2024-09-13 02:41:18
Falling demand, competition from Asia, green transformation: the steel business has become tough. At Thyssenkrupp, the dispute over what to do next is escalating. The share price is at rock bottom. Does the steel division have to go?
Thyssenkrupp – that was once an industrial icon and a DAX company of international stature. A company whose name was synonymous with the German industrial location. It manufactured everything from submarines to elevators to yachts. And produced steel. But the company has been in crisis for over a decade. And the crisis is coming to a head.
Following a scandal in the steel division’s supervisory board at the end of August, the company is meeting again today, Thursday. Employee representatives have CEO López in their sights. Jobs are at stake. With a price of less than three euros, the share is almost at rock bottom. How did it come to this? And: What happens next?
You have to look back quite a bit in history to find the beginning of the crisis at Thyssenkrupp. It was the financial crisis of 2008, sales collapsed. At the same time, new steelworks were being built in Brazil, for example, which were much more expensive than expected. The hope that demand for steel would be enough to make the calculations work out was dashed. The share price, which was an incredible 45 euros at the time, collapsed by around three quarters.
With a new investor and new investments, it recovered, but without lasting success. A merger with Tata Steel failed due to competition regulators. During the Corona pandemic, the company suffered from rising raw material and energy prices and falling steel prices. And these are still under pressure after Corona: cheap steel from Asia is flooding the world market. At the same time, demand is falling globally.
This left the steel division with a loss of two billion euros in the last financial year – and a crisis with no prospect of an imminent end.
For months, the company has been looking for a solution to get rid of its struggling steel business. The aim of CEO Miguel López, who has been in office for a year, is obviously to sell the steel division. But this is, to put it mildly, difficult in times when the economy and demand are weak.
If it were up to Thyssenkrupp, billionaire Daniel Křetínský would be more involved than he has been up to now. He already owns 20 percent of Thyssenkrupp Steel. But the talks will apparently only move forward when the steel division is in a better position than it is now. And that means that the company would have to take radical action.
A large proportion of employees – 10,000 of the current 26,000 employees are being discussed – would lose their jobs. Added to this would be severance payments, retirement arrangements and possibly closures. All of this costs time for negotiations and money.
Antje Erhard has been working as a journalist and TV presenter for around 20 years. Her career took her from the news agency dpa-AFX to ZDF, among others. She currently works for the ARD finance department in Frankfurt and reports daily on what is happening in the world of the stock market and economy.
Then, at the end of August, there was a scandal: Sigmar Gabriel, the chairman of the steel subsidiary’s supervisory board, threw in the towel. And with him, three other supervisors from Thyssenkrupp Steel. The deal failed because of a dispute over how the steel division should be organized and equipped for the future.
What remains is a loss-making business, still without a solution, an unsettled workforce and shareholders hit by losses. The challenges are big enough even without internal disputes. Keyword: green transformation.
Germany wants to be climate neutral by 2045. Energy-intensive companies such as steelworks must therefore change their production. New hydrogen-based manufacturing processes should make it possible to produce steel more cleanly and with less energy consumption.
But green hydrogen as the main energy source is expensive. Three billion has already been invested in a hydrogen-capable plant at Thyssenkrupp Steel. The federal government and the state of North Rhine-Westphalia have contributed two billion. To convert the entire production, further investments of billions would be necessary. A more than ambitious undertaking when you consider that this transformation is more than demanding even with tight management and precise planning.