Bloomberg News

ThyssenKrupp Chairman Exit Unshackles CEO in Push for New Start

March 08, 2013

The exit of Gerhard Cromme as chairman of ThyssenKrupp AG (TKA) after 12 years gives Chief Executive Officer Heinrich Hiesinger a free rein as he attempts to kick- start the struggling steelmaker.

“Hiesinger is freed from the burden of the past” with Cromme’s resignation, Trudbert Merkel, responsible for Deka Investment GmbH’s 0.78 percent stake in ThyssenKrupp, said in a telephone interview. “That’s good news for him to advance a new start at ThyssenKrupp.”

The company unexpectedly announced yesterday that Cromme, 70, is stepping down on March 31 as head of the supervisory board. Cromme will also quit as vice chairman of the board of trustees and as a member of the Alfried Krupp von Bohlen und Halbach Foundation, the company’s largest shareholder, the Essen-based steelmaker said.

Hiesinger, 52, is seeking to repair the damage from price- fixing and bribery scandals and a botched expansion in the Americas that cost ThyssenKrupp 3.6 billion euros ($4.7 billion) in writedowns in the last fiscal year. The company’s shares rose the most in almost six months after it said Cromme was leaving.

His departure ends a reign that began more than 27 years ago, when he was handpicked by industrialist Berthold Beitz, 99, to take the helm at a predecessor of ThyssenKrupp’s steel unit. Cromme, also chairman of Siemens AG (SIE)’s supervisory board, resisted calls to resign at the steelmaker’s annual general meeting in January in the biggest shareholder rebellion in the 14-year history of the merged company.

Cutting Units

Hiesinger, who noted “a lack of direction” when he took the CEO job two years ago, is cutting ThyssenKrupp’s business divisions to five from eight and the number of units to about 400 from 750. His largest single transaction involves finding buyers for the unprofitable Steel Americas business.

The disposals will reduce the share of sales the Essen- based company gets from its “currently barely profitable” steel operations to less than 30 percent, Hiesinger told reporters last week in Dusseldorf.

Hiesinger completed the sale of the Inoxum stainless-steel unit to Outokumpu Oyj (OUT1V) in December in a deal that valued the business at about 2.7 billion euros. Following that transaction and the planned disposal of the Steel Americas plants, in which ThyssenKrupp has invested more than 12 billion euros, the company will “just break even,” the CEO said.

ThyssenKrupp said last week that a second phase of the Steel Americas sale process was largely completed and that it had “strong interest” from prospective buyers.

Fewer Workers

The steelmaker is pursuing a further 500 million euros in savings by reorganizing its European steel business and cutting more than 2,000 jobs to reduce excess capacity.

ThyssenKrupp ousted three executive board members in December in an effort to repair the damage caused by its involvement in a rail and an elevator cartel and the ill-fated expansion in the Americas.

Bertin Eichler, deputy chairman of the supervisory board, said in January he will leave this year after he was investigated by compliance staff over five company-funded foreign trips deemed to have been of a partly private nature.

Eichler and Cromme’s departures will mean that just four of the 20-strong board who originally approved the investments in a steel plant in Brazil in November 2005 and in assets in the U.S. in May 2007 remain.

In the latest blow to the company’s image, Germany’s Federal Cartel Office raided ThyssenKrupp offices in Duisburg last month. The antitrust watchdog raided four offices as well as private apartments in a probe into supplies to the automotive industry.

‘Old Habits’

Hiesinger pledged in December to rid ThyssenKrupp of “old structures and habits.” The company displayed “an understanding of leadership, in which old boys networks and blind loyalty were more important than business success,” he said.

Hiesinger has said ThyssenKrupp’s transformation into a diversified industrial group is a process that will take “several” years. The disposals are the easier part of the exercise and changing the company from within will be harder, he said.

“I am not afraid,” he told reporters last week.

The steelmaker’s supervisory board waived half of last year’s pay in response to the shareholder unrest, Cromme said at the annual shareholder meeting on Jan. 18.

“I want to support a renewal regarding the supervisory board,” Cromme said in yesterday’s statement announcing his departure.

ThyssenKrupp gained 6.4 percent to 18.285 euros in Frankfurt trading, the most since Sept. 14.

“It’s a logical conclusion,” said Deka’s Merkel. Cromme is “taking responsibility for the investment disaster with Steel Americas. For all Beitz’s blind loyalty, he can’t ignore the mistakes of the supervisory board.”

To contact the reporter on this story: Tino Andresen in Dusseldorf at tandresen1@bloomberg.net

To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net; Angela Cullen at acullen8@bloomberg.net


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