AForeign companies in Russia have reacted differently in recent weeks to the war of aggression the country has launched against Ukraine. Some have left Russia or restricted their activities. Others stay put. Automotive supplier and tire manufacturer Continental is now showing a new approach. After the initial production shutdown, the Dax Group from Hanover is partially resuming production, according to information from the FAZ.
This is the tire factory in Kaluga, about 190 kilometers southwest of Moscow, where Conti suspended work in early March. Additionally, all import and export activities with the Russian Federation had been halted for the time being, it was said at the time. Production has resumed since last week, as confirmed by Conti on request. The group justifies this with “severe criminal consequences” that threatened employees and local leaders if they did not serve local demand. “The basis of this step is the duty of care to our employees in Russia.” We are talking about temporary “as needed” production, which is significantly lower than the factory’s previous capacity utilization. Conti has “no intention of making a profit”.
1300 employees in Russia
Other tire manufacturers had recently continued their work in Russia, such as Nokian from Finland. They want to retain control of the production facilities there, but will no longer invest, he said. The background of the discussion is that the Kremlin party “United Russia” presented a legislative initiative in early March that provides for the nationalization of foreign companies if they leave the Russian market or interrupt their operations.
The bill and probably also the threats of possible prison terms for local CEOs had sparked a big stir among Western companies. Hardware chain Obi recently sold 27 branches in Russia to a Russian investor, among other things to avoid expropriation. After initial hesitation, the consumer goods group Henkel is also leaving the country.
According to the Kremlin-loyal Izvestia newspaper, the expropriation bill is temporarily suspended and has not even been presented to the government. Many companies do not want to leave the Russian market for good, but want to resume operations soon, according to government circles. The government wants to accommodate these companies, so it reserves the law for “extreme cases”.
The Russian sales market is relatively small for Conti. Nevertheless, the war in Ukraine hit the group hard, mainly due to the rise in prices of the country’s raw materials needed for tire production. Around 1,300 employees work for Conti in Russia, most of them at the Kaluga site. These employees want to be “protected from criminal prosecution”, according to the headquarters in Hanover. The leadership strongly condemned the attack on Ukraine. “Continental supports and abides by all applicable sanctions and legal regulations imposed as a result of the war in Ukraine.”