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Thyssenkrupp Plans to Replace CEO as Pressure Grows

Eyk Henning and William Wilkes

(Bloomberg) -- Thyssenkrupp AG’s move to fire its chief executive officer at the same time it’s trying to sell off several key businesses shows the company is struggling to stop its downward spiral.

Guido Kerkhoff, who took the top job last year, has been under pressure from the supervisory board for moving too slowly to organize sale processes for units, such as components technology. He’ll be replaced on a interim basis by Martina Merz, according to a statement released late on Tuesday.

The overhaul at the top adds to the chaos at Thyssenkrupp, which has been hit by an ailing auto industry, trade concerns, falling steel prices and a weakening German economy. There are also now questions about how the company’s sale of its elevator business, estimated to be worth about 15 billion euros ($16.6 billion), will be affected by the surprise leadership change.

"Tough times are getting tougher for Thyssenkrupp,” said Christian Obst, an analyst at Baader Bank. “We recommend to stay away from any investment.”

Kerkhoff’s departure is the second time in two years that Thyssenkrupp has lost a CEO. His predecessor, Heinrich Hiesinger, resigned in 2018 bowing to shareholder anger over the company’s slumping revenue and share price.

Thyssenkrupp shares fell 1.8% to 12.25 euros at 10:32 a.m. in Frankfurt. Its share price has been cut in half since the start of 2018 and the company was removed from Germany’s DAX index earlier this month.

On Tuesday, Thyssenkrupp announced that it started a process to dismiss Kerkhoff. It’s expected to formally make the leadership changes soon at a supervisory board meeting. Siegfried Russwurm would take Merz’s previous role as chairman for the interim, the company said.

‘Crystal Clear’

“We are confident that Thyssenkrupp will now finally get a crystal clear strategy and a well-defined plan of action," said Lars Forberg, founding partner of Cevian, which is Thyssenkrupp’s second-largest shareholder.

The biggest question for Thyssenkrupp remains how it will proceed with its elevator sale. Kone Oyj has already said it wants a full merger with the elevator business and other potential suitors include about 10 private equity firms.

Kerkhoff had previously 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 swerve the kind of issues with competition regulations that torpedoed the planned steel joint venture with Tata Steel Ltd.

Surprise Timing

The timing of the leadership change "comes as a surprise to us," said Morgan Stanley analysts including Alain Gabriel. "It remains unclear whether the changes will accelerate portfolio restructuring."

In May, Thyssenkrupp announced a strategic U-turn, opening the way for a partial sale of the prized elevator unit and reviewing other operations. These include springs and stabilizers from the auto-parts unit, the system engineering and the heavy plate steel operations, and reductions in overhead structures.

Several private equity firms have expressed interest in these activities, but Kerkhoff was focused exclusively on an elevator deal to boost the company’s equity cushion, before turning to the other units.

Frustrated with Kerkhoff’s pace, board members informally discussed in the summer a potential replacement, because the company’s financial crisis demanded an executive with restructuring experience, people familiar with the matter told Bloomberg News at the time.

Read more: Thyssenkrupp CEO Under Board Pressure to Streamline Business

(Updates with Cevian comment under ‘Crystal Clear’ subhead.)

To contact the reporters on this story: Eyk Henning in Frankfurt at ehenning1@bloomberg.net;William Wilkes in Frankfurt at wwilkes1@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Nicholas Larkin

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