(Bloomberg) -- Thyssenkrupp AG (DE:TKAG) plans to fire Chief Executive Officer Guido Kerkhoff after only a year on the job as the ailing engineering conglomerate faces pressure to speed up its turnaround.
Members of Thyssenkrupp’s supervisory board lost confidence in Kerkhoff’s leadership and believed he was moving too slowly on executing a revamp that included selling divisions of the sprawling steel-to-submarines manufacturer, according to people familiar with the matter, who asked not to be identified because the discussions are private.
The company’s personnel committee plans to start negotiations to dismiss Kerkhoff, according to a company statement on Tuesday evening. Martina Merz, the supervisory board chairwoman, will take over the CEO duties on an interim basis, but not more than 12 months. Siegfried Russwurm would fill in for Merz as chairman.
The overhaul at the top adds to the chaos at embattled Thyssenkrupp (DE:TKAG), which is already struggling in the face of an ailing auto industry, trade concerns, falling steel prices and a weakening German economy. Its share price has been cut in half since the start of 2018, and the company plans to raise much-needed cash by selling a stake in or publicly listing the elevator unit.
Thyssenkrupp (DE:TKAG) shares fell 1.7% to 12.26 euros at 9:04 a.m. in Frankfurt.
‘Stay Away’
”Tough times are getting tougher for Thyssenkrupp (DE:TKAG),” said Christian Obst, an analyst at Baader Bank. “We recommend to stay away from any investment.”
Thyssenkrupp (DE:TKAG) said the board will meet soon to discuss the committee’s recommendation and make a decision. These steps are largely a formality before the company moves on the leadership changes.
The tradition-rich icon of German industry shied away from hiring an external chief for now to speed up the execution of the strategy overhaul. Kerkhoff has long faced pressure internally to whittle down and restructure the company’s sprawling business portfolio.
Some members of the supervisory board were frustrated by the pace of the restructuring for several divisions, including components technology, steel and industrial plant-building, according to the people familiar with the matter.
Strategic U-Turn
Thyssenkrupp (DE:TKAG) in May announced a strategic u-turn that foresees selling a stake in its prized elevator unit and reviewing other operations including springs and stabilizers from the auto-parts unit, the system engineering and the heavy plate operations as well as trimming overhead structures.
Several private equity firms have expressed interest in these activities, but Kerkhoff has solely focused on an elevator transaction to boost the company’s equity cushion before turning to the other units.
Frustrated with Kerkhoff’s slow pace, several board members informally discussed a potential replacement for Kerkhoff already over summer because the company’s financial crisis may require an executive with restructuring experience, people familiar with the matter told Bloomberg News at the time.
Thyssenkrupp’s elevator unit may be worth about 15 billion euros ($16.6 billion), according to Bloomberg Intelligence analysts. Potential suitors for the division -- a high-margin business that’s profiting from urbanization around the world -- include rivals like Kone Oyj and about 10 private equity firms.
Kerkhoff had signaled to private-equity bidders that he would prefer to sell a minority stake in the elevator unit to them. That way, the company could retain some control and skirt the kind of anti-competitive regulatory roadblocks that torpedoed a planned steel joint venture with Tata Steel Ltd.
(Updates with background throughout.)
