thyssenkrupp AG (TKA) Earnings Call Transcript & Summary

Dear, ladies and gentlemen, welcome to the conference call of thyssenkrupp. At our customer's request, this conference may be recorded. [Operator Instructions] May I now hand you over to Claus Ehrenbeck, who will lead you through this conference. Please go ahead.

Yes. Thank you very much, operator. Yes, hello, everybody. This is Claus Ehrenbeck from the Investor Relations team of thyssenkrupp. And also on behalf of the entire team, I would like to welcome you to our conference call today, which is on the definition of our target portfolio going forward. We released the news already last night. So all the documents that are relevant for this call are available on the IR section on our website. Here with me in the room are our CEO, Martina Merz; and our CFO, Klaus Keysberg. Martina Merz will lead you through the slides; and afterwards, both will be available for you for the Q&A session. With that, I would like to hand over to you, Martina, please.

Thanks, Claus. Dear investors, dear analysts, I welcome you on behalf of my colleagues from the Executive Board to today's conference call. As Claus mentioned, I have the great pleasure to be together with 2 Claus. So one with K, one with C in this room. So -- and we are all looking forward to an interesting and challenging Q&A session. Before that, I lead you through the presentation. And as already mentioned during our last meeting, today marks another important milestone in the execution of new tk. New tk has become visible now, what -- how it will look like. And almost exactly 1 year ago, we introduced the phrase new tk, and our strategy with the key pillars performance first, flexible portfolio and efficient organization remains valid. Back then, I accompanied the announcement of the new strategy as Chairwoman of the Supervisory Board, and now I'm talking to you as the CEO of thyssenkrupp AG. And no matter which role, I'm very convinced of the consequent development of tk towards a group of companies, with a structured portfolio and a true performance culture, which I look forward to introduce to you today. - However, before that, let me recap the most important milestones of our journey so far. And I assume you have the presentation in front of me, so Slide 1 now. A short year ago, in 2019, we started our transformation when we kicked off new tk, including its framework and key pillars. I then took over the driver seat as CEO in September, and my colleagues from the Executive Board and me could, after very short but also very intense time, thrilled with analyzing and discussing, announced first results in November 2019. At that time, together with our financial year numbers, we confirmed the restructuring of system engineering and the targeted reduction of more than 6,000 FTEs at tk overall. The team and I used then the time until the AGM in January thoroughly and decided on the future leadership and organizational approach for tk, a strong group of companies with a clearly structured portfolio and a consequent performance orientation. And of course, the group of company means also to develop away from a complex matrix structure as we had it so far. During this last month, we were setting the stage by first selling our elevators business with a great valuation and at the right time. And I think you heard it all despite corona, the buyer consortium and we are very confident that the deal will be closed in due course. Additionally, we initiated the Steel Strategy 20-30 to reclaim and further push the fundamental value of the steel business, as it lays the ground for sustainably and successfully positioning our Steel Europe business in a very challenging and very competitive environment. Also, we reduced the number of full-time equivalents at our corporate headquarters by 177 as of April 1, and we will continue the restructuring concept for Springs & Stabilizers. These important milestones have been accompanied by solving essential personal matters. Klaus Keysberg was, KK, so the bigger K, was announced CFO in addition to his existing responsibilities for Steel Europe and Materials Services, and he had introduced himself to you only last week with the Q2 results conference call. And I have the pleasure and the opportunity to lead tk for the next 3 years. For us, this represents the clear mandate to consequently implement the now even more transparent and clearer new tk strategy with the business management teams. We believe that up to now, we have demonstrated our willingness and our ability to deliver fast and decisively, and we intend to continue on that track. Let me now come to the reason we have invited you today, the next strategic milestone for new tk. We have sharpened even in difficult circumstances and in a difficult environment, we have sharpened our target portfolio with a clear focus on industrial logic, competitive profitability and cash flow. We lead the decision to exit businesses within total EUR 6 billion of sales where we do not see a sustainable future within thyssenkrupp. And all of this, of course, now with the full support of all our stakeholders representing a next level of clarity for new tk, and with the next level of clarity, a next level of ambition to act consequent on this strategy for the months to come. Slide 2, the Group of Companies. We made it difficult -- we made difficult, but long overdue decisions, however, we will emerge stronger, also smaller from this transformation. Let me guide you through our way of thinking. We began a potential analysis of each of our business, not just on business area level, but down to operating unit level, turning around every single stone in our company as promised already during our AGM. We hereby assessed the individual businesses according to their market attractiveness. How strong is the USP of the business? Is the respective market growing? And how fierce is the competition? Of course, this assessment is independent of corona. This is a top-down perspective, independent of the current environment. And this is why we believe the decision which led to this portfolio realignment is a resilient one. Our financial performance, how have these business units done in the past? How are they doing compared to competition? And last but not least, the value-creation potential of each of these business units, can they earn their cost of capital? What can they contribute to tk overall? And here, I have to say and Klaus and I and Oliver, we had really many discussions about is here, I think, here was the chance of corona. Because given the constraints, it forced us to be very, very decisive in where we want to allocate the capital we can allocate. So here we consider corona was helping us to really be very consequent and decisive on the value-creation potential, and so on the decision, what are the portfolio pillars. So this detailed analysis then led to the definition of our target portfolio, which we grouped in 2 main categories: tk being the sole owner or owner within the partnership; or category two, tk being not the best owner leading then to an exit consequently. How these 2 categories are hit by tk businesses, I will explain in a minute. And before that, a couple of words about our new sharpened target portfolio. The higher level ambition is to boost the performance of our business. To achieve this, we have bid farewell to top-down target setting. Laying the full responsibility into the hands on the individual business. Klaus and I stayed constantly to