Steel Merger

ThyssenKrupp Workers Steeling for a Fight

ThyssenKrupp warnt Politik
Stirring anti-merger sentiment. Source: DPA

Employee representatives at ThyssenKrupp are bitterly fighting a proposal to merge its troubled steel operations with those of Indian conglomerate Tata, arguing that their German plants would bear the brunt of job losses when the deal is done.

“A merger with Tata is no solution,” said Wilhelm Segerath, chairman of ThyssenKrupp’s works council. “All it does is take debts off the ThyssenKrupp balance sheet. We’re not going along with that.” Staff representatives have demanded clarity from management, he added.

On Monday, a deal seemed near after Tata separated the €20 billion pension scheme of its subsidiary Tata Steel UK, which had been seen as a stumbling block to a merger. But a meeting of ThyssenKrupp’s supervisory board, scheduled for Tuesday, was postponed to allow management to “discuss strategic options,” the company said.

ThyssenKrupp executives remain upbeat about the merger prospects, insisting that talks with Tata are going smoothly. But among the rank and file, resistance is growing amid fears that Tata’s British steel plants would benefit most from this industrial coupling.

“A merger with Tata is no solution. We’re not going along with that.”

Wilhelm Segerath, chairman of ThyssenKrupp's works council

Broad terms of the deal are still unclear. Initially it seemed that Tata would take a majority stake in the merged company, but now a 50-50 split under Indian leadership appears more likely. This would allow ThyssenKrupp to remove steel from its liabilities, while retaining employees on the board in Germany – a point considered non-negotiable among trade unionists.

To step up the pressure on management, steelworkers at ThyssenKrupp’s German plants will stage a major demonstration on Sept. 22, one day before the company’s supervisory board will meet to consider the deal. ThyssenKrupp still hopes an agreement will be signed with Tata by the end of the month.

It’s not clear what ThyssenKrupp’s managers can do to assuage employees’ concerns. In July, the company incensed trade unions by announcing a further round of layoffs to shore up its balance sheet and sweeten its merger prospects. If worker representatives remain opposed to the deal, the board will be deadlocked and chairman Ulrich Lehner will have to use his deciding vote to push it through. But this would be highly contentious in an industry where labor relations have traditionally relied on consensus.

During the current election campaign, politicians from the center-left Social Democrats, or SPD, accused Angela Merkel’s government of “running Germany’s steel industry into the ground.” Ideas were floated to form a new German steel conglomerate, including a possible merger of steelmakers Salzgitter and Georgsmarienhütte. But the proposals were criticized for failing to address overcapacity, and none got off the ground.

Cevian, ThyssenKrupp’s second-largest stockholder, has been less than enthusiastic about the proposed Tata merger.

ThyssenKrupp’s workers may get help from an unexpected source: Swedish activist investment group Cevian. ThyssenKrupp’s second-largest stockholder, Cevian owns about 15 percent of the company, has a seat on the supervisory board and has been less than enthusiastic about the merger plans.

If the Swedish company feels the deal will impact its profits, it could block the merger and demand fresh proposals from executives. These might include spinning off ThyssenKrupp’s steel division, or a floatation of other divisions such as elevator manufacture, components or industrial services. “A breakup would clearly be more lucrative,” said sources within the Swedish company.

If the steel merger with Tata fails, it will be a stunning blow for Heinrich Hiesinger, ThyssenKrupp’s boss, who is under pressure to deliver after two years of negotiations with the Indian company. “If Cevian throw a spanner in the works, it will show [Hiesinger] has not correctly assessed the tactical situation,” said one industry insider.

 

Martin Wocher is an editor with Handelsblatt, focusing on the mechanical engineering and steel industries. Brian Hanrahan and Jeremy Gray adapted this article for Handelsblatt Global. To contact the author: wocher@handelsblatt.com

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