Thyssenkrupp's new CEO faces impossible task: selling steel

Baader Bank AG

26/04/2023 06:00

(Repeats story with no change to text)

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      Borrego to take over as CEO from June 1
    

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      CEO Merz quitting after less than 4 years in role
    

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      Faced opposition to hiving off steel business
    

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      Shares have fallen 15% since Monday
    

  
    By Christoph Steitz and Tom Käckenhoff
       FRANKFURT, April 25 (Reuters) - Thyssenkrupp's  TKAG.DE 
incoming chief executive faces the same task his three
predecessors failed to get done: divesting its 200-year-old
steel business on which the iconic German conglomerate was
built.
    Just how tough it is became clear on Monday when Martina
Merz threw in the towel and asked to terminate her CEO contract
five years early, a consequence of growing opposition to a plan
to hive off the group's steel division, Europe's second-largest.
    The sudden move, which caused the group's shares to fall for
a second consecutive day on Tuesday, came after open rebellion
from labour representatives as well as growing resistance from
within her management board, two people familiar with the matter
said.
    Her likely successor, Norma  NOEJ.DE  interim CEO Miguel
Angel Lopez Borrego, will have to navigate the same complex web
of stakeholders that has made it impossible so far to sell what
is arguably the company's most emotionally-charged asset.
    "Thyssenkrupp's strategy is more unclear today than it was
12 months ago and the untangling of the company is proceeding
too slowly," said Ingo Speich of Deka Investment, a top-20
investor, adding steel was the company's "problem child".
    For the past decade, management has considered steel a
millstone around Thyssenkrupp's neck due to its cyclical nature,
yet previous efforts to merge the division with a peer, sell it
to a rival, list it or spin it off have all failed.
    Hendrik Schmidt, governance expert at DWS  DWSG.DE , among
Thyssenkrupp's top-10 shareholders, said that while steel would
be a key part of Borrego's to-do list he also needs to find
solutions for the group's defence and hydrogen units.
    "We have to ask ourselves whether we are facing another
period of uncertainty ... which is costing the company and its
owners money, and is stoking fears among its employees," he
said. "I hope there won't be two more years of strategy work."
    
    CAUGHT IN THE THYSSEN WEB
    Steel has traditionally been a stronghold of German labour
unions, the consent of which is required for any major
restructuring moves under co-determination rules. Worker
representatives also hold half of the 20 seats on Thyssenkrupp's
supervisory board.
    Then there's the conglomerate's biggest shareholder, a not
for profit foundation set up by the last member of the Krupp
family to lead the steelmaker, which is engaged in charitable
work and does not have the capabilities of a wealth manager.
    Borrego, 58, is no stranger to complex set-ups. He formerly
served as finance chief and then chairman of Siemens Gamesa
 ENR1n.DE , itself the product of the troubled merger of the
wind activities of Siemens  SIEGn.DE  with Spanish rival Gamesa.
    Expected to join as CEO on June 1, he will be Thyssenkrupp's
fourth CEO in less than five years to have a go at simplifying
the group's conglomerate structure, which apart from steel also
covers submarines, car parts and materials trading.
    Marc Tuengler of DSW, a lobby group that represents
Thyssenkrupp's private shareholders, said it almost didn't
matter whether steel remained part of Thyssenkrupp or would be
sold, as long as there was a clear decision.
    "The question has become so entrenched that taking one of
the two paths would provide clarity and relief," he said.
    If Thyssenkrupp's stock is anything to go by, there's not
much hope riding on the sudden CEO change: the group's shares
have lost nearly 15% since the announcement.
    "We will see if the new CEO can deliver decisions able to
regain investor confidence or if he gets caught in the
Thyssenkrupp network," wrote Christian Obst of Baader Bank,
which according to Refinitiv Eikon holds a 0.01% stake in the
group.

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BREAKINGVIEWS-Thyssenkrupp gives investors wrong kind of breakup
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 (Reporting by Christoph Steitz and Tom Kaeckenhoff; Editing by
Friederike Heine and Emelia Sithole-Matarise)
 ((christoph.steitz@thomsonreuters.com; +49 30 220 133 647))