Thyssenkrupp's Steel Meltdown: A Messy Leadership Uproar
The steel sector at Thyssenkrupp is half-cooked, as a seething leadership fiasco unfolds. The controversial exit of key managers has fueled a raging debate, with the parent company's supervisory board boss, Oliver Blank, lambasting the dispensing top brass for their nonsense in dealing with the chronic structural shambles and financial struggles plaguing the steel business.
In a furious outburst, Blank tore into the departing high-rollers for neglecting the steel division's chronic issues, which he claims have been causing problems for years, not just lately. Blank, who's also the president of the Federation of German Industries, advocates for the steel segment's restructuring and autonomy. A long-standing fight over the funds needed for this transformation has been a contentious debate between upper management and the steel team for weeks.
Last Thursday, it was disclosed that the steel CEO, Bernhard Osburg, as well as the production manager and HR honcho, had bolted the outfit without a second thought. The pandemonium that followed saw four members of the steel supervisory board also tape their resignations. Among the quitting board members was ex-chairman Sigmar Gabriel, who accused Thyssenkrupp's CEO, Miguel López, of mud-slinging against the steel board. Gabriel also suggested that Blank had been doing nothing.
Blank's statement was heavy on condemnation, declaring that the steel team had consistently missed their targets, including this financial year. Agreed restructuring programs have failed to live up to expectations promised by the steel team. "Thyssenkrupp Steel continues to gobble up resources at a rate that's a disaster for its future, the rest of the businesses, the company's owners, and the workforce," Blank exclaimed.
Post the resignations, the remaining board members, Dennis Grimm (Technology) and Philipp Conze (Finance), will supervise the steel segment's operations. The company promises to speed up the process of hiring new talent.
Thyssenkrupp's steel outfit has been wrapped up in the economy's weakness and cheap imports for quite some time. The predicament has led to cuts in capacity and, unfortunately, job losses. The long-term implications of these personnel changes for the workforce remain up in the air. The supervisory board had planned to draft a financial blueprint for the next two years; however, that vision still hasn't taken shape. Thyssenkrupp's steel division, employing 27,000 individuals, is Germany’s largest steel maker, with 13,000 of them based in Duisburg. The works council fears that the restructuring could lead to halving the plant and the loss of thousands of jobs.
Blow-by-Blow
Thyssenkrupp's steel division is currently grappling with a 10% tumble in sales year-on-year in the first quarter of fiscal year 2024/2025, amounting to €2.18 billion. This downturn is primarily due to lower spot-market prices across all client sectors, particularly in the automotive and industrial sectors, despite some offsetting demand in packaging steel and grain-oriented electrical steel[1][4][5]. The company is also grappling with:
- The potential exodus of a possible investor, CE Capital Partners, from acquisition discussions for Hüttenwerke Krupp Mannesmann (HKM) facility in Duisburg, which employs approximately 3,000 workers and is part of Thyssenkrupp's underperforming steel sector[1].
- An 11% revenue dip year-over-year in the steel division, primarily due to lower spot-market price levels across all customer segments. Despite this, the steel division has benefited from offsetting advantages for electricity prices and raw materials[2][5].
- Although determined by the company's green transformation plan, the closure of HKM is a potential prospect. However, Thyssenkrupp remains open to negotiations with other possible buyers, and there's a suggestion that HKM could become an independent steel mill capable of selling its rolled products directly to end-users, particularly for sectors requiring heavy plates like the defense industry[1].
The company is also working on restructuring efforts to enhance the competitiveness of its businesses and generate sustainable growth, including the plans to spin off its European steel business and publicly list its marine unit, which could benefit from rising military spending[4]. Thyssenkrupp is also committed to environmental sustainability, aiming to replace outdated blast furnaces with more environmentally-friendly electric furnaces[1][5]. The steel market remains troublesome due to uncertainties about future global economic growth and new US steel tariffs, which could lead to increased price pressure in Europe[2][5]. The company is also constructing a 2.5 million tons per year Direct Reduced Iron (DRI) plant, planning to use natural gas for DRI production until green hydrogen becomes competitively priced[2][5].
In summary, Thyssenkrupp's steel division faces significant challenges, including the withdrawal of a possible investor and market uncertainties. The company remains steadfast in its restructuring and sustainability efforts, aiming to secure a sustainable future for its business and employees.
