German steelmaker ThyssenKrupp is selling its automotive contract assembly unit, which makes axle systems for car makers, as it seeks to streamline its activities and beef up profitability, two sources familiar with the deal told Reuters.

The company has mandated BNP Paribas to find a buyer for the automotive systems sub-division, which has roughly 1 billion euros ($1.1 billion) in annual sales, they said.

Thyssen declined to comment.

The move comes after Thyssen's Chief Executive Heinrich Hiesinger embarked on a turnaround of Germany's biggest steelmaker, seeking to boost higher-tech, higher-margin industrial goods.

The sources said Thyssen has contacted axle makers as well as private equity groups regarding the possible divestment.

One goal of a sale of the automotive contract assembly business would be to increase the profit margin of the larger Components Technology business unit, they said.

In fiscal 2014, the adjusted EBIT margin of the Components Technology division stood at only 4.3 percent, compared with 10.5 percent at Thyssen's Elevator Technologies unit or 6.7 percent at its Industrial Solutions unit.

The margin of the automotive systems sub-division was even at only about 1 percent, one of the sources said, adding that the bulk of the business's sales came from axle parts that Thyssen buys from other automotive suppliers, assembles and then sells on.

"On a value-add basis, sales of the contract assembly unit are round about 100 million euros and the margin on that basis is more than 10 percent," one of the people said.

The business's competitors include Germany's Benteler and ZF Friedrichshafen, as well as U.S.-based American Axle and Dana.

 

in.reuters.com

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