Ad hoc: Continental AG Draws Consequences from the Significant Downturn in the Industry

Hanover, December 10, 2008. Continental AG, Hanover, is drawing further necessary consequences for the closing fiscal year 2008 following an extensive analysis of the substantial negative development in the automotive industry in the last six weeks.

Based upon these adjustments and the latest figures available, an EBIT margin of 7.5% to 8.0% is viewed to be attainable for fiscal 2008. This EBIT margin figure is before the adjustment for amortization and depreciation resulting from the purchase price allocation (PPA) as well as integration and restructuring expenses.

Furthermore, it is considered to refrain from paying dividends for fiscal 2008 to bolster the consistent reduction of financial liabilities. In 2008, the company paid a dividend of €2 per share for fiscal 2007.

Furthermore, goodwill impairment of up to one billion euros is possible in the Automotive Group already on the 2008 balance sheet, in view of the drastic drop in car sales predicted for 2009, especially in the markets in Western Europe and North America.

Thanks to the continuing strong business development in the Rubber Group, a substantial free cash flow is expected for 2008 on the whole. In addition to the cash flow provided by the sale of company units undertaken to date (including the EMD business to Brose) and the extensive conversion of the convertible bond with an original maturity date of May 2011, these free funds noticeably help reduce the net financial indebtedness despite the adverse market climate.