(Bloomberg) -- Thyssenkrupp AG’s steel unit plans to reduce its labor force by about 40% this decade, a move that would shrink a business that’s lost billions of euros to a global steel glut and rising energy prices.
The division on Monday proposed cutting 5,000 jobs while moving another 6,000 positions off the books by selling operations or moving people to external service providers. Thyssenkrupp aims to lower personnel costs by about 10% on average over the coming years.
Thyssenkrupp — a German conglomerate that also makes submarines and automotive parts — currently is in talks with Czech billionaire Daniel Kretinsky’s EP Corporate Group about the investment group increasing its share in the steel unit to 50% from a fifth. The group instead wants to focus on its higher-margin businesses such as engineering and constructing factories and selling high-value automotive parts.
The cost cuts may bolster prospects of a deal with Kretinsky, though challenges remain, such as persuading the company’s influential labor unions and securing approval from the Alfried Krupp von Bohlen and Halbach Foundation, the conglomerate’s largest shareholder. The steel unit employs around 27,000 of the group’s 98,000 workers.
The measures — which include shuttering two blast furnaces — add to a deepening industrial downturn in Germany, with Ford Motor Co. last week announcing thousands of job cuts and Volkswagen AG considering unprecedented factory closures. The industrial downturn is intensifying political strife, with the right-wing populist Alternative for Germany gaining ground in towns like Duisburg, where Thyssenkrupp’s steel division is located.
Thyssenkrupp shares rose 2.2% in Frankfurt. The stock is down about 39% this year.
The company is currently attempting a major restructuring that includes a possible initial public offering of its naval unit that makes submarines, surface vessels and naval electronics. Earlier plans to sell a majority stake to private equity firm Carlyle Group Inc. collapsed in October. Thyssenkrupp successfully sold its elevator division for €17.2 billion ($18 billion) in 2020.
Before the 2008 financial crisis, the company was a dominant global player across multiple industries, including steel production, industrial engineering and elevators. Managers are effectively winding the conglomerate down to a manageable core of smaller businesses.
With soaring energy costs and low steel prices, Thyssenkrupp’s steel unit has failed for years to break even. Losses and writedowns at the division have eaten into the company’s cash pile, and its high pension obligations have turned off potential investors.
“Increasingly, overcapacities and the resulting rise in cheap imports, particularly from Asia, are having a significant impact on competitiveness,” Thyssenkrupp said in a statement.
(Updates with details on Thyssenkrupp’s restructuring in 7th paragraph.)
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