ThyssenKrupp AG is to shrink and focus on higher-margin businesses as the COVID-19 pandemic hastens the break-up of one of Germany’s last mega-conglomerates.
The company said it is considering the sale of units that make steel and submarines as it fights for survival.
Once a byword for German engineering prowess, ThyssenKrupp is to be gradually split apart, as chief executive officer Martina Merz aims at reviving the group after the US$19 billion sale of its elevator unit closes later this year.
“We have taken some difficult decisions that were long overdue,” Merz said in a statement on Monday. “ThyssenKrupp will emerge smaller but stronger from the transformation.”
The steel unit, the traditional heart and soul of the company, burned through more than 1 billion euros (US$1.09 billion) in cash in the six months ending March 31. It has struggled for years against cheaper competition from Asia.
ThyssenKrupp’s European steel business had sales of 4.37 billion euros in the six months through March, while its Marine Systems unit had sales of 235 million euros over the same period.
The company said a cluster of loss-making businesses, including its plant technology unit that constructs factories, would also be dropped from its portfolio, with outright closures of heavy plate steel and battery solutions divisions an option.
It will look to develop its raw materials distribution and its components units.
ThyssenKrupp’s rising debt underscores the shrinking room for maneuver. The company’s net debt stands at 7.55 billion euros, according to earnings figures released last week, a figure likely to rise as the fallout from the pandemic cripples the global economy.
ThyssenKrupp already held exploratory steel talks with Salzgitter AG, people familiar with the matter said last year.
Chinese and Indian peers had also expressed interest in ThyssenKrupp’s European steel operations, the people said.
Sweden’s SSAB AB is also among the potential partners, one of the people said.
While the European Commission blocked a planned merger of ThyssenKrupp Steel with Tata Europe last year, both companies could revisit a deal and potentially sell or close steel plants to allay antitrust concerns, some of the people said.
ThyssenKrupp said it was in intensive discussions over a merger of the Marine Systems business, which builds submarines and other military ships, with a combination with a national or European competitor an option. The unit has run into project overruns in recent years.
“We have left no stone unturned in very carefully examining the individual development potential of each business for ThyssenKrupp,” Merz said. “The sale of the elevator business gives us the capacity for action.”
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