ESSEN, Germany — Heinrich Hiesinger was stunned by what he found in early 2011 when he became chief executive of ThyssenKrupp, one of Europe’s biggest and oldest industrial companies.
Not long after he took the helm, the company plunged into a series of deep losses totaling about 8 billion euros, or $10 billion, mostly as a result of his predecessor’s ill-timed investments in steel plants in Brazil and the United States. The company had been solidly profitable as recently as 2008, when it earned €2.3 billion.
“We had to ask ourselves how could it happen that our company is running into such a difficult situation and nobody is raising hands, or correcting it early enough,” he said during a recent conversation at the company’s steel and glass headquarters here.
Mr. Hiesinger has started a sweeping overhaul, no easy task at a tradition-bound organization like ThyssenKrupp. The company’s roots trace to the early 19th century, and its historical contributions include forging formidable artillery pieces for two world wars and developing the gleaming steel alloys that adorn the top of the Chrysler Building in New York.
The question is: Can an old-line European industrial company be truly recast as a competitive global player? Especially one constrained by a moribund regional economy, a predominantly unionized work force of 160,000 worldwide and a continued heavy emphasis on steel, which has devolved into a commodity business?
The questions are particularly relevant in the case of Mr. Hiesinger, 54, who before joining ThyssenKrupp spent most of his career at Siemens, another German industrial conglomerate scrambling to adapt to the rigors of the global marketplace.
Mr. Hiesinger’s latest report card will be issued on Thursday, when ThyssenKrupp is scheduled to report its financial figures for the year that ended on Sept. 30. The company has forecast, and analysts generally agree, that it will break even or make a small profit for the first time since 2010. It expects earnings before interest, taxes and depreciation — a metric its investors watch even more closely than net profit — will be about €1.2 billion, about double the amount of the previous year.
But edging into profitability would not necessarily mean the return of good times. The chief financial officer, Guido Kerkhoff, says the company still pays out more cash than it takes in, partly because of around €600 million a year in pension obligations to retired employees.
On Wednesday, the ThyssenKrupp board gave Mr. Hiesinger a vote of confidence by extending his contract until 2020. But not everyone is so sure.
“If there is a letdown in the economy, things could become difficult for Thyssen again,” said Carsten Riek, an analyst in London with UBS.
And though the company’s share price is up more than 11 percent this year, it is still down by about a third since Mr. Hiesinger took over.
Mr. Hiesinger has overseen the sale of businesses including civil shipbuilding and various steel units that were money losers or marginal, totaling about €10 billion in annual sales — about a quarter of the company’s total before he arrived.
One of his major goals, Mr. Hiesinger says, is to reduce the company’s dependence on steel, in which it is increasingly difficult for European companies to make money but which has long dominated thinking at ThyssenKrupp. So far, Mr. Hiesinger has shaved steel to less than 30 percent of sales from about 40 percent when he took over.
The businesses he favors include elevators, in which ThyssenKrupp is among the top four global leaders, though still far behind the No. 1 player, Otis, a subsidiary of United Technologies, an American company. He is also trying to fine-tune the company’s large business in furnishing components like steering systems for automobiles.
ThyssenKrupp’s most profitable unit last year was a business called industrial solutions that designs fertilizer and cement plants in places like the Gulf Coast of the United States and Saudi Arabia.
Last year, elevators, auto components and industrial solutions each reported about €6 billion in sales or about 43 percent of the company’s total — although the three together earned most of the company’s earnings before interest, taxes and depreciation.
If Mr. Hiesinger fails, it would be a hard blow for the network of factories strung across the already struggling Ruhr Valley, where about half of the company’s 60,000 employees in Germany work.
The Ruhr workers are warily watching Mr. Hiesinger’s progress. Peter Trox, head of procurement and sales at a ThyssenKrupp plant in Mülheim that makes high-end electric power steering systems for Mercedes and BMW automobiles, said the company’s struggles were very much on the minds of employees.
“Everyone is talking about that,” Mr. Trox said. “Let’s face it: These are good jobs.”
Jeff Largey, an analyst in London with the investment firm Macquarie Group, said the businesses Mr. Hiesinger favors should be helped by global trends like the need for more concrete and elevators in the growing cities of emerging-market countries like India and China.
“These businesses may not be considered ‘sexy,’ but they should continue to benefit from favorable demand trends over time,” Mr. Largey wrote in an email.
But analysts including Mr. Riek of UBS say ThyssenKrupp’s performance still depends too heavily on the steel business, which is cyclical and plagued by overcapacity in Europe, where ThyssenKrupp is the second-largest producer after ArcelorMittal.
Mr. Hiesinger has tried to unload some of the excess baggage.
Beginning in 2005 ThyssenKrupp spent about €12 billion, a little more than its current market value, to build steel mills in Brazil and in Alabama in the United States. The idea was to make raw steel in Brazil and finish it in the United States. But that effort led to billions of euros in losses, as the Brazilian currency appreciated and it proved difficult to quickly penetrate the American market.
Last year, ThyssenKrupp sold the Alabama plant to a joint venture of ArcelorMittal and Nippon Steel & Sumitomo Metal for about $1.5 billion. Mr. Hiesinger has also sold most of the troubled stainless steel business. Mr. Hiesinger has failed to find a buyer for the Brazilian plant but would like to sell it.
In the short term Mr. Hiesinger does not see any quick way out of ThyssenKrupp’s steel business in Europe, despite its being only marginally profitable. So he is pushing the steel business to develop higher-tech products that bring in a premium from automakers and other key customers.
At the research and development center near the company’s giant blast furnaces at Duisburg, one of the managers, Lutz Kessler, showed off a prototype of a partly plastic car door panel the company has developed. Mr. Kessler said it would reduce weight to allow steel to remain competitive with lighter-weight aluminum.
“We are fighting,” he said. “We still have hope.”
Paradoxically, the company’s travails may be giving Mr. Hiesinger more management leeway. The debacle of the last few years has curbed the clout of the Krupp Foundation, an Essen-based institution that formerly exercised enormous influence on the company and had gone along with the previous management’s ill-fated decisions like the investment in the Americas. After bringing in Mr. Hiesinger, the foundation, which has reduced its stake in the company, has given him a free hand.
The foundation did not respond to a request for comment.
Mr. Hiesinger has an ally, at least for the time being, in Cevian Capital, an activist hedge fund that has taken advantage of ThyssenKrupp’s anemic share price to build a stake of about 15 percent. A Cevian partner, Jens Tischendorf, has been nominated for election to the board in January.
In an interview this year, Christer Gardell, Cevian’s managing partner, said investors panicked over the steel business in the United States and Brazil and overlooked the company’s other assets. Mr. Gardell, who is based in Stockholm, said that ThyssenKrupp’s current management was on the right track.
Mr. Hiesinger concedes that the changes he began in 2011 are far from over. What is important is “to prove and demonstrate that each and every year we move forward,” he said.
“It is also our clear understanding, which we share with all, that we are still not there,” he added.
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