Outlook.
In our corporate strategy we must continue to find a balance between the demands of the market and the sustainability indicators which stand for the principle of responsibility.
Strategic development process
Following the successful completion of the restructuring process, ThyssenKrupp Steel will add new elements to its proven strategy based on its established strengths. To enable us to participate in the anticipated growth of the international steel market, we are planning to build an additional steel production facility in Brazil with a view to exploiting the region’s cost advantages and direct access to the raw materials base for iron ore. A steel mill with capacity to produce 4.4 million tons of slabs per year is being built at the coastal location Sepetiba in the state of Rio de Janeiro. The investment in two blast furnaces, a BOF meltshop, two continuous casters and port facilities will amount to US$2.0 billion. Production of the first slab is planned for 2008. The world’s biggest iron ore producer Companhia Vale do Rio Doce (CVRD) will take a 10% stake in the project.
Brazilian steel mill project
The supervisory bodies of the ThyssenKrupp Group gave the go-ahead for the Brazil project in late November/early December 2005. It forms the central element of an integrated internationalization strategy which also includes all other activities. Around half the slabs produced will go to the processing and finishing lines in Germany, the other half will be supplied to the NAFTA market.
Based on carbon flat steel volumes, North America is one of the most important markets on which ThyssenKrupp Steel aims to gain a stronger position. The declared goal of our growth strategy is to utilize our own processing capacities. The supply of low-cost slabs from Brazil represents a significant competitive advantage, allowing a sustained increase in our share of the market with international key account customers – for example in the automobile industry. Planning alternatives under consideration include building new facilities and entering into alliances.
The slabs from Brazil will also be used to systematically expand our presence in the European markets with products and services where we have specific strengths and sustainable competitive advantages. For this reason the Supervisory Board has approved an extra €400 million for follow-up investments at our German sites, where capacity is to be expanded. This will allow us to supply material from local production to our customers in the core market of Europe, which has grown as a result of the enlargement of the EU. Investment projects relate to the expansion of the value-adding coating and processing capacities which are currently subject to bottlenecks – chiefly the hot strip mills and hot-dip coating facilities.
Environmental focus
Under the sustainability strategy, a sustainability management system will be developed and implemented.
To tackle the problem of particulate pollution, ThyssenKrupp Steel is to conduct an analysis of the causes of particulate emissions in the north of Duisburg in association with the local Environmental Agency. One objective is to determine ThyssenKrupp Steel’s contribution to emissions. Plans to create a green belt around the Duisburg production facilities are aimed at strengthening the separation of the plant from residential areas. This will further reduce problems caused by dust or noise in the immediate neighborhood.
In 2006 the second stage of the emissions trading system (NAP 2) will be discussed by the political bodies. Together with our industrial associations we are striving to achieve an optimization of the system.
The EU is continuing its efforts to introduce a framework directive for an Integrated Product Policy (IPP). The danger of bureaucratizing the ecological assessment of products is that it would place too much emphasis on environmental aspects at the expense of technical and economic considerations. This would significantly limit companies’ scope for developing new products. It is already standard practice today to consider environmental protection aspects when developing new products.
This was shown most recently in the NSB® NewSteelBody concept for lightweight auto construction. Together with German industry’s sustainability forum econsense and the European Steel Association Eurofer, ThyssenKrupp is using examples such as tailored products to show that by maintaining dialogue with customers and competitors, the environmental impact of products can be improved – even without an IPP directive. We are currently seeking talks with the European Commission in Brussels to ensure that our input is included in the planned legislative procedure to prevent any moves which might restrict innovation and create competitive disadvantages.
“Program Future” in human resources
At ThyssenKrupp Steel the continuous improvement process is now firmly established. In the coming years we must continue our efforts to increase efficiency and productivity. We currently have more employees that necessary for a cost-optimized workforce. However, the balance will change in the next few years. The demographic shift presents us with new challenges in the personnel area. The average age of the ThyssenKrupp Steel AG workforce is already just under 43. From 2011, 500 to 600 employees will reach normal retirement age each year. In addition, the average age of the workforce will continue to rise significantly because until now only relatively few young people have been recruited on a long-term basis. There is a danger of an excessive aging of the workforce leading to a sudden loss of competency, knowledge and experience. As a result, personnel requirements will increase sharply. We will adjust to this completely new situation in good time. We will then have to seek out skilled and motivated employees on the labor market and in doing so we will be in competition with other companies who are equally affected by this demographic trend.
For this reason the company has developed a strategy entitled “Program Future” aimed at stabilizing the number of employees over the long term and gradually reducing the average age of the workforce. The plan is to use the tool of partial retirement specifically to provide openings for young people from 2007/2008. Overall it is expected that an increased number of apprentices will be taken onto the workforce as from 2008.
Current challenges: Workforce development without the company’s intervention
From 2014, when, without intervention from the company, the permanent workforce would no longer be large enough to cover requirements, employees are to be encouraged to stay with the company longer. To safeguard our competitiveness and secure jobs in the company, ThyssenKrupp Steel has set itself the objective of continuously developing the competencies of employees. This means that employees of all ages will have to increase their qualification and performance levels to prevent skills deficits before they happen and close any existing gaps. In addition, increased use is to be made of potential within the company. The aim is to optimize employee deployment to offset fluctuations in the workload and ensure employees are allocated to activities in line with their skills and age. More work is to be performed by the company’s own employees and less by independent contractors. Finally, the overall performance of the workforce is to be enhanced by targeted health management.
The Executive Board, works council and executives’ committee are currently developing a framework for the implementation of Program Future. Together with Project 2006, it will safeguard our ability to act in today’s competitive environment in the short term, and in the medium term it will reconcile the current need for adjustment with the social and economic challenges of the future. This will help the company sustain its successful growth and thus secure employment in the long term. We will thereby create ideal conditions for the employees of subsequent generations.
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