FRANKFURT (Reuters) – Thyssenkrupp’s decision to simplify its corporate structure marks a victory for activist investor Cevian as the German conglomerate strives to keep shareholders onboard with its broader restructuring plan.

FILE PHOTO: A logo of Thyssenkrupp AG is pictured at the company’s headquarters in Essen, Germany, November 21, 2018. REUTERS/Thilo Schmuelgen/File Photo

Alongside a weak set of first-quarter results on Tuesday, the submarines-to-elevators group said it would scrap its matrix structure, which has long been criticised by investors for adding costs and slowing down decision making with its multiple leadership layers based on products and regions.

The company said the move, which includes taking out parts of its organisation related to regional headquarters and shared services, would help to reduce general and administrative costs to below 300 million euros ($339 million) by 2020/21. That would be down by more than a fifth from current levels.

Cevian, Thyssenkrupp’s second-largest shareholder with an 18 percent stake, has been one of the more vocal critics of the matrix structure, calling for a more nimble and leaner set-up for the maker of everything from chemical plants to car parts.

“The decision of Thyssenkrupp’s management team to remove the matrix structure is a major step to free entrepreneurial forces and increases accountability of management,” Lars Foerberg, founding partner of Cevian Capital, said in a statement sent to Reuters.

“Thyssenkrupp has great potential and we support every step that improves the competitiveness of the company.”

The organisational changes mark the second victory for Cevian in just a few months after Switzerland’s ABB, in which it holds a 5.3 percent stake, in December also scrapped a matrix structure.

The revamp at Thyssenkrupp comes ahead of a broader restructuring that will see the group separate its capital goods arm – elevators, car parts and plant engineering – from its materials operations, and needs to be implemented before the legal separation, which will be effective as of October.

While many investors have pushed for the break up of the conglomerate, Thyssenkrupp shares have lost about a third in value since it was announced in September, with some anxious about the lack of detail provided so far.

“There won’t be any excuses going forward,” Thyssenkrupp Chief Executive Guido Kerkhoff told journalists on Tuesday, referring to increased accountability of the new structure.

The way companies are organised is a regular target for activist investors. Procter & Gamble in November announced the creation of six business units, its biggest organisational overhaul in the last 20 years, after Nelson Peltz, chief executive of activist hedge fund Trian Partners, pushed for a simpler structure.

($1 = 0.8853 euros)


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