Krupp and Thyssen call temporary ceasefire

The two German steelmakers, Krupp-Hoesch and Thyssen, yesterday drew back from an all-out takeover battle and agreed to explore the creation of a "commonly held steel business" after top-level political intervention.

In a joint statement, the two companies said Krupp-Hoesch would put its pounds 5bn bid for Thyssen on hold for eight days while they held talks aimed at reaching a steel cooperation agreement.

The temporary ceasefire came after the personal intervention of the German economics minister, Gunter Rexrodt, and the premier of North Rhine Westphalia, Johannes Rau, who brokered a meeting between the chairmen of the two groups on Tuesday night.

Industry analysts suggested that the shock hostile takeover bid launched by the Krupp-Hoesch chairman, Gerhard Cromme, had been deliberately timed to force his opposite number at Thyssen, Dieter Vogel, back to the negotiating table after earlier merger talks broke down. "Krupp decided to bring out the tanks just to get Thyssen talking to it," said one analyst.

If the discussions fail, then the two sides will revert to their original positions, allowing Krupp-Hoesch to proceed with its takeover attempt.

A combination of the two groups would create Europe's biggest steelmaker, eclipsing British Steel. But even an agreed merger would entail fierce rationalisation and heavy job cuts at a time when German unemployment is at a post-war high and industrial unrest rampant in the Ruhr area.

Mr Cromme has dismissed fears that the merger could result in up to 30,000 job losses as "pure panic-mongering". The German Chancellor, Helmut Kohl, emphasised the importance of preserving jobs by urging the two companies to "live up to their total responsibilities".

He said: "In the interests of those employed by the two companies and in the interest of the economic climate of the country, the issue is to find a reasonable solution."

Mr Rexrodt, who discussed the cooperation plan with Mr Cromme and Mr Vogel, said the two steelmakers had not sought state subsidies but wanted to achieve long-term competitiveness under their own steam.