German industrial conglomerate ThyssenKrupp (TK), which has been trying in vain for the past year to sell its steel plants in Brazil and Alabama, is considering a new plan that would see the company exiting the United States entirely.
According to a report by the Wall St. Journal, TK is considering a plan to build a new steel processing plant in Brazil. Under the plan, the company would also retain its stake in its current plant there, but sell its Calvert, Ala. steel mill.
The Journal explained the company’s recent financial troubles in Saturday’s article:
ThyssenKrupp commissioned both plants amid last decade’s global steel boom, with raw steel slabs being made in Brazil and shipped to Alabama to be rolled into sheets for the American auto industry. But the global financial crisis and a volatile Brazilian currency upset that plan and both plants have lost money since opening in 2010.
ThyssenKrupp has spent more than $15 billion on the plants, whose book value stands at $4.5 billion after write-downs of $10.7 billion over the last three years. The Steel Americas operations have continued to burn cash in the three quarters ending Sept. 30, although less than before, a person familiar with the matter said.
A spokesperson for ThyssenKrupp told the Journal they are “in advanced talks with one leading bidder” who is looking to acquire the plant. Sources familiar with the negotiations indicate that Luxembourg-based steel giant ArcelorMittal (AM) is the bidder. AM is the largest steel manufacturer in the world.
ArcelorMittal submitted a $1.5 billion bid for the Alabama plant back in January, but ThyssenKrupp at the time believed it could get a better deal from Brazil’s state-backed Companhia Siderurgica Nacional, which was making a play to takeover the Alabama operation as well as a majority stake in TK’s plant in Brazil.
Insiders say the ArcelorMittal negotiations have heated up in recent days. Its sales team has already told some of their top customers they expect to take control of the Alabama plant in the near future.
“We will only sell our steel plants if the disposal conditions ensure a more sustainable solution than the continuation of Steel Americas as part of our company,” ThyssenKrupp CEO Heinrich Hiesinger told a German newspaper last week.
Aid from Alabama state and local governments to ThyssenKrupp’s $5 billion Alabama operation has topped $1 billion. A Mobile Press-Register report in 2011 estimated Alabama taxpayers were spending an eye-popping $400,000 per job. ThyssenKrupp employs over 2,000 people in south Alabama, making it one of the region’s largest employers.
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