the organization. We are not talking about targets, we are talking about the plan. And the plan is a list of measures closing a gap, that's a plan. We are not talking about targets. Yes, there is a target. But for us, it's more important to have a plan. To jointly, we have set, of course, financial targets derived from competitive benchmarks and supported by precise measures to achieve these targets to what we described the plan. We will stringently allocate capital according to the expected value generation for tk. We will implement the target portfolio, which will lead to an uplift in our financial KPI by exiting loss makers and cash burners. And therefore, improving the EBIT adjusted by EUR 300 million and the business cash flow by EUR 400 million, which is based on last year's results. Further financial upside, of course, comes from exercising stringent performance management in the future and also from a much leaner Corporate Headquarters, downsized to tk's envisaged size and structure to focus mainly on portfolio and capital allocation. Let me confirm, once again, our performance first principle. It continues to be true, maybe now more than ever. After closing of the elevators transaction, we need to strengthen the profitability of our other businesses even more and enable tk to generate the positive free cash flow without elevators. Additionally, all of the companies within tk need to earn at least their cost of capital, preferably more in the long run, of course. There will be no excuses, anymore. Finally, yet importantly, we strive to return to paying an attractive dividend and reposition the tk share as an attractive and long-term value investment. Ladies and gentlemen, with this, we embark on a journey of small steps. It is typical for performance. The turnaround will require hard work and dedication, and we are up for the task. Slide 3, the Target portfolio. We reached the conclusion that we need to differentiate the potential of our businesses. Many of them are leading technology companies. Many of them have very strong market positions. And now we have a clear idea of how to better grasp that potential. However, we also learned that for some entities, we are not the best sole owner. All of these lessons are reflected in our target portfolio setup. On the basis of its own market position and competitive strengths, we see persistently good development potential in Material Services and Industrial Components, Forged Technologies and bearings here. They will continue to grow based on their own strength. Also, the Automotive Technology segment will remain part of our group of companies. The industry -- the trend in the industry is heading towards collaboration and big players and system providers. Therefore, we can imagine alliances and the development of partnership on a selective basis. At Steel Europe, we are currently driving performance with our 20-30 Strategy, which supports any further options, including a stand-alone development. However, and this is not new, we have always considered the consolidation of the European steel industry to be beneficial. The pandemic crisis even reinforce this necessity as European structural overcapacities increase further. At the same time, we see chances to accelerate the needed transformation towards a climate-neutral steel production by bundling industrial sources, supported by a required political framework. This is why we decided for the dual-track solution, securing a stand-alone solution by actively pursuing industrial consolidation options. Keeping all options open is a lessons learned from the failed joint venture with Tata, and keeping all options open and drive competition into this site for the best option is definitely helpful to improve the value of each individual option until the moment in time when we decide. So driving competition into these different options is, from our perspective, a significant value driver. And therefore, we wait, as we did with elevator, until the very last moment in time to decide what options create the best value for the stakeholders. Very similar is our approach for Marine Systems. We are in intense talks regarding various possible consolidation scenarios because we are convinced that the consolidated naval ship building sector would gain in competitive strength on international flows. Both national and European options are viable. Dear investors, dear analysts, after carefully analyzing our portfolio, we came to realize that we currently own businesses for which we see no sustainable future prospects within the group. The reasons are barriers and specifically tied to the individual businesses, it might be specific business model, the relative market position and the market expectations are missing value drivers, so various options. These businesses will be combined and managed separately within new segment, Multi-Tracks. This Multi-Tracks falls into 2 categories: for some businesses, we can imagine either sale or partnerships; while at the same time, we continue to drive performance by restructuring. Plant Technology, or stainless steel business, AST, of Springs & Stabilizers belong into this category. For other businesses, we rather consider a sale or even a closure, for example, infrastructure, battery solutions and heavy plate. To better evaluate the true performance of our new core portfolio, we will report the Multi-Tracks segment separately from the new fiscal year onwards. In order to make it crystal clear to everyone inside and outside of the company that our ambition is very supported by everyone, we've decided to offer Volkmar Dinstuhl, and he accepted to offer Volkmar Dinstuhl to become the CEO of this segment, in addition to running the M&A department. So here, he with his team and the management team then of Multi-Tracks, he can, of course, stand with a different KPI set for such a segment, optimize the execution of our strategy within this segment. And that's an additional accelerator to solve the issues of these business segments as soon as possible. So his appointment, as said, ensures efficient M&A processes and clear KPI-led leadership; and as said, these are different KPIs to other areas and to the other segments for the best solution of each of these businesses. Slide 4 then, portfolio sharpening and story for the long speak. It's not that we want to avoid questions, it's just that we want to provide a full picture. So not to avoid questions. So Slide 4, before we jump to the Q&A, let's wrap and see what lies ahead here. Looking at the new tk, the portfolio sharpening process will accelerate the restructuring at thyssenkrupp in our key elements. Performance first. I think I make it now a very bit shorter, flexible portfolio, and last but not least, the elevator sale. I know you are expecting more clarity on the use of proceeds. And facing the corona crisis, we will ensure to retain maximum flexibility and navigate by site. To put it in a nutshell, by turning every stone within thyssenkrupp, we reached full clarity about the current situation of our businesses. We, the member of the Executive Board, together with our leadership team, also have a full and mutual understanding what needs to be done. Leading to a much greater acceptance for necessary consequences in the restructuring processes, the leadership team takes full responsibility for the financial results and leaves no room for excuses in the future. Having that said, I'm -- Klaus and I -- Klaus, yes. I'm now ready to take your questions. And Klaus also.

