© Reuters. FILE PHOTO: Guido Kerkhoff, CEO of steelmaker Thyssenkrupp AG, speaks during the annual shareholders meeting in Bochum

DUESSELDORF (Reuters) – Management and labor leaders at Germany’s Thyssenkrupp (DE:) have agreed on a way forward after the industrial conglomerate announced a fresh restructuring drive that could lead to the loss of 6,000 jobs.

Agreement was reached in talks between management and workers overnight to recognize the need for radical action whilst ensuring fair treatment of employees at the Essen-based group, a senior workers’ leader told Reuters.

CEO Guido Kerkhoff announced the overhaul on Friday, ditching plans to split the business into two and abandoning a European steel merger with India’s Tata Steel.

The group will adopt a holding structure and plans to list its elevators unit, its most successful business.

The decision, first reported by Reuters, triggered a 28% recovery in Thyssenkrupp shares – their biggest daily gain – as Kerkhoff abandoned a cross-shareholding structuring that had ceased to be financially viable.

“Now it is up to shareholders to decide whether Thyssenkrupp steers towards a (viable) future, or towards conflict,” said Markus Grolms, deputy head of the Thyssenkrupp works council who represents the IG Metall industrial trade union.

Thyssenkrupp personnel chief Oliver Burkhard confirmed that agreement had been reached with labor leaders. Further details were not immediately available ahead of a supervisory board meeting on May 21 to vote on the plan.

The restructuring will lead to the loss of around 4% of the workforce. Some 4,000 jobs would go in Germany, where labor protection is strong and companies usually try to negotiate job cuts before resorting to forced layoffs.

Kerkhoff’s reversal bowed to months of pressure from investors who have demanded more radical steps to turn around the steel-to-submarines group and realize shareholder value – in particular by floating its profitable elevators business.

They reckon that the elevators business is worth 14 billion euros – twice the value of the parent – reflecting a so-called conglomerate discount that already has forced other industrials, including Siemens and GE, to take more or less radical action to reduce corporate sprawl.

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2019-05-11