Since the resolution was passed in September 2018 to divide the Group into two much more focused and efficient companies, the general parameters have changed significantly. Firstly the steel joint venture with Tata Steel was prohibited by the European Commission, so we now intend to realign the steel business on our own and make it sustainable. Secondly the worse-than-expected operating performance of our businesses, the economic downturn and its impact on the business situation and the capital market environment meant that the separation could not be implemented as planned. For this reason thyssenkrupp reassessed the strategic options in May 2019 and decided on a realignment under “newtk”. Based on the three principles “Performance first”, “Flexible portfolio” and “Efficient organization”, the Group’s performance is to be decisively improved. In addition, the conditions are to be put in place to enable the businesses to perform at their best and achieve leading market positions.
Increasing performance in all our businesses has priority. All our businesses are working on the continued systematic implementation of the performance programs already introduced and where necessary adding further measures. We have identified priority areas for implementation where we see the biggest levers for improving our cash flow. We have also identified businesses which are currently not competitive or where the current market situation calls into question whether they can be positioned competitively within the Group from today’s perspective. These are Springs and Stabilizers (chassis components for the auto industry), System Engineering (construction of production lines for the auto industry) and Heavy Plate (steel plate for construction, shipbuilding and pipelines, among others). These three businesses represent four percent of the Group’s sales but a substantial share of our negative business cash flow. For these businesses, which are now under review, restructuring plans are currently being developed. If restructuring proves unsuccessful or not possible, other strategic options will be examined. The steel business faces particular challenges. Here the aim is on the one hand to address the structural problems in the European steel industry and on the other to mitigate the effects of the current market dislocations, characterized by weaker customer demand and high and volatile raw material prices. A corresponding future strategy for the business is currently being developed. As part of “Performance first” we will also be focusing more strongly on our performance culture throughout the Group and pressing significantly harder to continuously enhance our competitiveness. This will also involve reviewing our key performance indicators and the logic behind them as well as the associated compensation systems.
In the future we will measure our success on how well our businesses perform – not on whether we own a majority stake in them. Accordingly we are considering which is the right portfolio strategy for the businesses or individual parts of them. With regard to the automotive components businesses, the key factor will be deciding on a set-up to tackle the big changes in the sector such as e-mobility and autonomous driving. In plant engineering the increasing competitive pressure above all from Asia raises the question of whether the businesses could develop better through partnerships, mergers or other options. In the materials businesses the Group continues to see options for consolidation. Size is strategically relevant here.The most important portfolio measure is the partial IPO of Elevator Technology resolved in May. However, in parallel with preparations for the IPO, the Group is also examining the bids received from strategic and financial investors. The intention is to ensure that we make the best decision for thyssenkrupp and its stakeholders going forward. The aim is to significantly strengthen the Group’s capital base and increase our financial leeway to tackle the necessary restructurings and make our businesses fit for the future. Preparations for the IPO of the elevator business are proceeding according to plan. The aim is to complete the carve-out by the end of 2019. Depending on the capital market environment, we intend to carry out the IPO in the course of fiscal year 2019/2020.
- “Efficient organization”
To enable them to operate more successfully on the market, the strategic realignment will give the businesses more entrepreneurial freedom but also more responsibility. The Group’s organizational setup will be leaner and more agile, which will also reduce costs. We are currently defining the future organizational and management structures in each of the business segments and at the headquarters. The aim is to start working in the new structure from the beginning of 2020. We planto further reduce costs at Corporate. Some success with this was already achieved in the reporting year, with Corporate improving altogether by €71 million to €(306) million. We expect further savings from the streamlining of our management structures as well as cost reductions in the individual businesses. More information is provided under “Business area review” in the section “Report on the economic position”.