German steel giant ThyssenKrupp scraps Tata merger

German industrial conglomerate ThyssenKrupp said on Friday that it was scrapping merger plans with Indian steel giant Tata and would slash 6,000 jobs worldwide in a structural shakeup.

German steel giant ThyssenKrupp scraps Tata merger
A steel worker at the ThyssenKrupp's Schwelgern plant. Photo: picture alliance/Rolf Vennenbernd/dpa
The German group said “continuing concerns” from the European Commission had sunk its bid to join its steel business in Europe with Tata's.
The Indian company said in a separate statement that both “partners assume with deep disappointment that the European Commission will not approve the joint venture”.
The aim of the merger had been to create the second largest European steel company behind multinational giant ArcelorMittal and to join forces in the face of the surge of Chinese steel.
Having shelved the plans and ruled out offering more concessions to Brussels in order to get a green light, ThyssenKrupp said it was now aiming for a stock market listing of its elevators business as part of a restructuring.
CEO Guido Kerkhoff said ThyssenKrupp's “new group-wide” programme would also include “the reduction of 6,000 jobs” with 4,000 to be cut in Germany and the rest abroad.
While Kerkhoff said while the company had a “good tradition of avoiding compulsory redundancies”, he admitted “this time it's a difficult process”. Thyssenkrupp faces “a situation where we had to make this major change, 
because it is the right decision for the company now in the changed frame conditions”, he added.
'New ThyssenKrupp'
The group had planned 4,000 job losses, half of them in Germany, if the merger had been successful, but its collapse means the conditional agreement already negotiated with the unions “is no longer valid”, admitted Kerkhoff.
“We are building a new Thyssenkrupp… we are going to change a lot of things and it will not be an easy road,” he added.
Kerkhoff declined to give any details on the planned IPO of its elevators unit: “as to the right price and the right time, we can't say anything”.
The elevator division employs around 50,000 people worldwide and sales of 7.7 billion euros ($8.7 billion) and is one of the group's most profitable areas of business.
The flurry of announcements saw ThyssenKrupp's stock soar, up 17.31 percent to 13.10 euros by around 1230 GMT on Frankfurt's stock exchange, while Tata Steel shares closed down 6.1 percent in Mumbai.
Brussels sticking point
Thyssenkrupp and Tata declined to accommodate Brussels' concerns which they said would “affect the synergies expected from the merger” to the point of compromising its economic relevance.
The merger had been regarded as a core part of the planned restructuring of ThyssenKrupp. In the wake of the U-turn on the merger plans, the German conglomerate said it has also binned a proposal, put forward last September under pressure from activist shareholders, to split into two separate groups — “Industry” and “Materials”.
Shelving the plan to split is a blow to Kerkhoff, who had banked on the scheme to push profit and simplify ThyssenKrupp's complicated business structure. 
In the wake of the failed merger, ThyssenKrupp said it expected a net loss for the year and would release the adjusted group forecast on Tuesday with the second quarter figures for 2019.
The adjustment to the forecasts takes into account the reintegration of the steel division into the conglomerate's balance sheet and the increase of 100 million euros in a risk provision in a German anti-cartel investigation.

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German steel giant rejects ‘high cost’ state support

German industrial giant Thyssenkrupp on Friday rejected state participation to support it during the pandemic, an option favoured by unions but judged too costly by management.

German steel giant rejects 'high cost' state support
Thyssenkrupp's offices in Duisberg. Photo: Ina Fassbender / dpa / AFP
“State participation off the table,” Klaus Keysberg, the group's financial director, told the German daily Rheinische Post on Friday.
Keysberg blamed “high costs” in the long term of government assistance, “due to the interest payments and the terms of repayment.”
Already weakened by years of cut-price competition from China in the steel industry, Thyssenkrupp has further struggled with the effects of the pandemic that caused business activity to plunge.
The company said in mid-November it would cut an additional 5,000 jobs as part of its restructuring plan, bringing the total to nearly 11,000, to be spread out over several years.
Thyssenkrupp chief executive Martina Merz has not ruled out state assistance.
The powerful IG Metall union had organised rallies in October to demand a rescue plan from Berlin.
But the government was never enthusiastic, despite their acquisition of stakes in the airline Lufthansa and tour operator TUI, which also had business ravaged by Covid-19.
“I don't believe that nationalisation is the right response at the moment,” Germany's Economy Minister Peter Altmaier said in October on Thyssenkrupp.   
But national and regional governments favour more traditional aid structures, such as subsidies, or moves to convert to production of so-called green steel.
Discussions will continue to find alternatives.
A takeover of Thyssenkrupp's steel activities is still on the cards. British steel giant Liberty, founded by industrialist Sanjeev Gupta, launched a takeover bid in October.
Discussions are also underway with Sweden's SSAB and India's Tata Steel.
An alliance with fellow German steelmaker Salzgitter to create a national steel champion is also being considered. But these options won't be decided until “spring 2021”, Thyssenkrupp said.