By Christoph Steitz and Tom Käckenhoff
FRANKFURT/DUESSELDORF, Germany (Reuters) – Thyssenkrupp (DE:) is preparing to replace its chief executive Guido Kerkhoff, whose brief tenure at the German submarines-to-car-parts group included four profit warnings and two failed restructuring efforts.
The departure of Kerkhoff, who is set to be replaced on an interim basis by Supervisory Board Chairwoman Martina Merz, adds to the turmoil at the industrial conglomerate, which is struggling to cope with falling steel prices, a weak car market and a declining German economy.
The company has been trying to restructure itself by selling or listing all or parts of its elevators unit, its most profitable business, in a bid to rake in cash to fund pension liabilities and a turnaround of its other units.
But progress has been slow and the implementation of the strategy failed to create momentum, a supervisory board source told Reuters. “That’s why Thyssenkrupp’s key owners had to hit the “emergency brake”,” the person said.
Shares in the group fell 0.8% in early trade.
The overhaul at the top comes after mounting scepticism over Kerkhoff’s ability to turn around the group, with shares having fallen 40% since he took over as CEO in July 2018, hitting their lowest levels since 2003 last month.
Lars Foerberg, founding partner of Thyssenkrupp’s second-largest shareholder, Cevian, said he fully supported the appointment of Merz.
“We expect that the new leadership will speed up the transformation process that Thyssenkrupp so urgently needs, and improve the quality of implementation. We are confident that Thyssenkrupp will now finally get a crystal clear strategy and a well-defined plan of action,” he said.
Earlier this year the group admitted that some of its units would be better off under different owners and that the company needed to improve margins.
“The realignment of the group announced in May 2019 and unanimously approved by the supervisory board will be systematically continued. The focus will be on the three areas ‘performance first’, ‘flexible portfolio’ and ‘efficient organization’,” Thyssenkrupp said in a statement.
Under Kerkhoff’s tenure, Thyssenkrupp cut its earnings forecast four times, dropped out of Germany’s benchmark stock index and scrapped plans to spin off its capital goods business and efforts form a joint venture with Tata Steel (NS:).
Thyssenkrupp did not elaborate on the decision, but said it would propose Merz, a former Bosch manager, as interim CEO for no longer than a year. She would be replaced by board member Siegfried Russwurm as chairman on an interim basis.
The company said it would also recommend that Klaus Keysberg, head of the group’s Materials Services business area, join its management board.
The supervisory board will decide on the proposals at an extraordinary meeting shortly, the company said.
Kerkhoff, who joined Thyssenkrupp as finance chief in 2011, took over as CEO last year following tumultuous weeks during which the conglomerate’s former CEO and chairman departed due to mounting investor pressure over strategic issues.