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ThyssenKrupp counts the cost of exiting steel

Steel News - Published on Fri, 19 Jan 2018

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Handelsblatt reported that by most measures, ThyssenKrupp CEO Heinrich Hiesinger should be hailed as a hero for engineering the tricky spinoff of the company’s steel division into a joint venture with Tata Steel Europe, creating the second-largest steel company in Europe. By one stroke, the spinoff has extracted ThyssenKrupp from a commodity business dominated by China where profits are few and far between. He also succeeded in navigating an agreement with the company’s IG Metall labor unions that permitted the spinoff to take place, at a cost of guaranteeing jobs and factories for nearly a decade. It will own about 25 percent of the newly created joint venture, but could sell that in an IPO.

Despite these accomplishments, however, when Mr. Hiesinger addresses the company’s shareholders meeting on Friday, he is likely to encounter growing frustration with the slow pace of change at the company, which also makes elevators, industrial plants and auto components.

Swedish hedge fund Cevian Capital, the company’s second-largest shareholder after the Krupp Foundation, has been campaigning against Mr. Hiesinger’s turnaround strategy and wants to split the company up, in the same way John Flannery, CEO of US conglomerate General Electric, said he was considering. He has complained that ThyssenKrupp’s shares, now about EUR 26, could be worth EUR 50 if the company was broken up.

For his part, Mr. Hiesinger rejects Cevian’s advice and says he is working on a plan to focus the business on more lucrative and less cyclical business sectors such as elevators, plant construction and car components now that the firm is largely out of the steel business.

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Posted By : Nanda Koijam on Fri, 19 Jan 2018
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