Thank you, Martina, for the speech.

Okay. Thank you

Thank you very much for the elegant shortening and giving the audience more time for the Q&A session. Thank you very much for this. And with that, operator, please take over for the Q&A session.

[Operator Instructions] And the first question is from Ingo Schachel, Commerzbank.

Yes. On the scenario that you're outlining regarding potential consolidation in -- for Steel Europe. Just wanted to understand, when you speak about all options being open [indiscernible], kind of [indiscernible], whether we should take that as the position of Management Board or the position of the Supervisory Board? Or in other words, when you discussed in yesterday's Board meeting, did you get unanimous support for such a strong position? Or I think we've heard from some employee representatives that they would still prefer a German solution in case it's really something with the international potentially Asian buyer. How much resistance from employee representatives would you expect based on the discussions you had yesterday in the Supervisory Board?

So thank you, Mr. Schachel. So first, yes, I would say, to answer the question from this end. Yes, we got yesterday, it was not a decision for the Supervisory Board. It was yesterday, a meeting to inform because we are not yet in the execution. All what we presented yesterday, so it's still in the area, fully in the area of responsibility of the Board of management, but we wanted to be sure that we get support from the Supervisory Board, and we got a unanimous support. So they said, okay, we are informed, management has informed us, and we unanimously take into consideration what has been said and we supported [Foreign Language]. Sorry for the German. Yes. So I think -- sorry?

No, no, no. I just want to say that makes it very clear. Thanks for the clear German term. And the...

Yes, go ahead.

I think Martina...

Then the other question would be just on the Industrial Components parts. I think I would agree with you that it's a very strong business and so on. But when I look at your M&A activity during the last years, of course, at times, you've sold weaker businesses. And then I think this year, you rightly said that the disposal of a very strong business in elevators, what -- yes, was one of, I think your most successful transactions with a very attractive price and so on. So when it comes to Industrial Components, and of course, we don't know how corona is going to play out. Today's update, should we really read it as if really in 5 years' time, Industrial Components is certainly going to be part of thyssenkrupp? Or could you also imagine if there's a double dip more liquidity requirements, you might also consider one of the more performance businesses? Or is it really ruled out based on today's announced or yesterday's announcement?

