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The long-established company split its steel division into a joint venture that could soon become public. Once the merger is sealed, a major shareholder calls for new upheavals.
By Benedikt Müller, Düsseldorf
What steel did not bring to the world Without the mixture of iron and coal, the railway would not have been formed if there were no suspension bridges or reinforced concrete buildings. And yes, without the humanity of steel would have been spared tank pallets and ammunition. All this is necessary if you consider the emergence of one of the most well known companies in Germany: Thyssenkrupp. After all, it is Friedrich Krupp who founded in Essen, more than 200 years ago, the first steel smelting factory in Germany, originally from a dynasty.
Now, the company is separating from these roots. Thyssenkrupp subcontracts its steelworks to a joint venture with its competitor Tata Steel. The companies have signed the contract on weekends, after a lot of back-and-forth Together, they want to forge the second largest steel producer in Europe, with 48,000 employees in Germany, Great Britain and the United States. Netherlands. "We are creating something big," Thyssenkrupp boss Heinrich Hiesinger told badysts. The European steel industry is facing the biggest merger since Arcelor and Mittal merged more than a decade ago.
What does she say about the situation of the industry if the famous Krupp Steel does not want to compete anymore? What will become the industrial icon?
With their merger, companies react to overwhelming excess supply. All the steel mills in the world could produce 2.3 billion tons of steel a year, but only 1.6 billion are in demand. Since the beginning of the millennium, new factories have emerged, especially in China, where wages and standards are lower than in the West. Now many huts are underutilized. US President Donald Trump is trying to protect the US steel industry from high world market tariffs. But that 's why more and more imported steel arrives in Europe. Almost no other state wants to give up producing the material, which is so crucial for war, steel.
The German steel industry, however, has been shrinking for decades. If the industry still employed 420,000 steel workers in the 1960s, it is now only 85,000 people. The manufacturers developed new technologies, reduced costs and merged again and again: Thyssen and Krupp merged in 1997. Two years later, British Steel and the Dutch Koninklijke Hoogovens merge to form Tata Steel Europe. If the antitrust authorities are in agreement, one of the four manufacturers will soon become one.
In their joint venture, Thyssenkrupp and Tata want to save twice as much, for example for sales and administration. So, to be eliminated up to 4000 jobs, half of them in Germany. In addition, companies rely on economies of scale when they buy raw materials together. The negotiation of this merger cost the ThyssenKrupp Executive Committee much more time and nerves than initially planned.
Hardly the merger plans announced two years ago, Britain has surprisingly voted in favor of Brexit. It was not until the autumn of 2017 before Thyssenkrupp and Tata signed a protocol agreement. Thousands of steelmakers protested plans in the Ruhr area. Until Thyssenkrupp badured that by 2026 no worker would be forced to leave the company and shut down. In the end, employee representatives on the Supervisory Board voted in favor of the merger. "I'm glad we have clarity," says Tekin Nasikkol, Steelworkers' Council Leader, "and the workers after an endless period of uncertainty now know where the trip is going."
In addition, Thyssenkrupp and Tata have promised that they will jointly hold the controlling interest in the joint venture for at least eight years. Nevertheless, companies are allowed to float parts of the steel subsidiary on the stock market. In this case, Thyssenkrupp now has 55% of its turnover. The Esseners negotiated this advantage shortly before the end, because their mills increased their profits, while Tata went down. However, both companies have equal voting rights in their joint venture, which means that Thyssenkrupp will no longer have to declare the steel business in crisis in the consolidated balance sheet.
"ThyssenKrupp fails with its conglomerate strategy," says Investor Cevian
the extraction and processing of steel: in elevators and escalators, in car parts, large facilities and submarines. These industries have belonged to the group since the postwar period, when Thyssen and Krupp had to abandon their foundries. They make more stable profits than those of steel. In addition, after the split, Thyssenkrupp has a debt lower than 4 billion euros.
But the group has barely sealed the merger of steel, its second largest shareholder Cevian is calling for new upheavals. The Swedish investment company holds more than 15% of the shares of Thyssenkrupp. The industrial sectors of the group would now be quickly profitable, criticized Sunday the founder of Cevian, Lars Förberg. "ThyssenKrupp failed with the conglomerate's strategy and its matrix organization."
The major shareholder demands that the traditional group consider further splits. The stipulation must be industrial logic, says Förberg, "and not taboos, historical development, emotions or personal ambitions". Cevian estimates that a Thyssenkrupp share could be worth $ 50 on the stock exchange if the company made the right decisions. Currently, newspapers cost 21 euros. "The divisions of the group will survive and succeed only if they are thin and well positioned," says Förberg, "and can take place without the excessive costs and headquarters bureaucracy."
CEO Hiesinger, 58, already wants to respond to criticism in mid-July and present a more specific strategy for Thyssenkrupp. In this document, the former CEO of Siemens also wants to set clearer financial targets for the next few years, he told badysts. Critical investors like Cevian will judge it by that.
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