Interview with thyssenkrupp AG Executive Board members Keysberg and Burkhard and Steel Executive Board Spokesman Osburg

thyssenkrupp focuses on technology leadership in steel and has reached an agreement with German metalworkers' union IG Metall to implement the steel strategy. A corresponding press release will be sent to the media shortly. The thyssenkrupp AG executive board members Klaus Keysberg and Oliver Burkhard as well as spokesman of the Steel Board Bernhard Osburg explain the steel strategy 20-30 further in an interview for our employees

Mr Burkhard, what does the agreement between the Board of Management and co­determination mean?

Oliver Burkhard: Today is proof that even in a situation with unique challenges, we are standing together and tackling the decisive changes in a socially responsible manner. The restructuring process is a demanding challenge for all of us. Companies and employees. But: Such comprehensive changes are only possible with and not against the employees. Together we are now proving this once again at steel. With a good balance between economic necessity and social responsibility. Today's agreement makes our Steel segment leaner, more flexible and better – and thus creates long­term future prospects for our Steel employees. The collective agreement will enter into force on April 1, 2020 and run for six years until March 31, 2026.

What do you mean when you say it will be a "demanding challenge"?

Oliver Burkhard: As announced, we will cut up to 2,000 jobs in the next three years. Roughly another 1,000 jobs are to be cut by 2026. The plan is to strengthen the integrated production site in Duisburg by closing individual units at other locations. Of the total of approximately 3,000 jobs, around 1,000 will be cut in administration. 800 jobs are affected in the heavy plate segment. We have already said that we see no development prospects within thyssenkrupp. In addition, around 1,200 jobs will be cut beginning in 2022 through the optimization of the production network.

Can so many jobs be cut without layoffs?

Oliver Burkhard: We do not want any forced redundancies. The reduction will be based on the demographic curve. In addition, we open up the possibility of transferring employees who are willing to change to external jobs. All this with social safeguards. This volunteer program follows the proven motto "from employment, into employment". We need room to maneuver so that we can react flexibly to fluctuations in workload and changing customer needs. The arrangements we have made give us this. We prefer to redeploy employees to other positions rather than simply lay off staff. This can be at the same location. However, the closures will also involve the transfer of jobs to other locations.

Mr Keysberg, is the agreement a breakthrough for Steel?

Klaus Keysberg: With today's agreement, we are putting steel in a position to take advantage of the opportunities that arise and to meet the challenges. With our steel strategy we are making Steel competitive again. The expertise of our team is highly valued by customers. Our steel business has the potential to lead the European pack.

...this has not been the case for a long time...

Klaus Keysberg: Indeed. Unfortunately, we have lost valuable time in recent years. On top of that, due to the prohibition of the joint venture with Tata, we have to face the challenges alone. We can and must improve significantly in terms of capacity utilization, cost structure, quality level and processes. We are too complex today and have an inappropriate cost structure. Among other things, the disappointing business performance in this financial year is proof of this. We have ongoing structural problems in the market. The sector has been characterized for years by overcapacities, high import pressure and fluctuating raw material prices. In addition, the economy is trending against us. We are feeling price and demand pressure, among other things because of the economic weakness in the automotive industry – our largest customers.

Sounds like it's all up against Steel...

Klaus Keysberg: The challenges are great. But: steel is needed: In many applications today and in the foreseeable future, the material has no alternative. Our materials are the starting point for long industrial value chains – especially in Germany. Thecurrent situation shows how important intact value chains are locally.

By the current situation you mean corona?

Klaus Keysberg: Exactly. The corona crisis makes the situation even worse. It is leading to a drastic decline in customer call­offs and a deterioration in the order situation. Against this background, we have agreed on an immediate package with the German metalworkers' union IG Metall: Individual measures in the steel strategy will be reviewed regularly. To this end, a joint monthly monitoring of the situation has also been agreed for the duration of the pandemic to implement the agreement reached today.

Oliver Burkhard: We will have to go into short­time work at many Steel locations in the coming weeks. This will initially affect production­related areas, but also administration. We are taking a close look at all of them to see when which measures make sense. Even when we run out of work, we try to keep everyone in employment. So we can get back on track after the crisis. The immediate package also includes the requirement for the Steel segment to increase the short­time work compensation to 80 percent in the event of reduced work hours.

You mention investment, Mr Keysberg. What volumes are we talking about?

Klaus Keysberg: We will restructure heavily in the Steel segment and invest at the same time. The investments, which are already included in the planning, amount to 570 million euros annually. In addition, there is now a volume of 800 million euros over the next six years. The planned investments will then help us to expand our market and technology position. However, the prerequisite for the planned investments is a significant reduction in costs.

... and how is this cost reduction progressing, Mr. Osburg?

Bernhard Osburg: We are putting the brakes on costs: the team has understood that it is very serious. We are now tackling the necessary restructuring very consistently ­ based on the agreement with co­determination. Performance first ­ that also applies to steel. We must, for example, significantly streamline our administration. We also have to optimize our processes so that we can react faster to market developments. We are too inflexible in this respect.

Getting the funds is one thing, investing the funds wisely is another. What exactly do you have in mind?

Bernhard Osburg: We want to be ahead not only in terms of costs, but also in terms of quality. With the planned investments we are securing our technological capabilities so that we can continue to differentiate ourselves through the quality of our products in the future. The optimization of the network puts us in a position to continue to be a technological leader with a good cost position. This is a strong signal for our customers. We will thus be able to also offer the next generation of high­tech steels at attractive conditions.

...and then Steel is rolling again?

Bernhard Osburg: The conditions for implementing the steel strategy have been created: We have received the green light from the Group. Now it's a matter of turning the associated investments into successes on the market and with our customers. The task that lies ahead of us is very clear: We have to prove that investing in steel is worthwhile again. That is up to us.

Is this also about investments in climate­neutral steel?

Bernhard Osburg: We are pioneers in climate­neutral steel with two technologies: Carbon2Chem and the use of hydrogen in the blast furnace. With our hydrogen strategy, we are the first in the world to start converting production at the blast furnace. The first climate­neutral product will be available within the next 1­2 years. We are already talking intensively with our customers about this. But the extremely complex transformation of the steel industry will only succeed if we can rely on the necessary framework conditions. Many discussions are taking place with politicians, and we are heavily involved in these discussions.

But aren't the current profitability problems much more pressing?

Bernhard Osburg: The steel industry has investment cycles of 20­25 years. That means time is pressing. Today we are laying the foundations for climate­neutral steel production in 2050, so we can't afford a "first one, then the other" approach. We have to move forward and attack on many different fronts. Yes, we are facing a headwind. But: with the agreement and the investments we can also counter this with a tailwind. That is why we are now tackling it together.