In the Industrial Components business, of course, there are 2 businesses, the 2 business units being part of Industrial Components. They are -- their market development is, for sure, different. One is bearings. And you know that bearings, thanks to their high share in wind energy, so that's definitely, we believe, a long-term value driver for thyssenkrupp. So there, we do not see anything. We have an extremely strong market position. We are a global player. So there, I think we can -- that's definitely a value driver. And we have absolutely no indications even now in corona that what we should reconsider the outlook or review the outlooks of bearing. So that seems a very stable item. Forged Technologies, of course, people start the discussion, how close is the end of combustion engines. But we all know that it takes a long time until the entire industry is being transformed into full electromobility. So we believe that there is, for us, that there is significant potential to extract value out of these businesses in the years to come. And that's what we are going to do. So we see Industrial Components for the years to come, definitely as value contributors to the group. Both are contributing over-proportionally today. And the investments needed for their business to drive value, I would say, are absolutely okay.

The next question is from Sylvain Brunet, Exane BNP Paribas.

This is Sylvain Brunet with Exane BNP Paribas. My first question is on the automotive components. If you could articulate for us a bit more where you see the sustainable competitive advantage going forward? And in that context, why System Engineering that was deemed somewhat more problematic before you think has a play in the core portfolio? My second question is on antitrust. As you're rightly exploring the potential for more consolidation in steel in Europe, what do you think needs to be done differently compared to previous deals, if we assume that the European Commission wouldn't have changed their views on the way they calculate market share in Europe? And lastly, if you -- if we look at the whole Multi-Tracks portfolio together, could you -- do you have an estimate of how much pension obligations would be attached to that whole bucket taken all together, please?

Sylvain, very attractive set of questions. So I'm going to start with the automotive area. The automotive industry undergoes, I think it's, and this will be there -- corona plays the role of an accelerator. The fragmented approach of the automotive industry in Europe is given the fact the biggest market by far is in China. And this -- I have to say this disadvantage in Europe, I think, forces everyone to reconsider whether the challenges to master to transform the industry in parallel to autonomous driving and to electromobility. This forces that the companies think about alliances. And all -- so the OEMs, which have, today, in a way, relatively complex supply base and a relatively complex task sharing amongst themselves and with the supply base I think everybody is now thinking about how to simplify the task sharing in the automotive industry in order not to lose against the bigger regions like the U.S. and China. And now in the automotive industry as a supplier with our components, you know that we are in none of our components, #1, 2 or 3. And that's now an advantage because we are the one people can partner with without getting an issue this with antitrust authorities. So means we really have to option to play in a certain -- to play somewhat the role of those being available to the companies who want to build system competence. And here, I'm very honest. I think if you could look into the automotive industry and you ask yourself, who are the big heroes with system competence, you see a slight, let me say, overweight in Europe with, for example, my own employer from the past, but we see definitely Asians coming, whether it's Japanese or Chinese looking for partners to co-operators. I think the most recent examples, Hitachi Automotive, just as an example. But Sylvain, I believe here, it's definitely an option that we, with our market position in the automotive industry, can partner with others as we are not #1, 2 or 3. And we can also think about asset swaps. No, this is -- we have within the automotive area, we have segments in the same chassis and steering area. So I think we are relatively flexible. And as we are so flexible, we decided to develop the strategy for automotive from within the segment. Because the segment itself is in close contact with its business partners with the OEMs with the customers. So we decided to strengthen the management team in automotive to develop their strategy from within. So you will soon see that we bring in our -- the Head of our group strategy as CFO to automotive. So this underlines our willingness to develop a strategy for automotive from within by talking with the partners in the industry. So System Engineering is a good question also, Sylvain. System Engineering has various business units. And 2 of the business units, only 2, Car Body Solutions and Lightweight Solutions remain in the car portfolio because there, we have a very good market position, historically good market position. We believe it's good enough to extract value from these business segments. The 2 where we do not believe that we can develop them, they are on the Multi-Tracks side. So the Battery Solutions and the Powertrain Solutions. So 50% of System Engineering remains in Automotive, the other 50% go to Multi-Tracks. Then third question before I hand over to Klaus. Steel, of course, we are not ignoring what happened last year with the European authorities. And we consider that in going forward.

