FRANKFURT – If brick-and-mortar construction and job creation serve as the litmus test for a company's overall financial health, then Continental Automotive Systems isn't doing too badly.

At a time when many major suppliers in the U.S. are downsizing or closing facilities, considering bankruptcy, in bankruptcy or negotiating more attractive terms with major customers, the German-based brake and electronics specialist is on an aggressive expansion drive.

At the company's North American headquarters in Auburn Hills, MI, that the supplier built five years ago, Continental will hire 40 additional engineers by the end of the year and another 40 in early 2006, says Bill Kozyra, president of Continental's North American automotive business.

New contracts to supply electronics, brakes and safety components are driving the hiring. The company also is investing $30 million to expand its Morganton, NC, manufacturing facility to meet growing demand from auto makers for electronic stability control (ESC).

Bill Kozyra

Continental claims the No.1 market position for foundation brakes worldwide. For ESC, the supplier says it is No.1 in North America and No.2 worldwide (behind Robert Bosch GmbH).

The company is expanding its aftermarket replacement business, which also will be based at the supplier's North American headquarters, Kozyra says.

ATE-branded brake products (named for company founder Alfred Teves) will provide premium disc brake rotors to retailers for all vehicles in North America, followed by the addition of premium brake pads early next year.

The supplier says it has set up a distribution center in Louisville, KY, to handle customer orders.

Expansion is not limited to the U.S., extending also to two other vital markets. Continental recently opened a larger and better-equipped Asian headquarters in Shanghai. Previously, the supplier's management in the region was based in Japan.

In its home market of Germany, Continental has been expanding its Electric Drives business unit in Berlin, focused on motors, actuators and control electronics for hybrid-electric vehicles (HEVs).

Continental Berlin facility

Since 2003, the workforce at the Berlin facility has expanded from 300 to more than 400, while the engineering staff has grown from less than 40 to more than 100. Further expansion and hiring are a possibility, the supplier says.

Continental will discuss its HEV strategy at this week's Frankfurt auto show. The supplier recently announced it will partner with Germany's ZF Friedrichshafen AG in developing parallel hybrid systems. The suppliers say the systems will be available for series production in 2007.

ZF brings to the relationship its expertise in transmissions, clutches, double-mass flywheels and synchronous electric motors. Continental's contribution will be in power electronics, software integration, electric accessories and regenerative brakes.

Continental currently supplies regenerative brakes for the Ford Escape Hybrid cross/utility vehicle.

Parent company Continental AG has four divisions, including Continental Automotive Systems.

The Automotive Systems group leads the company in profitability, posting a 10% margin in 2004, compared with 6.5% for passenger-car and light-truck tires; 6.6% for commercial-vehicle tires; and 7% for ContiTech, which specializes in rubber and plastics technology.

Kozyra says about 60% of component manufacturing for Continental Automotive Systems is done in low-cost regions of the world.

tmurphy@primediabusiness.com