Thyssenkrupp to axe 11,000 people as steel woes worsen
The German group almost doubles the number of positions it plans to eliminate after recording a €5.5bn net loss for the year to end-September
Thyssenkrupp will cut 11,000 jobs, roughly 10% of its workforce, as the conglomerate’s beleaguered steel business haemorrhages cash and Germany’s government bickers over a possible rescue.
The steel and materials group almost doubled the number of positions it plans to eliminate after recording a €5.5bn net loss for the year that ended in September. The company forecast another more than €1bn deficit for the current period in a statement Thursday.
“We will have to move further into the ‘red zone’ before we have made Thyssenkrupp fit for the future,” CEO Martina Merz said. “The next steps could be more painful than the previous ones. But we will have to take them.”
Thyssenkrupp shares fell as much as 7.6% in Frankfurt trading. The stock has plunged more than 60% since the start of 2020.
Once synonymous with German industrial prowess, Thyssenkrupp is now fighting for survival. Its steel division faces severe problems with yawning pension deficits and cheap imports from Asia. The end game for the company is likely to involve a mix of asset sales, restructuring and the ignominy of a taxpayer bailout.
Management has held talks with potential buyers and merger partners for the steel unit to help address chronic overcapacity. They’re also in discussions with the German government over an aid package that could be worth at least €5bn, people familiar with the negotiations said last week.
With a workforce of more than 100,000, Thyssenkrupp remains a systemically important employer to politicians in its home state of North Rhine-Westphalia. It’s endured a tumultuous few years marked by a string of management departures and clashes with activist investors Cevian Capital and Paul Singer’s Elliott Management.
The conglomerate sold its prized elevator division earlier in 2020 for €17.2bn in a bid to buy time to restructure other parts of the business. It now has about €13.2bn of cash and undrawn credit lines.
Excluding proceeds from the elevator sale, Thyssenkrupp burnt through €5.5bn in the last fiscal period, triple its prior-year outflow. It’s forecasting another €1.5bn of negative free cash flow over the next 12 months.
“The outlook for next year is still pretty dire,” said Ingo Schachel, senior analyst at Commerzbank.
The Essen-based company said it needs to cut more than the 6,000 jobs planned in May 2019 because of long-term market developments and effects of the coronavirus pandemic.
Thyssenkrupp expects to make a “fundamental” decision in the spring on a solution for its steel business, which swung to a €946m loss in the last fiscal year. The full group’s adjusted deficit before interest and taxes was €1.6bn.
Though the company expects sales growth in the low- to mid-single-digit range after a 15% contraction in 2019, it expects an adjusted earning before interest and tax loss in the mid-three-digit million-euro range.
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