Yes. Maybe one -- also one remark from the Steel side from my side. I think it's very clear that the reason for potential corporations in the European steel market is very clear. We have, let's say, a situation where we see overcapacities even before corona, and we are -- well, we don't know, but there is a certain risk that overcapacities are going to grow after corona. This is the one thing. And the other thing is the necessary transformation to carbon-free steel production. And both these aspects makes it quite, let's say, logic to talk about corporations. And the question now is, if you have a situation like this, then the willingness of all stakeholders might be higher to go and talk about cooperation than it was before. This is, of course, the first very necessary step to come to, let's say, to a solution, anyhow, what kind of solution we talk about then. And the second step, of course, is the antitrust, that's very clear. But we have to deal with antitrust in any case, we see here, and then the question is how to deal with the remedy. So I think the overall willingness is now stronger than it has been before. And I think the last question was how much of the pension liabilities is related to the Multi-Track business, if I got you right?

Yes.

And the answer is that it is roughly EUR 1 billion, roughly EUR 1 billion, and the major part or the biggest part is coming from Plant Technologies.

The next question is from Carsten Riek, Crédit Suisse.

Two questions from my side. The first one, Martina, you outlined your vision, and it's very clear to me at least that you aim to downsize the business and put way more stress on the performance than was done before. However, I would like to get a better understanding of the plan, including the milestones embedded in a plan to achieve that vision. That means what would you tackle first in this strategy and when? What is the time frame of the execution of those measures you outlined? That's the first one. The second one. Just on the Automotive, again, maybe from a different angle. Has it actually the critical size after probably downsizing or in the strategy, this business already? And what happened if the unit does not live up to your margins, cash flow expectations, could you reconsider at a later point?

So performance, just the first statement before I hand over to Klaus. You can imagine, that in the Executive Board, we discussed about our own priorities. What should we now do when we saw corona hitting full blown, the economy and our business? But we then decided to stick with our plan and to start the term -- the strategic realignment of thyssenkrupp's portfolio because the allocation, the capital allocation required in order to be done very disciplined, it requires a clear segmentation of your portfolio in order to prioritize where you allocate your capital. So we felt -- we have to be absolutely clear in our portfolio that everybody understands what drives and what influences our capital allocation. And that was clear to us that in the performance track, we still need to, let me say, to accelerate and to make it more clear to you in the capital markets because you might ask us, what is your -- now your track record and so on and so forth. We know that here, we had not the full priority on it in the last 2, 3 months because we had to, let me say, we had to handle on challenges with corona. But I think Klaus can elaborate on what we intend to do going forward. But as said, we think portfolio, it was the right thing now to make clear how to segment and how to structure our portfolio.

Okay. Then maybe I can give you some words about the performance issues. As Martina already said before, we -- before corona, we derived for every business model, not only for a business area or something. For every business model, we derived financial targets, which were derived from the competitors, from the best competitors. This we did for every business. And then, of course, we made it, let's say, a top-down and a bottom up approach. The bottom-up approach, what are the levers? How to get there? And also what is the target we see from top down? And we got a very good understanding, what are the potential levers to go there? And we have a good feeling that we are talking about the right and also sufficient levers to do this. And of course, an issue is also that we really make the businesses responsible to do so on the one hand; and on the other hand, we, as a Board, have to be in the position to really enable the business also to develop in this direction. That's also the reason why we really focus with this new portfolio. On these businesses, we really then can really and able to do this. This is also something to do with money, but not only with money, also with the right people and things like this. So this is approach to how to deal with this. Of course, with corona, now we have, let's say, and so far a problem because we now have to evaluate. For some businesses, we have to rethink what is the new normal. We saw in the comparison pre and after corona. And therefore, we also have to, let's say, adjust some measures, some levers and things like this. In this process, we are -- and we cannot say how long corona will be, but we are very sure that at 1 point of time here, we will have the right measures after corona to really drive the business to the sufficient targets we see.

Okay. Just a follow-up quickly on this one. Is this what you'll outline today, 2 years, 5 years or 10 years kind of horizon? Just to get it a little bit into a time frame.

Okay. Our plan was at the AGM, and I refer to what I said at the AGM in a -- for such a comprehensive restructuring. I said at the AGM, it will take 2 to 3 years. We, of course, and I think you know that at the phone, we have to -- even with corona now, we have to accelerate our own plan on one hand; on the other hand, on the Multi-Tracks segment, the execution remains an issue. The M&A markets are almost dead. So what we can do is we can prepare things, we can develop buyer universes and so on and so forth. So we can prepare everything, but it's rather difficult now to say how long it will take. Before, I thought it's 2- to 3-year road map, and I believe that remains still realistic. But, of course, with corona -- with having corona in our mind, it's a bit difficult to say. But typically, I would say, 2 to 3 years.

