2019 is a crisis year for Thyssenkrupp. The new CEO Martina Merz is expected to bring about a turnaround: The company is in a state of upheaval and hopes for a cash blessing through the sale of the elevator division. Meanwhile the losses increase – and the stock crashes.
At the beginning of October, Martina Merz took over as Chairman of the Management Board. Her task is not easy. The company is making losses and struggling with rising debt, Thyssenkrupp was forced out of the Dax in September of this year after more than 30 years, the stock is plummeting. All that is clear is that ThyssenKrupp is on the verge of a major reorganization.
Thyssenkrupp was not in an easy position, as Merz already admitted. “The truth is that in some areas it will not work without significant job cuts. Just over 160,000 employees work for the Essen-based industrial group, and there are currently plans to cut around 6,000 jobs. But job cuts only won’t do the trick. What management needs is a plan for the future.
Restructuring, reorganization, reconstruction
And the motto of the plan is reorganization. In addition to a possible separation from the elevator business, the focus is on plant engineering and automotive components, the company announced today. The plant engineering business, which is currently making losses, is to be brought back up to speed operationally. At the same time Thyssenkrupp is examining the possibility of further developing the business with partners or under a new organisation.
The news agency Bloomberg recently reported that Thyssenkrupp had commissioned the US bank Citigroup to investigate its business in industrial plants and systems. The Industrial Solutions division could arouse the interest of competitors or investment firms.
Merz also wants to change things in the automotive supply business. In the System Engineering business unit, which primarily manufactures components for the automotive industry in the areas of bodywork and powertrains and offers automation solutions for electric storage and drive systems, Merz plans to cut around 640 jobs. Overall Thyssenkrupp has earmarked a mid three-digit million euro amount for restructuring in the current fiscal year.
Elevator business could be sold
What would remain is the elevator division, the steel division, which is also on the verge of restructuring, and the Material Services division. At least for the time being, because the future of the elevator division is uncertain. A sale or partial sale could flush capital into the coffers that is urgently needed for the conversion.
“Elevator Technology” is said to be worth up to 17 billion euros. The Group as a whole is currently worth just over 8 billion euros on the stock market. Competitors such as the Finnish Kone as well as a number of financial investors might be interested. A consortium of the investors Blackstone, Carlyle and the Canada Pension Plan Investment Board is named, as well as another from Advent, Cinven and Abu Dhabi Investment Authority.
Even an IPO is still conceivable. Management has now announced that internal preparations are to be completed by the end of the year. A decision on one of the options is expected to be made in the first quarter of 2020.
The economy is slowing down
A major problem for ThyssenKrupp is its strong dependence on the global economic situation. Both the steel business, plant engineering and the components business suffer if the economy is sluggish. For some time now, the steel segment has been struggling with weak demand and overcapacities.
There are also increasing signs of a crisis in the auto industry: “The best of the party is over,” Volkswagen CFO Frank Witter recently announced. Especially in China, the world’s largest passenger car market, momentum is slowing – recovery uncertain. In addition, there are concerns about the trade disputes between the USA, China and the EU.
“Weaker economic conditions, lower demand for cars, especially in China, distortions on raw material markets and import pressure for steel are weighing on volume and margin trends, primarily in business with automotive components and materials,” the nine-month report said. The conditions for management are therefore not exactly ideal. Under boom conditions, many things would probably be easier.