wellen: Of course. Continental will be the brand for premium tire applications, building on European positioning. General is the good quality value brand, featuring tires for station wagons to SUVs. Our private brands are completing our multi-brand portfolio.

Continental's multi-brand strategy is achieving results in the marketplace. Here's how we are doing it:

* Increasing awareness of the Continental brand through market specific advertising, and partnering with customers.

* More customers wanting to partner with us in their markets.

* Investing in refreshing the General brand while building on strong existing brand equity/awareness nationally.

* Product advertising investment is increasing market and product awareness and brand equity on a national basis.

* Favorable reaction by OE customers to brand enhancement activities.

At the same time, we are continuing to expand our product portfolio in all brands. This year we already introduced five new Continental and General passenger car tire lines.

In the Continental brand, we introduced two ultra-high performance tires, the ContiSportContact 2, an OE and replacement tire and the first all-season ultra-high performance tire, ContiExtremeContact.

In the General brand, (we introduced) the first H-rated General tire, the General Exclaim; a touring line, General AmeriGS60; and a new LT line, AmeriTrac TR.

MTD: How important are OE fitments to your brand strategy?

Wellen: OE business is very important because we feel we will get as much as 30% repeat business from this type of business. And we continue to launch major new OE applications. We just announced a new contract that makes Continental the OE tire on Ford's popular Ranger pickup.

Just recently, we were given the supply for the Ford Expedition -- 100% supplier to Ford for the 2003 model. Continental is also expanding its applications on European, Asian and other American auto manufacturers' models.

MTD: In 2000, Firestone accounted for 43% of Ford's OE tire supply. In May 2002, the supply stopped completely. How much of that supply has Continental and/or General picked up?

Wellen: It's not quite that simple. I can tell you that now we are Ford's largest OE tire supplier. And as I just mentioned we currently supply tires for OE applications on many Ford models and will continue to grow our business.

MTD: Have you made any inroads with DaimlerChrysler in the U.S.? Have you increased your supply to GM, at least with the Continental brand?

Wellen: We continue to strengthen our relationship with all the OEMs. As far as DaimlerChrysler, we are very optimistic that we will receive significant business from them in the near future.

With GM, we have increased our business on a worldwide scale and will continue to partner with them.

MTD: In addition to selling through independent tire dealers, what other distribution channels do you sell through? How important are these other channels to your marketing strategy?

Wellen: All of our distribution channels are important. We work very closely with all of our business partners and are continually developing our relationships.

MTD: What are you doing to help independent tire dealers?

Wellen: We continue to support and partner with our customers. We provide them with tools and services that will help them grow their business.

For example, we have trained our dealers on all our new products. Some of them even had the opportunity to experience the product at our product launch event in Uvalde, Texas, our 5,000-acre, state-of-the-art testing facility.

Continental's customized marketing programs provide our dealers with market-specific advertising and promotions. In addition, as mentioned before, we already have and will further expand our product portfolio.

Our corporate advertising efforts will also increase the brand awareness for our Continental and General brands and help our dealers sell our products to the consumer. We will also continue to look for unique opportunities that will show the consumer and our dealers our commitment to the brands, products and the American market overall.

MTD: Thank you, Dr. Wellen.

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