Germany's Steelmaker ThyssenKrupp Plans to Lay Off 2,000 to Cut Costs

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Researched by Industrial Info Resources (Sugar Land, Texas)--German steel and engineering firm ThyssenKrupp AG (Essen, Germany) announced that it plans to cut 2,000 employees in its European unit by 2015 to save $674 million in its steel division.

Tough competition, increasing pressure from Russian peers, and a slump in European demand resulted in ThyssenKrupp's decision to capsize its operations in Europe. Currently, the number of payrolls in the company is 27,600.

According to a company statement, ThyssenKrupp is considering options for "closure, relocation or sale" of its coil coating line in Duisburg-Beeckerwerth, an electrolytic coating line at its Dortmund plant, and the cold-rolling and coating plant in Neuwied. The company also said possible disposals could result in more cuts.

The measures are part of the company's optimization program to raise the steel unit's profitability and competitiveness. Sales at the European steel division fell 14% to $14.6 billion in ThyssenKrupp's last fiscal year (October-September), while orders dropped 15% to $14 billion. The division's pre-tax earnings dropped from $1.47 billion to $251.4 million in 2011-12.

"Steel Europe is holding up very well compared with competitors, but the past fiscal year achieved an adjusted earnings before interest and taxes (EBIT) margin of only 2.2%," ThyssenKrupp said. In early December, the company reported a net loss of $6.28 billion for fiscal year 2012, which it attributed to write-downs on new steel plants in Brazil and the U.S. The company aims to sell these steel plants by the end of September.

Last week, ArcelorMittal (NYSE:MT) (Luxembourg, Luxembourg), the world's largest steelmaker, forecasted that the challenges remain for the steel sector. Arcelor management expects apparent steel consumption to fall 1% next year, following an 8.8% decline in demand in 2012. Economists from Barclays Capital predict that gross domestic product (GDP) growth will be flat in the eurozone this year. Also, credit rating agency Standard and Poor's expects apparent steel demand to stay flat in 2013.

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