Dusseldorf The corona crisis is forcing the Essen-based industrial group Thyssen-Krupp to adjust its strategy. On Monday, CEO Martina Merz presented the supervisory board with a new concept for the further development of the conglomerate, Thyssen-Krupp announced the evening after the meeting. After the sale of the profitable elevator division, the group wants to concentrate on the materials business.
“We made difficult and long overdue decisions,” said CEO Merz. “Thyssen-Krupp will be smaller, but stronger, from the renovation.”
The most important part of the adjustment is a possible fusion of the core business of the Essen-based steel division with a competitor from home or abroad. It had already become known at the weekend that the Ruhr group was in talks with Chinese rival Baosteel, SSAB from Sweden and Tata Steel from India.
It has long been clear that Thyssen-Krupp will largely withdraw from the technology business. According to the group’s management board, it is already holding talks with interested parties to get rid of the crisis-ridden plant construction. A few months ago, Merz also sold the elevator business to a consortium of financial investors for 17.2 billion euros, which included the investment companies Advent and Cinven as well as the Essen-based RAG Foundation.
Merz wanted to use the money to rehabilitate the other parts of the group, which in addition to steel also included materials trading, the shipyard division, the auto supply business and the manufacture of industrial components. Parts of the company are also available here. Thyssen-Krupp reaffirmed its ambitions to participate in the consolidation of shipbuilding after talks about a merger with German Naval Yards and Lürrsen had recently failed.
In addition, Merz also wants to part with parts of the automotive supply business or at least seek partners for it. The modified strategy now provides for the businesses for sale to be bundled in a separate company. In addition to plant construction, this also includes the stainless steel plant in Terni, Italy, as well as the springs and stabilizers business unit, which is located in the auto supply sector.
Renovation with radical cuts
Thyssen-Krupp is also looking for a buyer in the areas of heavy plate, special construction and the construction of systems for battery cell production. If no one is found, the corresponding subsidiaries should be closed.
Overall, the sales company has group sales of around six billion euros and around 20,000 employees. In 2019, the businesses together posted a negative cash flow of around EUR 400 million, the message said. The company is to be managed by the manager Volkmar Dinstuhl, who had already been responsible for the sale of the elevator division as head of the Mergers & Acquisitions department.
The steel division, materials trading, industrial components and the shipyard division remain in the group. Merz plans to invest part of the proceeds from the sale of the elevators here. In addition to materials trading and industrial components, the group is also looking for partners here.
With the radical cuts, the former Bosch manager wants to finally reorganize the Ruhr group after a decades-long crisis. Billion dollar bad investments in steel plants in the United States and Brazil had brought Thyssen-Krupp to the brink of ruin in the late 2000s. To date, the company has not been able to recover from this.
In addition, there has recently been the corona crisis, which Thyssen-Krupp is likely to cost a few billion this year. The steel division suffered an operating loss (EBIT) of almost half a billion euros in the first six months of the fiscal year that ends at Thyssen-Krupp in September. Net financial debt rose to a good 7.5 billion euros, and the ratio between equity and debt (gearing) was just under 643 percent.
With the money from the sale of the elevator division, these values are to be reduced to a tolerable level. At the same time, Merz wants to reduce the pension burden of just over 7.6 billion euros recently. There are also high investments in the steel division: The Management Board has committed an investment volume of 800 million euros over the next six years.
IG Metall, which provides half of the 20 members of the Supervisory Board, supports Merz’s plans – but urges that Thyssen-Krupp retain the majority in the steel and marine business consolidation. “We reject a holding company that is active as a lay player in a wide variety of markets and is only good as a junior partner in the core steel business,” said IG Metall’s deputy chairman and chief treasurer, Jürgen Kerner.
The Krupp Foundation, which holds the largest share package at Thyssen-Krupp, also welcomed the strategic adjustment. “In view of the extremely challenging situation, we also make difficult decisions for the good of the company,” said a message from the foundation on Monday. “Thyssen-Krupp has no time to waste.”
More: Thyssen-Krupp is holding talks about a new steel fusion.