Salzgitter sues Thyssenkrupp for HKM joint venture

A spokesperson for the company announced on Thursday that Salzgitter had filed an arbitration case against Thyssenkrupp in order to determine their future financial obligations regarding their steel joint venture HKM.

Thyssenkrupp has said that it may need to close or sell HKM, the 50-30-20 joint-venture between Thyssenkrupp and Salzgitter, which employs 3,000 people.

Tensions have arisen between the partners due to the uncertainty surrounding the future of a joint venture.

Gunnar Groebler, the CEO of Salzgitter, told German newspaper WAZ that his company may be willing to continue HKM at a capacity of 2-2.5 mtonnes per year, down from its current 4.2 mtonnes. He also said that this plan would reduce staffing by around 1,000.

Groebler stated that in certain circumstances Salzgitter would be able to take over the entire HKM. The joint venture partners would also have to pay for downsizing costs, and Thyssenkrupp will need to clarify the purchase volumes of the next two years.

Groebler added that there needed to be a positive response on the 200 million euro ($235 million), in subsidies HKM had applied for, in relation?to a brand new electric arc oven.

He added that a state guarantee is being discussed with the state where HKM has its headquarters, North Rhine-Westphalia.

The spokesperson for Salzgitter did not give any details about the arbitration claim.

Thyssenkrupp Steel Europe's (TKSE) Thyssenkrupp division decided in April to terminate a contract with HKM.

Thyssenkrupp has set aside HKM provisions in the low triple-digit millions of euro range. The company is currently in negotiations to sell TKSE to India’s Jindal Steel International.

Miguel Lopez, the CEO of Thyssenkrupp at that time, refused to comment on whether Salzgitter filed a lawsuit. He only said "legal action would not be helpful". Reporting by Christoph Steitz. Editing by Jane Merriman

(source: Reuters)