FRANKFURT -- Thyssenkrupp said it was preparing to replace CEO Guido Kerkhoff, making him the latest casualty at the German steel-to-submarines conglomerate which has been in crisis mode for more than a year.
The plan to ditch Kerkhoff after 14 months at the helm follows a loss of confidence among key investors, who no longer believe the 51-year old can deliver on a turnaround that includes selling the group's most profitable division, elevators.
It adds to turmoil at a company that has struggled to cope with falling steel prices, a weak car market and a cooling global economy. Since Kerkhoff became CEO in July 2018, the group has issued four profit warnings.
"Most importantly, we see an increasing risk surrounding a timely execution of the elevator business strategy, in turn creating further questions over whether the company's stretched balance sheet can be fixed over the next 6-12 months," Credit Suisse analysts wrote, keeping an "underperform" rating.
Shares in the group were 0.2% lower at 1503 GMT after falling as much as 2.7% earlier.
Kerkhoff is to be replaced for an interim phase of up to 12 months by Supervisory Board Chairwoman Martina Merz, who will face pressure to quickly find a buyer for the elevator business, which is valued at up to 17 billion euros ($18.7 billion), more than twice that of its parent.
Kerkhoff's plan to sell elevators, raise margins and find new ownership structures for Thyssenkrupp's other units, such as car parts and plant engineering, was executed poorly and failed to create momentum, said two people familiar with the matter.
"That's why Thyssenkrupp's key owners had to hit the 'emergency brake'," one of the sources said, after Thyssenkrupp did not give a reason for Kerkhoff's departure in its statement.
Growing skepticism has been reflected in a 40 percent share price decline since Kerkhoff became CEO, compounded by two failed restructuring plans under his watch: a spin-off of the capital goods units and a joint venture with Tata Steel.
Adding to the woes was Thyssenkrupp's exclusion from Germany's benchmark DAX index this week.
Lars Foerberg, founding partner of Thyssenkrupp's second-largest shareholder, Cevian, said he fully supported the appointment of Merz, a former Bosch manager who became chairwoman in February.
This echoed remarks by the Alfried Krupp von Bohlen und Halbach foundation, the biggest shareholder with a 21% stake.
If elected as interim CEO, Merz's duties as chairwoman will be taken over on an interim basis by former Siemens board member Siegfried Russwurm, who joined Thyssenkrupp's supervisory board in April.
The company said it would recommend that Klaus Keysberg, head of the group's Materials Services business, join the board.
"We expect that the new leadership will speed up the transformation process that Thyssenkrupp so urgently needs, and improve the quality of implementation. We are confident that Thyssenkrupp will now finally get a crystal clear strategy and a well-defined plan of action," Foerberg said.
Described as being modest as well as a straight shooter by those who know her, Merz, 56, is expected to speed up an existing turnaround plan. But the number of seats she holds on steering committees of other companies could draw criticism and has previously resulted in calls to drop some of them.
Merz, a trained engineer, also holds seats on boards at German airline Lufthansa, Swedish truck maker Volvo , automotive supplier SAF Holland and French roofing business Imery SA.
Dirk Sievers, head of Thyssenkrupp's works council and a member of the group's supervisory board, said the group's strategy needed to be implemented faster and more consistently now, adding there would be no change to the existing plans.
Thyssenkrupp's supervisory board will decide on the proposals at an extraordinary meeting shortly, the company said.
"The realignment of the group announced in May 2019 and unanimously approved by the supervisory board will be systematically continued. The focus will be on the three areas 'performance first', 'flexible portfolio' and 'efficient organisation'," it said.
Kerkhoff, who joined Thyssenkrupp as finance chief in 2011, took over as CEO last year following tumultuous weeks during which the conglomerate's former CEO and chairman also left due to mounting investor pressure over strategic issues.
Thyssenkrupp ranks No. 16 on the Automotive News Europe list of the top 100 global suppliers with worldwide sales to automakers of $14.43 billion in 2018.
