19 Aug 2019

Germany: Plans to break up ThyssenKrupp take shape

Dietmar Gaisenkersting

The ThyssenKrupp Group is accelerating its offensive against its approximately 160,000-strong workforce. On August 8, CEO Guido Kerkhoff announced that a number of the company’s divisions were “to be put to the test” because they were allegedly uncompetitive. About 9,600 workers are directly affected, mainly those employed in the auto parts business and in the heavy plate mill in Duisburg-Hüttenheim.
On August 8, Kerkhoff cited the concern’s latest quarterly figures. Orders received by the company were slightly in excess of the same period of the previous year and sales had also risen slightly, but in the first three quarters, the group recorded a net loss of €207 million. ThyssenKrupp now expects a profit of around €800 million for the entire financial year—€300–400 million less than planned. Former head financial officer Kerkhoff has revised the company’s earnings forecast downwards for the third time in his one-year term as CEO.
The background to the drop in profits is above all the decline in production in the auto industry, upon which several divisions of the company depend. In addition, the prices of raw materials, especially iron ore, have risen. “Global trade conflicts make the situation even more difficult,” Kerkhoff said.
The company’s three divisions—heavy plate (800 employees), springs and stabilizers (3,600 employees) and system engineering (construction of production facilities for the auto industry, 4,700 employees)—“represent 4 percent of Group sales, but account for a quarter of the negative cash flow expected in the current financial year” a press release stated.
Despite the poor quarterly figures, the company share price—currently at its lowest level for 16 years—rose after Kerkhoff made clear that the group was to be fundamentally restructured.
“Either we succeed now with restructuring, or we must seriously ask whether we can continue these businesses within the concern,” Kerkhoff said. There are opportunities for further development, “but not necessarily under the roof of ThyssenKrupp.”
Kerkhoff, who receives up to €9 million a year as CEO, said, “What will no longer happen is that divisions are allowed to permanently burn money without any clear perspective, thereby destroying value generated by other areas.”
The latest reviews are part of the plan already announced by Kerkhoff in May to transform the concern into a type of holding company and break it up in the long term.
According to this plan, the most profitable segment, the elevator division with around 50,000 employees, will be listed on the stock exchange next financial year (i.e., October 2020 at the latest). But, Kerkhoff added, a sale is possible to competitors such as Kone or, according to Reuters, financial investors such as KKR, Advent or CVC.
Kerkhoff has announced the slashing of 6,000 jobs over the next three years, including 4,000 redundancies in Germany, with 2,000 of these in the steel sector. Administrative costs in the company’s headquarters in Essen are to be almost halved next year from the current level of €380 million.
Kerkhoff claims that his plans will place steel production and materials trading at the heart of the concern’s activities, but these are currently the sectors making losses. In the first three quarters of last year, the company’s steel mills made an operating profit of €597 million. Now, in the same period of the current financial year, they recorded a loss of €75 million.
It was precisely due to such fluctuations that ThyssenKrupp originally planned to form a joint venture with its competitor Tata Steel. But the fusion failed following a decision by the European Commission that the resulting company would have monopoly status.
The plans for cuts announced in May were developed in liaison with the hedge funds that have been buying into ThyssenKrupp in recent years. These financial vultures are eager to break up and exploit the company.
The central role in the offensive against ThyssenKrupp workers is played by the IG Metall trade union and its works councils. With 10 representatives, IGM make up half the membership of the company supervisory board. They have been working closely with management and shareholders for years behind the backs of the workforce.
The merger with Tata Steel and the planned division of the two companies—now obsolete—were worked out by IG Metall and the works council in consultation with investors. A key role has been played by IG Metall Secretary Markus Grolms, deputy chairman of ThyssenKrupp’s supervisory board. He works closely with the former state head of the IG Metall, Oliver Burkhard, who in 2013 moved directly from the union into the board of directors, where he receives up to €4.5 million a year as personnel director.

No comments:

Post a Comment