Newspaper article International Herald Tribune

Steel Titan of Germany Amasses a Record Loss ; Bad Investments in U.S. and Brazil Top off Year of Scandal at ThyssenKrupp

Newspaper article International Herald Tribune

Steel Titan of Germany Amasses a Record Loss ; Bad Investments in U.S. and Brazil Top off Year of Scandal at ThyssenKrupp

Article excerpt

The German industrial giant suffered huge losses at the unit that operates steel plants in Brazil and Alabama and had to pay fines related to a price-fixing scandal.

The German steel maker ThyssenKrupp, battered by slow economic growth and a series of corruption scandals, reported the biggest loss in its history and confirmed that three top executives would leave the company.

The loss of EUR 5 billion, or $6.5 billion, for the fiscal year that ended in September, was announced late Monday, capping a tumultuous year for a company that once symbolized German industrial might. The period was marked by the revelation of huge losses at the unit that operates steel plants in Brazil and Alabama, fines related to a price-fixing scandal and other setbacks.

Last year, the company reported a loss of EUR 1.8 billion.

"I'm not going to talk anything up here, because it is obvious that a great deal has gone wrong in the past," Heinrich Hiesinger, the chief executive of ThyssenKrupp, said Tuesday at its headquarters in Essen, Germany.

ThyssenKrupp attributed EUR 3.6 billion of the loss to its unit Steel Americas, which Mr. Hiesinger referred to as a "disaster." He conceded that managers had valued plants in Rio de Janeiro and Calvert, Alabama, at far above their market value. Accounting rules required the company to record a loss after recognizing the factories' actual worth.

The Brazilian factory suffered from cost overruns during construction, and both mills were hit by slack demand, ThyssenKrupp said.

The fiscal-year loss means that ThyssenKrupp will not pay a shareholder dividend for the first time since it was created by a merger in 1999. Still, ThyssenKrupp shares rose about 6 percent in Frankfurt on Tuesday as investors concluded that Mr. Hiesinger, who became chief executive in January 2011, was grappling with the problems.

"The track record of new management has been very solid," analysts at Credit Suisse said Tuesday in a note to clients. "They are dealing with perhaps some of the most difficult issues of ThyssenKrupp's existence."

Blame for the problems fell on three members of the company's six- member executive board. ThyssenKrupp said the three had agreed to terminate their contracts at the request of the company's supervisory board.

The managers are Olaf Berlien, whose responsibilities included plant technology; Jurgen Claassen, the longtime head of communications; and Edwin Eichler, who was in charge of Steel Americas. About 50 managers have already left the company after they were found to have violated compliance codes, said Mr. Hiesinger, the chief executive.

Mr. Claassen, who was also responsible for compliance with the company's ethics rules, has been the subject of articles in the newspaper Handelsblatt and other news outlets asserting that he took journalists on junkets that were considered lavish even by the flexible standards of the European press. …

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