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Steelmaker Thyssenkrupp rejects German state aid

December 12, 2020

Industrial giant Thyssenkrupp has ruled out government participation to support it during the COVID pandemic, an option favored by unions but judged too costly by management.

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A worker at a Thyssenkrupp steel manufacturing unit in the German town of Duisburg
A worker at a Thyssenkrupp steel manufacturing unit in the German town of DuisburgImage: picture alliance/dpa/R. Weihrauch

The management of Thyssenkrupp has rejected the prospect of the German government coming to the rescue of the ailing conglomerate, arguing that it would be too costly.   

"State participation off the table," Klaus Keysberg, the group's financial director, told the German daily Rheinische Post.

In an interview published Friday evening, Keysberg blamed "high costs" in the long term of government assistance, "due to the interest payments and the terms of repayment."

Thyssenkrupp CEO Martina Merz, however, has yet to rule out state assistance.

Already weakened by years of cut-price competition from China in the steel industry, Thyssenkrupp has further struggled with the effects of the COVID-19 pandemic that caused business activity to plunge.

The company incurred heavy losses over the course of its fiscal year, ending September 30, particularly in its steel business. Earnings before interest and tax plunged to minus €1.6 billion (minus $1.94 billion), with the steel sector accounting for €946 million in losses. In the previous fiscal year, Thyssenkrupp made a net loss of €110 million. Revenue fell year-on-year by 15% to €28.9 billion.

Looking ahead, Thyssenkrupp expects to make a net loss of "over one billion euros" in its 2020-2021 financial year.

Thyssenkrupp moves ahead with company split

The right response?

To counter the headwinds, Thyssenkrupp has indicated it is looking for partners to help shore up steel operations. British steel giant Liberty launched a takeover bid in October. Discussions are also underway with Sweden's SSAB and India's Tata Steel.

An alliance with fellow German steelmaker Salzgitter to create a national steel champion is also being considered. But these options won't be decided until "spring 2021," Thyssenkrupp said.

In mid-November, the troubled company said it would cut an additional 5,000 jobs as part of its restructuring plan, bringing the total to nearly 11,000, to be spread out over several years.

Can steel production be made greener?

The powerful IG Metall union had organized rallies in October to demand a rescue plan from Berlin.

But the government was never enthusiastic, despite their acquisition of stakes in the airline Lufthansa and tour operator TUI, which also had business ravaged by the health emergency.

"I don't believe that nationalization is the right response at the moment," Germany's Economy Minister Peter Altmaier said in October on Thyssenkrupp.

sri/mm (AFP, Reuters, dpa)