Thyssenkrupp Steel Europe announced this Monday the keys to its industrial strategy for the future to meet the challenges linked to overcapacity and the pressure on competitiveness from cheap imports, particularly from Asia, notably a 40% adjustment of its workforce in the coming years by eliminating around 5,000 jobs until 2030 and the transfer of another 6,000 to external suppliers.
According to the German steel company, the implementation of the presented key issues document “will be accompanied by a significant reduction in jobs” and other measures aimed at reducing personnel costs.
Thus, Thyssenkrupp Steel Europe estimates that the planned group-wide adaptation of the production network and a significant streamlining of administration will result in the loss of around 5,000 jobs by 2030, while The company plans to move an additional 6,000 jobs to third-party service providers.
As part of its plan, with the stated objective of avoiding layoffs for operational reasons, personnel expenses will be reduced by 10% on average in the years to come, thus adjusting them to a competitive cost level.
“We will adapt to new market conditions through specific capacity adjustments and cost reductions,” emphasized Thyssenkrupp Steel Europe CEO Dennis Grimm, who called for a “comprehensive optimization and rationalization” of the production network. and processes.
“We are aware that This path will ask a lot of many people, not least because we will have to cut a large number of jobs. in the years to come, to be more competitive”, declared the general director of the steel company, whose workforce amounts to around 27,000 people.
Strategic keys
The headcount adjustment was announced against the backdrop of the presentation by the management board of Thyssenkrupp Steel Europe to the strategic committee of the supervisory board of a key issues document addressing the company’s global industrial strategic plans for the future .
In this sense, the German company indicated that this document seeks to respond to the consolidation of fundamental and structural changes in the European steel market and the main customer and destination markets, emphasizing that excess capacity and the resulting increase in low-cost imports, particularly from Asia, “exert considerable pressure on competitiveness.
Furthermore, the company considers that “urgent measures” are necessary to improve Thyssenkrupp Steel’s productivity and operational efficiency and achieve a competitive cost level.
The company hopes to develop this key issues document in the coming weeks as part of a dialogue with supervisory bodies and worker representatives.
Reduce capacity
In this sense, one of the key aspects envisaged provides reduce the company’s production capacity from the current 11.5 million tonnes to a target production level of between 8.7 and 9 million tonnes based on market conditions, thereby adapting capacity to future market expectations.
In this scenario, the company indicated that the demerger of Hüttenwerke Krupp Mannesmann (HKM) remains a key element in the necessary capacity reduction and, although the main objective is to sell the shares of HKM, if not not possible, Thyssenkrupp Steel will discuss with the other shareholders mutually acceptable closure scenarios for the company, and has indicated that the processing plant in Kreuztal-Eichen (Germany) will be closed.
Alongside the adjustment measures, Thyssenkrupp has expressed its desire to continue to promote the process of independence of the steel sectorof which it has already sold 20% of the shares to the Czech EP group with the aim of increasing its stake to 50%.
“Through the long-term strategic and structural realignment, we will prepare Thyssenkrupp Steel for the long-term future,” said Marie Jaroni, chief transformation officer at Thyssenkrupp Steel, adding that the company still needs to improve in terms of operational efficiency and profitability “in key competitive areas”.
“We need to close these gaps if we want to see a positive future. This is even more important because we want to systematically promote green transformation” added the executive, emphasizing that the implementation of the concept presented this Monday will be decisive for the competitiveness of the company and, therefore, for the future of the company.
Losses
Last week, Thyssenkrupp announced that it had recorded losses of 1,400 million euros at the end of its financial yearwhich involves reducing the “red figures” by 30% by around 2 billion euros compared to the previous year, after assuming a negative impact of 1,200 million due to the deterioration in the value of its assets, mainly steelmaking activity in Europe (“Steel Europe’).
Concretely, the company specified that the majority of this negative impact, around 1,000 million euros, was attributable during the year to Steel Europe, as well as to Material Services and Automotive Technology.
In addition, Thyssenkrupp highlighted the impact of other expenses amounting to around 270 million euros due to necessary restructuring measures in the areas of automotive technology, low-carbon technologies and material services, among others.
For its part, over the whole year, the German company recorded orders amounting to 32.8 billion euros, or 11.6% less than the previous year, while the figure business decreased by 6.7%, to 35 billion.
In this sense, he highlighted a significantly lower demand from key customer sectorssuch as automotive, engineering and construction, which had a negative impact on the group’s main financial indicators and resulted in lower order intake.
Thus, given the current macroeconomic challenges, Thyssenkrupp assumed that in the current financial year it would be able to increase its sales between 0% and 3%, while it expects an adjusted Ebit between 600 and 1,000 million euros, compared to 567 million last year.
Additionally, Thyssenkrupp expects free cash flow before M&A to be between -€400 million and -€200 million, including approximately €250 million of cash outflows related to restructuring and higher investments compared to the previous year.
Concerning the net result, the company expects a return to “black figures” with an improvement in a range between 100 and 500 million euros.
