SIE Siemens AG

By Ruth Bender and Ben Dummett 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 26, 2019).

BERLIN -- Thyssenkrupp AG's directors moved to oust the company's chief executive 14 months after he took the job, marking the latest effort to pull the industrial conglomerate out of years of slowing sales, shrinking profit and indecision over strategy.

Thyssenkrupp, a former crown jewel of German industry with products ranging from high-grade steel to submarines and elevators, said its supervisory board's personnel committee has recommended that Guido Kerkhoff be replaced by Chairwoman Martina Merz until a long-term successor could be named. Ms. Merz would be Thyssenkrupp's first female CEO and one of only two women running a major listed company in the country.

The directors decided to act after Mr. Kerkhoff failed to convince them that he could reverse the prolonged erosion of profit, people familiar with their thinking said.

A company spokeswoman declined to comment and said Mr. Kerkhoff wasn't available to comment.

Thyssenkrupp's struggles, including executive turnover, point to the challenge of trying to turn an unwieldy conglomerate into a simpler, nimbler company and squeeze higher value from disparate businesses.

Siemens AG, another German behemoth that has produced 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 reshape itself and relented only after becoming targeted by activist investors.

Mr. Kerkhoff, who was serving as finance chief, became interim CEO in July 2018 as both his predecessor and the company's chairman left under pressure from investors. However, Mr. Kerkhoff's first major initiative -- a plan to split the company into two businesses -- was abandoned after regulators blocked plans to form a European steel joint venture with India's Tata Steel Ltd.

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

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

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

Trade union IG Metall said Mr. Kerkhoff's termination, which is still being processed, is bound to unsettle employees already troubled by the uncertainty over planned asset sales.

Thyssenkrupp said late Tuesday that 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 support 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, which were little changed Wednesday, are down about 18% so far this year. As a result, the company was dropped from Germany's blue-chip DAX index earlier this month.

Write to Ruth Bender at Ruth.Bender@wsj.com and Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

September 26, 2019 02:47 ET (06:47 GMT)

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