Details of the proposed cuts coincided with a denial by Deutsche Bank that it had advised Thyssen at the same time as it was helping Krupp prepare a hostile bid for the steel maker. The almost unprecedented hostile bid by Krupp, later abandoned in favour of a friendly tie-up, has highlighted potential conflicts in the governance of German companies where banks invariably hold significant stakes and sit on the boards of quoted companies.
The planned job losses are well in excess of the 4,000 cuts the two companies had already indicated they would make separately but less than some estimates in the past few days that up to 8,000 steel workers would lose their jobs. Most of the jobs to be lost are at Krupp Hoesch's steel plant in Dortmund, following an insistence by Thyssen that it would only agree to a deal if Krupp footed the bill.
Details of the cuts emerged as terms of a merger between the companies, to form the world's fifth-largest steel maker with sales estimated at DM63bn, were agreed. Krupp is to pay between DM800m and DM1.3bn in restructuring charges after the merger takes effect on 1 April.
The merger is expected to help reduce overcapacity and spur further consolidation in Europe's steel industry. Thyssen's chief executive, Dieter Vogel, said he expected the merged venture to be profitable this year.
Because Thyssen's steel unit, Thyssen Stahl, is more profitable than Krupp's steel business, Krupp Hoesch Stahl, Thyssen will receive DM300m in preliminary profit annually during the venture's restructuring phase, which lasts until 2001.
Thyssen will then take 60 per cent of the remaining profit, while Krupp Hoesch will receive 40 per cent. "The burden that will come from foregoing any business-related layoffs won't be to the cost of Thyssen," Mr Vogel said.
Thyssen agreed to consider the merger last week after Krupp revealed plans to make a unsolicited bid to take over all of its larger rival's operations.Reuse content