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Thyssenkrupp and German Politics

19 November 2020 by jbchevrel

Thyssenkrupp AG (TKA) is a Germany-based group of industrial and technology companies. The Company operates in 6 segments. Steel Europe (flat carbon steel products), Materials Services (global distribution of materials + technical services for the manufacturing sector), Plant Technology (engineering and construction services), Automotive Technology (components for the automotive sector), Industrial Components (wind energy, construction and engineering sectors), Marine Systems (civil and naval shipbuilding). TKA (employs more than 100k) said they would cut 7.4k more jobs, due to COVID impact. TKA had 3 CEOs in 1.5 year and had sold its profitable Elevators business to a PE for €17B in FEB. Free cash flow excluding M&A income collapsed to -€5.5B this financial year (ending SEP19 to SEP20). The company reported a full-year loss of -€5.5B, warning it expected a further loss of at least -€1B this financial year, with rising restructuring costs. Today the 5y CDS is wider +33bp as a result. Still looking for other options to raise cash, TKA said last month that it was approached for its Steel unit (40% of TKA steel stales / lost -€0.9B / highly reliant on the Auto industry / 27k staff) by Liberty Steel. TKA is also in talks with other steelmakers (incl. SSAB). TKA is also talking to the German government to potentially get financing from the state. Like TUI. This is causing some political division within Chancellor Merkel’s coalition, with free marketeers resisting a push for increased state intervention. The government signalled it would help TUI and TKA. The companies entered talks for multibillion-euro bailouts from the government rescue fund, but Merkel’s coalition is still divided over how much power the state should take when it hands over taxpayer’s money. The SPD wants to copy the model for the €9B bailout of Lufthansa in which the state secured voting rights and 2 supervisory board seats. Some CDU are resisting and want a silent holding that would limit state interference.