Thyssenkrupp may create auto JV with Japan's NSK

BERLIN -- Thyssenkrupp and Japanese supplier NSK are considering forming an automotive joint venture, Thyssenkrupp said, as it continues to explore new ownership models for its key business areas to become leaner.

The two companies signed a memorandum of understanding to explore a tie-up between Thyssenkrupp's Automotive Technology division and NSK's steering business, Thyssenkrupp said. The goal was to develop an approach for a joint automotive business, the German steel company said.

"In the automotive business in particular, size and economies of scale are key factors for achieving success in global markets," CEO Martina Merz said in a statement on Thursday. "A collaboration between our automotive segment and NSK Steering could help us to further strengthen and expand this position," he said.

The companies aim to make a decision on a possible cooperation model by the end of the year.

Thyssenkrupp Automotive Technology accounted for a third of the company's adjusted operating profit last year and 13 percent, or 4.5 billion euros ($4.7 billion), of sales.

Thyssenkrupp  raised its outlook for profits this year after posting better-than-expected earnings in the first three months, marking a bright point in the steelmaker’s efforts to improve years of sluggish performance.

The company said Wednesday it expects full-year earnings to reach 2 billion euros ($2.10 billion) before interest and taxes, up from its previous high-end projection of 1.8 billion euros.

Quarterly earnings rose to 802 million euros in the three months ending March 31.

Thyssenkrupp cautioned that the improved guidance reflects expectations for stable pricing and unrestricted access to natural gas and other raw materials. Even so, the results are a boon to the company, which has been struggling to overcome deep-seated structural issues and shaky finances.

Even so, the company said it would continue to burn through cash this year, reinstating guidance suspended in the wake of Russia’s invasion of Ukraine. The company now expects negative cash flow on the order of a mid-three-digit-million euros range, below the breakeven level anticipated before guidance was withdrawn in March.

"Despite more difficult conditions in our automotive and components-related businesses, we had a good second quarter,”  Merz said, referring to supply chain problems such as a global semiconductor shortage and disruptions to parts deliveries.

Once synonymous with German industrial prowess, Thyssenkrupp is fighting for survival.

Boom times for the steel industry are helping to steady Thyssenkrupp's long-shaky finances, with its material-services division, which trades and supplies metals to industrial firms, and its steel unit leading the group's earnings improvement.

Yet, the company said Wednesday that almost 5,000 jobs were lost during the quarter, pushing the number of employees below 100,000.

Merz's management team has turned the company's free cash flow guidance into a yardstick to measure its turnaround progress.

"We expect that there will be sequential improvements for us in the subsequent quarters," Chief Financial Officer Klaus Keysberg said of the new guidance. "A return to positive free cash flow before M&A remains our priority goal.”

Bloomberg contributed to this report