Beleaguered German steel group Thyssenkrupp has tumbled to a full-year loss of €5.5 billion and announced that it would cut a further 7,400 jobs, as the coronavirus pandemic ramped up the pressure on the company to accelerate the sale of its underperforming business.
Thyssenkrupp HQ, Essen
Thyssenkrupp HQ, Essen, Germany. Photo: Lutz Marl / Flickr
The company still employs over 100,000 people but also warned that it was anticipating losses of at least €1 billion in this financial year, as the costs of restructuring spiral further.
Thyssenkrupp has been unable, so far, to escape a slow and steady decline over the past ten years. In February this year, it sold off its lucrative elevators business to a private equity consortium for €17.2 billion in order to drive down some of its enormous debt burden and massive pension fund liabilities.
However, one of German industry's best-known names has continued to haemorrhage money in its remaining businesses. Not counting income from mergers, its free cash flow plummeted to minus €5.5 billion in its most recent financial year which finished at the end of September.
Three CEOs have come and gone in the past 15 months, and now Thyssenkrupp is led by an outside, Martina Merz, a former executive at Bosch, who resigned from the company's supervisory board to take over at the helm.
In May, Merz revealed a major plan for restructuring, the end result of which would be several smaller businesses - which together employed 20,000 people and saw combined sales of over €6 billion - being spun off from the company completely, with those businesses that were left being run under a loose holding structure.
The announcement of further job cuts now brings the number of roles under threat to 11,000, with Thyssenkrupp refusing to rule out forced redundancies - a move that is particularly unusual for a heavily unionised German company.
“The next steps could be more painful than the previous ones,” Ms Merz said, “but we will have to take them.”
Thyssenkrupp shares fell by 5% as trading opened this morning in Frankfurt.
Last month, it was revealed that the group had been approached by British tycoon Sanjeev Gupta's company Liberty Steel regarding the potential sale of its steelmaking unit, which employs 27,000 and saw a loss of €946 million in the last financial year. Details of the approach were not disclosed by either party.
Cheap imports from Asia, along with an overreliance on business with the troubled automotive industry have meant the steel division has struggled to compete. The auto sector, which is forecast to contract by 25% this year, accounts for around 40% of Thyssenkrupp's steel sales.
The group has also held talks with Sweden's SSAB, and has been in discussions with the federal government in North-Rhine Westphalia about the possibility of receiving state funding.
Last year's decision by the European Commission to block a potential tie-up with India's Tata Steel has not prevented the two companies revisiting the idea of a possible merger, which this time, given the subsequent changes that have taken place within the European steel sector, may receive fewer objections from Brussels.
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