Thyssenkrupp Board Seeks to Oust CEO in Renewed Upheaval -- Update

By Ruth Bender and Ben Dummett 

BERLIN -- Thyssenkrupp AG's directors moved to oust the company's chief executive 14 months after he took the job, in the latest effort to shake the company out of years of slowing sales, shrinking profits and hesitations over strategy.

Thyssenkrupp -- a former crown jewel of German industry, with products ranging from high-grade steel to submarines and elevators -- said late Tuesday that its supervisory board's personnel committee recommended that Guido Kerkhoff be replaced by Chairwoman Martina Merz until a long-term successor could be named.

The directors decided to move against Mr. Kerkhoff after he failed to convince them that he could reverse a yearslong erosion of profits, people familiar with their thinking said.

Drama-plagued Thyssenkrupp has become a prime example of the perils and pitfalls of attempting to turn an unwieldy conglomerate into a simpler, nimbler company and to squeeze higher value from disparate businesses.

Siemens AG, another German behemoth that has dabbled in everything from lightbulbs to mobile phones and gas turbines, has been aggressively pruning underperforming businesses, simplifying its corporate structure and trimming its head office.

Thyssenkrupp, by contrast, long resisted pressure to do so and only relented after becoming targeted by activist investors. Mr. Kerkhoff, the former finance chief, became CEO in July 2018, ending a monthslong hiatus after his predecessor left under pressure from investors.

Mr. Kerkhoff's first, bold initiative -- a plan to split the company into two businesses -- was abandoned after the European competition watchdog blocked a planned European steel joint venture with India's Tata Steel Ltd.

Recently, a deteriorating economic environment has added to Thyssenkrupp's homegrown problems. The company, which issued four profit warnings under Mr. Kerkhoff's short tenure, has been hit by slowing demand from car makers, higher raw material prices and rising uncertainty caused by international trade conflicts.

Some directors thought Mr. Kerkhoff was moving too slowly, according to people close to the board. Mr. Kerkhoff announced plans to shed nearly 4% of the staff and nearly halve administrative costs in May last year, when the company issued its third profit warning.

Some board members also disagreed with Mr. Kerkhoff's decision to only sell a minority stake in the elevator business after the company had considered a full or partial divestment or an initial public offering, these people said.

Trade union IG Metall said the sudden departure of Mr. Kerkhoff had created more unease among employees already troubled by the uncertainty over planned asset sales.

Thyssenkrupp said the planned overhaul would be "systematically continued."

The Krupp foundation, representing heirs to the company's founders with a roughly 21% stake, and Cevian Capital, which holds about 18%, said they fully supported Ms. Merz. A trained mechanical engineer, Ms. Merz spent 17 years at auto supplier Robert Bosch GmbH and has overseen restructuring as a board member of Swedish car maker Volvo AB.

"We expect that the new leadership will speed up the transformation process that Thyssenkrupp so urgently needs, and improve the quality of implementation," said Lars Förberg, founding partner of Cevian Capital.

Shares in Thyssenkrupp fell about 1.5% Wednesday and were down about 18% so far this year. This resulted in the company's ousting from Germany's blue-chip DAX index earlier this month.

Write to Ruth Bender at [e-mail] and Ben Dummett at [e-mail]

(END) Dow Jones Newswires

September 25, 2019 09:10 ET (13:10 GMT)

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