The German steel giant ThyssenKrupp is suffering from a Greek headache, but not the one you would expect.
The firm is facing a claim of more than €2 billion ($2.2 billion) in compensation from Greece over a deal involving the sale of four submarines. The crippled country says it was cheated out of cash by ThyssenKrupp subsidiary Hellenic Shipyards at the height of its financial crisis, and now it wants its money back.
The deal was seen as symbolic of Greece’s profligate spending and the submarines have never sailed, but the company says the demands “appear to be unfounded.”
Its management team is also claiming to be unperturbed by the unfolding financial drama in Greece. The issue is “insignificant,” the company says, as “we only make 0.048 percent of our sales in Greece.” A Grexit would “not be noticeable.”
The relative calm on the Greek front makes it easier for CEO Heinrich Hiesinger and his team to concentrate on real problems. Mr. Hiesinger has guided the battered company through the worst of it and staunched the bleeding of billions. Now, he must teach the sluggish maker of steel, car parts, industrial systems, submarines, elevators and escalators how to make money again.
In the fiscal year ending September 30, 2014, there was profit for the first time in three years. But at just €210 million, it was an extremely modest return of only 0.5 percent on total sales of €41.3 billion. Free cash flow before divestments, meanwhile, was minus €254 million. The bottom line is that ThyssenKrupp, based in Essen, continues to spend more on its operating businesses than it brings in.