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Continental plans to cut the number of external engineering contractors it employs following the acquisition of the Siemens VDO business. It will use the engineering capacity it has acquired from VDO – now more than 18,000 engineers worldwide – to help it reduce R&D costs.

In a statement outlining the group's financial position, chief executive Manfred Wennemer sought to reassure staff engineers that their jobs were safe and their work important to the company’s future growth.

But there will be significant changes for many. Continental expects to cut 2,000 production jobs in Germany; the worldwide figure is not yet known. Most job cuts will be among production workers and administrative staff at former Siemens VDO units.

Continental needs to make substantial savings and fast. Buying Siemens VDO has put it €10.856 billion into debt and the cost of integrating operations will be in excess of €100 million. The firm has revised upwards to more than €300 million the figure that it expects to save through by 2010 by bundling with VDO its R&D activities, purchasing volumes, IT and sales and administration structures and realigning production.

Wennemer said: “We need every engineer we have worldwide – it’s the basis for our growth. We can offer attractive jobs and first-rate challenges, but not everyone will keep the same task and be employed at the same site. We don’t expect to cut engineering jobs, provided those affected are highly flexible. Our existing engineering capacity is the basis for our growth.”

Continental is vague on the figures, but said that cutting the contractors would save tens of millions of euros in each of its divisions. Ending the areas of development in which Siemens VDO and Continental simultaneously operate will save “sums in the high double-digit millions every year”.

Streamlining purchasing, production and logistics could achieve savings in “triple-digit millions”, said Continental. The company has started talks with unions. It is not ruling out redundancies, but said they were a last resort, if employees are not prepared to take jobs that are not in their “home” regions. “We don’t mean switching from Germany to China,” said Wennemer.

The company’s priority for 2008 is to reduce its debt and to achieve sales of more than €26.4 billion in 2008, the figure achieved by Continental and Siemens VDO combined in 2008. In 2009, it intends to grow by a further 5 per cent.