I mean, one thing is very clear. If you talk about time frame, of course, it's simply really not possible to give you a time frame. But normally, 2 to 3 years, that's very clear. On the one hand, the M&A track, this is the one thing, on the other hand, to develop the business. But one thing is also very clear. When we talk about developing the businesses into the target ratability and things like this. We now, with corona, have a bit of another approach because assuming that the corona level achievement before corona and after corona will take some time. We are very much more in the necessity to drive performance and to adjust.

And maybe this is a little bit brainstorming now or it seems brainstorming, but I raise it. The M&A market, they will develop business model as the market is dead. If corona remains an issue for a while, they develop business models, which people would -- could call possibly co-restructuring partners. Things like selling 49%, 51% and so. I'm 100% sure that here the time works in our direction in a certain way. This is why we believe that the Multi-Tracks segment is still a good thing to do and to prepare things. So to be prepared for the moment where the typical M&A approach is being adapted to the new normal in corona.

Carsten, does this answer your question?

Yes, yes, yes. Just on the Auto business, I think you missed that. Has that a critical size? And could you reconsider?

Actually, I believe we have already the critical size because the most important investment is to develop the global footprint. And now we have already the global footprint, and it's now to grow into the global footprint. So the biggest investments are done, so it was costly but now it's there. So I think we have the critical size already. We are beyond that point.

The next question is from Bastian Synagowitz, Deutsche Bank.

I've got a couple of questions left. And my first 1 is just on capital allocation, which seems to be receiving the attention it deserves. I guess one problem in the past always was that there was a very strong half from the BUs, but just not sufficient challenge from the top and whether respective investments can really deliver the expected return. I guess a good example is probably the list of assets, which has -- which are now being divested and which in some cases, include some businesses, I guess, which the previous management explicitly invested into. And can you please explain to us in a bit more detail on how you approach this in the future to just make sure that the capital is not being given away too easily? Maybe there are some anecdotes or maybe you can even explain to us how it works technically. That is my first question.

Okay. The first question. The second is coming later, I guess. So regarding respective investments. So I think there are 2 issues with respective investments. During this corona phase, there is a super restrictive investment policy. Because we -- every single project, we have to really look at whether it makes sense to do this. Even also the project we already released and are not yet paid out. We have to look at this is, I think, normal doing within corona. If you look at more on future perspective, I think one thing is very clear. If you look at business and we are not owning capital cost there, this is, let's say, the things we could not achieve in the past. But the most important thing, of course, is to turn the businesses into capital cost earning businesses. And this is only the way if we really look at the investments and the potential, let's say, targets and [ rentability ] targets for these investments? And that's the reason why we will clearly as we saw because of the portfolio focusing, but also focusing in the, let's say, in the way we are going to allocate the money, we really look at target [ rentabilities ], which we are going to adjust very much because we really need clearly the perspective that they are going to have minus rentability,

Minimum return.

Minimum returns in this case. And of course, this is something which at least we did in our, let's say, responsibility that we clearly make the people responsible to do so, and also that we recalculate these investment projects in a normal manner. Everybody has to report about this in the future.

Okay. And maybe just 1 follow-up on that. Is there a threshold for an investment volume, which is being looked at by the Board, i.e., is there a certain volume investment volume where you would always look at it from a board-level once you basically surpass that volume level?

Yes. I think this is something which we are going to -- which we already now adjusted in the corona crisis. Of course, there is a certain, let's say, classification of investment, which has to do with security and things like this, which the businesses can do by their own. But now in future, of course, there is a threshold which is very low. We are going to be involved and every kind of investment project has to go to, let's say, the corporate controlling and also to the Board here.

And could you maybe share with us what that volume is, just to have a broad idea?

We will -- we have to make this decision about this, but this is something which is definitely not much more than EUR 1 million.

Okay, okay. That's very interesting. Then my next set of questions is again on the steel business, where obviously you said before also that you felt the consolidation is required. And yet, now you clearly reemphasized that you pursue that more actively. Now my first question is, has the step also been motivated by the higher capital needs of the business, which the business obviously may have in the future? And then secondly, and obviously, there was a question on that point already, but just with regards to the antitrust situation, is your sense that the EC has already softened its stance here on that front, given the current situation? And then my last question is just when you say consolidation, does that rule out a combination with a new market entrant to the European market? And also, would you be open to basically give up control in a combination with a non-European player?

