DUESSELDORF (Reuters) - Thyssenkrupp, whose attempt to merge its steel operations with a rival was thwarted by regulators earlier this year, now plans to transform the business into its biggest profit engine, according to an internal memo seen by Reuters.
The German group told staff it aimed to boost earnings before interest and tax (EBIT) at Steel Europe by an average of up to 600 million euros ($661 million) over the coming years, helped by job cuts and selling more to the autos industry.
That would make it the backbone of the conglomerate’s operations following an expected sale or listing of its elevator division, currently its best performing business by far.
“Our plan is a clear forward strategy to strengthen Thyssenkrupp Steel’s long-term competitiveness and viability. We cannot simply carry on as before, unless we accept missing the boat to the future,” the letter said.
On Wednesday, thousands of workers at Thyssenkrupp’s elevator division staged protests at the group’s headquarters in Essen, asking management for job protection.
Thyssenkrupp Elevator Technology (ET) could fetch up to 17 billion euros in a sale, which could help Thyssen repair its stretched balance sheet - at the expense of losing its cash cow.
“Our business has been growing in sales and profits for many years and we reliably bring in cash year by year,” said Susanne Herberger, a member of ET’s supervisory board.
“If we’re to be sold as a reward we expect first and foremost that the people at Thyssenkrupp Elevator will be in focus.”
Steel Europe will cut up to 1,000 jobs in administration and an additional 200 staff would be affected in its operating business, the letter said. The cuts are part of a job reduction program announced earlier this year.
Steel Europe’s Heavy Plate and Electrical Steel businesses would either be restructured, sold or wound down, the letter added, with decisions expected in the coming months.
Heavy Plate, which employs 800 staff, has been under review since August.
Thyssenkrupp also said it planned to increase steel shipments to an average 11.5 million tonnes a year, helped by a product drive in the car sector, the company’s single-biggest customer group.
Last year, shipments totaled about 11 million tonnes.
European Union competition regulators in June blocked a planned joint venture between Steel Europe and India’s Tata Steel, forcing a strategic rethink at Thyssenkrupp.
Reporting by Tom Kaeckenhoff, Additional reporting by Christoph Steitz; Editing by Mark Potter and Alexandra Hudson