German steelmaker Thyssenkrupp AG’s most opaque division has gone from hero to zero in the space of four short years. The not-very-sexily-named “Industrial Solutions” unit builds plants for cement, chemical and mining customers. Until last month, it also included its ship-making and submarines business.
When sales boom, industrial contractors like this generate cash thanks to the advance payments they get from customers for long-term projects. But if orders evaporate or the contractor misjudges the cost of finishing complex tasks, they bleed cash instead. Industrial Solutions has burned through about 2.3 billion euros ($2.6 billion) over the past four years, something the indebted parent company can ill afford. It explains why Thyssenkrupp remains under pressure after seven years of cost-cutting, asset sales and restructuring.