So I start with the last question. First, we have no taboos, and we confirmed that yesterday also with the Supervisory Board. That means if the best of all options for the stakeholders is that we deconsolidate deal, means we merge it or we sell it, if it's -- I said yesterday, when we talk about consolidation, it has all the principal options. We sell the business, we merge or be ourselves by take over the majority in a combination with somebody. So these different forms of combinations are all possible, yes. And we have no taboo here. And as it takes 2 to tango, we in the meantime, work on our own capabilities by executing this Steel 20-30. And Klaus?

Yes. I mean, I think we said it several times that this new Strategy 20-30, we are totally convinced that this is the right strategy. And we are also convinced that we would be successful or even in a stand-alone phase here because this is something to do with restructuring. We are working on 3,000 people here. We invest in, let's say, in market segments and customer segments with growth and also with high-margin volumes potential. And also these investments go also in, let's say, reduction of footprints within the thyssenkrupp network here. And this is very important to do so. We are totally convinced that this is the right one, and we are totally convinced that we create value with this. But as I said before, there are 2 levers, which belong to the whole European steel industry. This is overcapacity on the one hand, maybe after corona, even more. On the other hand, it's just the trend to produce carbon-free steel. And in a combination, we think that value creation is more easy to do this in a combination.

And maybe a slight [indiscernible] because many people don't know that, but the transformation to carbon-free steel production is per ton of CO2 reduction, significantly cheaper than the transformation of the auto industry. That means if you talk about additional funding from third parties, means governments, government or others, sustainable finance, the steel industry is the industry to look at because you get much more carbon reduction, then you get it from the auto industry for the same investment.

Then just on my question with regards to the EC, do you feel that the EC has softened its stance on the antitrust side?

No, we cannot say this. We don't have really indicators for that or even that we have asked or something like this. But they are responsible for this, and they have to do their jobs here.

Okay, okay. So has there been any discussions with EC basically in the last few months already post -- I guess, post the Tata situation, I guess, would be quite surprising, if not? But also there has been at least a push from several governments to take a slightly more loose stance on the antitrust side. And I'm just wondering whether there has already been at least a slight change versus in indication maybe versus what you experienced in the Tata conservation.

So as Klaus said, we have not asked the East, the European Union, but I just, Klaus, as you could not participate, I had the advantage now, a slight info advantage. So our lawyers have asked, so we asked our lawyers in Brussels whether they've get any indication. And in our last team meeting, where you couldn't participate, they told us that they have really, as you said, no indications of any softening in there in this case. So there's no indication yet.

The next question is from Rochus Brauneiser, Kepler.

Maybe let me start. First one, I'm not really 100% sure whether I got the strategic point on auto technology versus deal in Marine System. Can you maybe help, when I look at this from the endpoint where you're in a reshaped strategic position is auto something you develop over a longer time frame than the strategy on Steel and Marine? Is there a higher probability on the Auto side that you are going to retain a maturity stake? At the moment, it looks to me that you have a lot of options on the table, and you discussed nearly everything. But can you give me a better sense how you look differently on the order side, mid to long-term versus steel and marine. That's the first question.

First, I just have to say, I'm just asking myself how we -- of course, how we can -- let me say, this can lead to an impression that we discussed nearly everything. So because -- or I think in the steel and marine case, I think it's relatively obvious. So that is trust the ecosystem, let me call it like that. That is trust the ecosystem is emerging and evolving in a certain direction. And we are trying to make the best out of it for us. So that's -- but in the auto world and -- in the auto world, I think it's slightly different. That's a relatively closed shop. And here, you could, of course, pursue options on the M&A side or you pursue options to reduce your costs by developing alliances with a certain task sharing for certain customer orders, also certain customer segments, for example. Look, you can say, for example, we developed a R&D cooperation for, let me say, the truck industry, by working together with company's budget. That would already reduce costs. And by doing so, that is, what I would call, an alliance. On the other hand, it's possible to consider to really develop something into a joint venture, if the partner and us would see value in doing so. So I think here, as you said, here, there are many options really possible. But what I know is you cannot say that top down. In the auto industry, as I said, this is somewhat a closed shop. You cannot work against your own customers. They play a role in whatever strategic alignment and they have a clause in the contract, which allows them. It's a change of control co, so you anyhow need the allowance in all what you do. So the difference between steel and marine and auto is, in auto, we leave in a way, the activities for strategic realignment we leave that in the segment because these guys are talking with the customers. And in order to enhance their capabilities in doing so, we have decided to have our group -- our Head of Group Strategy, being the CFO of the Auto segment in parallel. So this allows that we are sure that the strategy development in the auto is well aligned with what we believe has to happen on group level. This is why we have this core responsibility of the person in charge. But we believe here, this comes out of the business, has to be developed with customers, partners in the business. With steel and with marine, we see ourselves a kind of -- we are the shareholders, so we are deciding what we are doing with these companies in the company. So here, we play from the group Executive Board, here it's us to speak with the potential partners in the industry. It is clear to you now?

