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UPDATE 2-Continental to cut up to 2,000 jobs at Powertrain

(adds comments from executive, updates shares)

SALZGITTER, Germany, March 27 (Reuters) - German automotive supplier Continental AG CONG.DE plans thousands more job cuts at its Siemens VDO business over the next two years while it restructures its powertrain division, it said.

Continental which bought VDO last year, expects to slash 1,500 to 2,000 jobs worldwide at Powertrain in addition to thousands of jobs to be lost through its integration, as it restructures three of its business units into one more efficient unit, it said on Thursday.

“New synergies result through its streamlining,” Powertrain head Karl-Thomas Neumann told Reuters, adding that the measures will help ensure Continental reaches its target of an operating margin of at least 10 percent at Siemens VDO by 2010/11 before depreciation of the purchase price allocation.

In February, Chief Executive Manfred Wennemer said Continental expected to cut 2,000 or just over 3 percent of jobs at Siemens VDO to hit its planned net cost synergy targets it recently increased to 300-350 million euros ($474-$552 million) by 2010.

The costs of the new restructuring plan at Powertrain are, however, included in the integration costs the group estimates will amount to a figure in the low hundreds of millions of euros.

A good half of the new jobs cuts will be in production, a third in administration with the rest in research and development, with Continental aiming to find other jobs in the group for engineers affected by the cuts.

Powertrain’s electronics plants in Regensburg, Germany, and Foix in France were under-utilised, for example, and Continental will look to boost the amount of electronics manufactured in low-cost countries.

Continental plans to combine Diesel Systems, Gasoline Systems and Electronics into a single unit, it said.

“We will make our organisational structure, which is currently characterised by some duplication of responsibility, significantly leaner and more efficient. The positive impact of this will become apparent very quickly,” Neumann said.

Continental shares were up 2.8 percent at 63.24 at 1612 GMT, outperforming the German blue-chip index .GDAXI, which rose 1.2 percent.

Continental, also the world's fourth-largest tyremaker, bought VDO from Siemens AG SIEGn.DE last July for 11.4 billion euros to strengthen its electronics portfolio and complement the business with advanced fuel injection systems.

Reporting by Christiaan Hetzner; editing by Rory Channing/Elaine Hardcastle

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