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Thyssenkrupp promises no major job cuts as workers agree to split

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Thyssenkrupp promises no major job cuts as workers agree to split

Thyssenkrupp promises no major job cuts as workers agree to split
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Thilo Schmuelgen(Reuters)
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DUESSELDORF, Germany (Reuters) - Thyssenkrupp's <TKAG.DE> plan to split in two should not to lead to major job cuts, its chief executive said, adding he had "broad support" for spinning off its elevators, automotive and plant-engineering businesses as Thyssenkrupp Industrials.

In the most radical shake-up of a big German company in decades, the remaining 18 billion-euro business will be known as Thyssenkrupp Materials and include metals distribution, the 50 percent stake in the company's future steel joint venture with Tata <TISC.NS>, bearings and forging, and naval vessels.

Guido Kerkhoff, installed as interim chief executive after the abrupt departure of long-serving Heinrich Hiesinger in July, announced the split on Thursday after years of intensifying pressure from shareholders led by activist Cevian.

It was a coup for the former finance chief who was initially seen as a stopgap, but who got Cevian, trade union IG Metall and the company's biggest shareholder to back the plan.

"Kerkhoff has bought himself a lot of time with this," said one investor who asked not to be named.

Kerkhoff told ZDF television on Friday that although some administrative jobs may be lost, he did not "expect any major effects" from the split.

The IG Metall union welcomed the split as a chance for all Thyssenkrupp's businesses to survive and avert a complete break-up of the conglomerate, although it demanded that there be no compulsory redundancies and that it keep its supervisory board role which gives it effective veto rights on major decisions.

FIRST STEP

The split must now be officially approved by the supervisory board, worked out in detail, and then voted on by shareholders in 12 to 18 months' time.

"This is not a strategy. It's a first step into the right direction," the investor said. "It's still much more than the market had hoped for."

Thyssenkrupp shares, whose value had fallen by half since a 2011 peak, jumped as much as 17 percent on the news on Thursday, although they slipped slightly on Friday.

"There may be a problem in that a break-up by itself doesn't make the business more profitable," said Thomas Hechtfischer, managing director of shareholder advisory group DSW, which usually represents 1 percent of Thyssenkrupp's voting rights at its annual general meeting.

"And the effort it takes is enormous, as we've just seen with E.ON and Uniper," he added, referring to utility E.ON's <EONGn.DE> 2016 spin-off of its energy generation and trading company, which plunged E.ON deeper into losses as it bore restructuring costs while retaining legacy problems.

Analysts at HSBC broadly welcomed the move, although they cautioned that a merger of Thyssenkrupp's highly profitable elevator business with a rival such as Kone <KNEBV.HE> was now off the table for the foreseeable future.

"We like the idea that TK shareholders will have a claim on viable industrials businesses," wrote global co-head of industrials research Michael Hagmann, keeping his "buy" rating.

Thyssenkrupp Materials will initially keep a minority stake in Thyssenkrupp Industrial, and both will be listed.

(Reporting by Matthias Inverardi, Tom Kaeckenhoff and Christoph Steitz; Writing by Georgina Prodhan; Editing by Alexander Smith)

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