Yes, yes. No, I think just got -- made it very clear now. In this context, what you said in the discussion you had with the Supervisory Board, has been a certain expression of desire that after a consolidation move in steel and in the Marine System that thyssenkrupp wants to retain a certain stake in that enterprises for the mid- and long term? And would that be kind of a concession required to get the union support for such consolidation moves?

So here you can imagine that in such discussions, each different group tells us what the desired outcome of our assessment. So we get every day, we get, let me say, we get information, what I press those people speak with media and so on. Of course, in a company like ours and in, let me say, in a society, like we have it in Germany, our stakeholders is to express their views inside and outside of the company. But I think I can say, and it has been decided yesterday that the option we are investigated are all, let me say, taken into consideration. We have expressed them, and we left the room without a comment, don't do this or don't do that.

Okay. Another question is in -- let's consider that Steel would be subject to a resolution where thyssenkrupp into a minority position. Do you see a concern that the natural bracket at least historically thyssenkrupp group is gone? And that market would keep pressuring on the logic of the portfolio, saying, why do you combine? Why are you combining this and that? What's the logic? And is -- are you seeing a risk in that direction?

Actually, I don't see a risk. Because what we have developed now in this portfolio is, as you see, is not -- isn't -- there isn't -- there is a company, thyssenkrupp. And thyssenkrupp, of course, is committed to deliver value. But there is no bracket like steel around this company. It is, of course, what made this company, but it's -- we are well aware that the group's identity over many years is we say, still is the foundation of this group. So you can imagine how painful the discussions around steel are in this company. But the people in this company are not blind. They see what's happening in markets. They see what's happening with the challenges to master the transformation to carbon-free steel. So I think it's emotionally a very difficult process, but I would not say that there is a bracket around this company, which is formed by steel.

Okay. And then finally, on the potential for consolidation move, how shall we think about a realistic time line for this -- doing this? I think the industry, there's always kind of discussions in high-level discussions about what could happen under these strategic challenges for the industry. How can we look at this from a time frame? Because the other issue for you is now to turn the performance around and to realign it back with the performance of the peer group. How -- what is the preference, is getting a deal done or getting the performance fixed first?

I mean something about the time line to say it really to commit on something or to say on something, this would not be, let's say, fair, or even not possible to do so at the moment. But I can tell you, we are, let's say, working on this very much with very much pressure, and we feel that this is the moment where we can, let's say, where we see that all stakeholders or many of the stakeholders are ready to talk and that we come to a quicker solution. And I think this is what we can say. We cannot commit on a certain time line.

yes. And maybe to close the call. I think we are facing all a very challenging environment. And we are facing, as we say, significant -- we have to master significant challenges to overcome our own history. But -- and I can only say that I feel nice as well embedded in a very, let me say, in a well-functioning environment. I think our Supervisory Board and us in the Executive Board, I really feel that we have all the same view on the things. We have provided transparency. We -- I feel that they are very close to us. So I think Klaus, I can only say, I think we are well supported in mastering the challenges ahead. And I think that's a historic opportunity for the company because as we feel that there is a great alignment now between the Supervisory Board and the Management Board.

Yes. Thank you very much, Martina, for these closing words. And with that, I think we will close the call. And of course, if you want to follow up the Investor Relations department, as always, it's available for you. And also, we are happy to arrange calls with the management for you. But for the time being, we would now like to say goodbye. Thank you very much for attending the call. And Martina wants to say...

Yes. I want just to say thanks, Claus, to you and to [indiscernible], who is also in the room. Because we -- I think the team at Investor Relations and our Corporate Headquarters, we went through a significant reduction of headcount in the last month, and in your team also. So you, dear analysts, and you might have recognized here and there a different performance. So we try to overcome that. But I have to thank, [indiscernible] and Claus now to you and your team for the efforts and helping us reducing our cost. And thanks to you, dear analysts at the phone for accepting that we had slight issues here and there.

Thank you very much, Martina, and Klaus. And I will also provide your remarks to the other members of my team. Okay. Yes. Then thank you very much for attending, and we look forward to staying in touch with you. Bye-bye.

Yes. Thank you. Bye-bye.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.