Published January 18, 2013
BOCHUM – ThyssenKrupp AG Chairman Gerhard Cromme admitted on Friday to making mistakes that contributed to massive losses at the German steelmaker, but didn't bow to pressure from some shareholders to step down.
"If you ask me whether we as a supervisory board could have done things better in the past, then my honest answer is 'yes, we trusted too long, we could have acted sooner'," he told the company's annual shareholders' meeting on Friday.
Cromme has come under fire for not stopping a botched multi-billion euro project in the Americas, lavish junkets for journalists and a cartel fixing the price of rail tracks.
His comments were greeted by a mix of cheers and boos from a lively audience of several thousand, aware that problems had mounted under Cromme and former Chief Executive Ekkehard Schulz.
Last month the company posted a 4.7 billion euro ($6.1 billion) net loss for the year after taking a writedown on its Americas project and said it would pay no dividend for the 2011/12 fiscal year.
Thyssen invested billions of euros in Steel Americas - comprising two steel mills in Brazil and Alabama - which cost more than expected to set up and has generated losses since.
The euro zone debt crisis has meanwhile hurt demand for cars and weighed on steel prices, causing a slump in profits at Thyssen's European steel business too. The company has 5.8 billion euros of net debt, almost 1.3 times its equity.
Current CEO Heinrich Hiesinger, who in 2011 became the first Thyssen boss to be hired from outside the steel industry, is leading an overhaul to cut the company's exposure to the volatile steel sector and shift investment into higher-margin products and services.
The company is for instance building elevators for the One World Trade Center building - known as the Freedom Tower - in New York City, manages parts of plane maker Boeing's supply chain and has developed a lightweight composite material for cars that it says is more cost-effective than aluminium.
Following the sale of assets with annual sales of 10 billion euros, only about 30 percent of Thyssen's business will come from the steel sector.
But the quagmire in the Americas, a fine for fixing the price of rail tracks and the luxury press trips have countered Hiesinger's attempt to focus on his renewal efforts.
The company has confirmed that a board member took journalists on trips and Hiesinger told the AGM that "certain elements of the trips were not altogether appropriate", but he did not go into any further detail.
Having axed half of his management board last month and vowed to do away with self-interested "old boys networks" in the company, Hiesinger pleaded for shareholders to focus on the company's future rather than on past failings.
"If we continue to focus exclusively on the past we will find countless things that were not appropriate by today's standards. The media can list every single trip made by a board member, it will teach us nothing new," he told the meeting.
Cromme promised to work with management to ensure a successful future but still put most of the blame for the Americas disaster on former executives.
The supervisory board was "forced to realise that despite critical questioning, a number of the assumptions and figures used by the executive board proved to be far too optimistic or in hindsight incorrect," he said.
Yet even with some shareholders voicing discontent with Cromme's failure to take responsibility for Thyssen's failures, the silver-haired executive still looked unlikely to be forced out after 11 years at the helm of Thyssen's supervisory board.
He is backed by Berthold Beitz, the 99-year-old patriarch at Thyssen's biggest shareholder, the Alfried Krupp von Bohlen und Halbach Foundation, which holds 25.3 percent of the company's voting rights.
(Editing by Victoria Bryan and David Holmes)