ThyssenKrupp Hits Reset on Restructuring

With apologies to Steinbeck, the best-laid plans of mice and conglomerates often go awry.

Having previously announced plans to split its operations, ThyssenKrupp ran into several obstacles, forcing the firm to reevaluate its plans. Originally, the company — bowing to shareholder pressure — announced it would divide itself into two firms: one focused on industrial goods and the other on materials.  The new TK Industrials would include the Components, Elevators, and Industrial Solutions operations, while TK Materials will be composed of Material Services, Industries, Marine Systems, and a steel joint venture with Tata.

The move was undertaken as activist shareholders pushed for change at the firm.  According to a report in The Wall Street Journal, shareholders criticized ThyssenKrupp’s conglomerate structure for being inefficient, costly, and bureaucratic.

However, the plan ran into trouble with regulators when its effort to create a steel joint venture with Tata Steel was scuttled.  This joint venture was supposed to be a precursor to forming the two new ThyssenKrupp companies.

Following this failure, management revised its strategy. Now the company is  pursuing an IPO of its elevator business, worth an estimated EUR14 billion ($16 billion).  In addition, the company has announced layoffs of some 6,000 employees and placed several units under review for divestment.  This latest effort has been dubbed “newtk” and will see ThyssenKrupp remain intact, sans the elevator unit.

That said, it is possible ThyssenKrupp Marine Systems will also be put on the block. Previously, the restructuring ax has hit this sector with the divestment of one of its submarine operations.  In 2014, the firm divested its Sweden-based ThyssenKrupp Marine Systems AB after Sweden and ThyssenKrupp had a falling out over price and submarine exports.  As a result, Sweden pulled A26 submarine work from the firm and tasked Saab with devising a plan for the country to maintain an indigenous submarine-production capability.  Under the $50.5 million deal, Saab acquired operations in Malmö, Karlskrona, and Muskö, Sweden.

In late 2019, the company announced some EUR250 million in investment plans for ThyssenKrupp Marine Systems — a positive sign for the shipyards.  According to a Reuters report, the company has also said it is not averse to selling a majority stake in the operation, should the opportunity arise.  Names mentioned in regards to such a purchase have included Rheimetall and France’s Naval Group.

The often-discussed partnership with Naval Group has been scuttled in the past due to political fears over which dockyards would remain open and where they would be located.  A possible scenario would see ThyssenKrupp building submarines, with Naval Group focused on surface combatants.  A vulnerability of such a deal would be the ensuing labor headaches brought on by consolidation.

For the time being, no plans have been made to sell the unit.

About Richard Pettibone

A military history enthusiast, Richard began at Forecast International as editor of the World Weapons Weekly newsletter. As the Internet grew in importance as a research tool, he helped design the company's Forecast Intelligence Center and currently coordinates the EMarket Alert newsletters for clients. Richard also manages social media efforts, including two new blogs: Defense & Security Monitor, covering defense systems and international issues, and Flight Plan, which focuses on commercial aviation and space systems. For over 30 years, Richard has authored the Defense & Aerospace Companies, Volume I (North America) and Volume II (International) services. The two books provide detailed data on major aerospace and defense contractors. He also edits the International Contractors service, a database that tracks all the contractors involved in the programs covered in the FI library. More recently he was appointed Manager, Information Services Group (ISG), a new unit that encompasses developing outbound content for both Forecast International and Military Periscope.

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