The fate of Eko Stahl, the largest steel producer in the former East Germany, remains deeply uncertain following the decision last week by Italian steelmaker Riva to pull out of a deal giving it control of the antiquated steel company.
After four years of looking for a new investor, the Riva Group signed a deal late last year with the Treuhand, the German agency charged with privatizing former East German government assets. New subsidies, which were tied to capacity reductions at Riva's two other east German plants, were painstakingly agreed to after much political bargaining with the European Union Commission in Brussels.The Italians were to invest in a new hot rolling steel mill that could produce a maximum of 900,000 tons annually, under European Union rules.
Then, last week, apparently following disputes between Emilio Riva and the union representation at Eko Stahl, the Italian company pulled out. The German press quoted Mr. Riva as saying that he had never been so degraded in his life following the negotiations over a so-called neutral representative on Eko's supervisory board.
Mr. Riva objected to naming Hans Apel to the board as he was seen as being to close to the unions.
But the real reason is thought to be Mr. Riva's interest in taking over Ilva, Italy's state steel concern. And with media magnate Silvio Berlusconi now the country's prime minister, speculation here is that Mr. Riva will get large sums of government money for the deal - far more than Germany's Treuhand could offer.
Riva, one of Italy's most tight-lipped companies, declined to comment on why they dropped their bid for Eko Stahl.
Mr. Riva's retraction of his offer took the industry and government by surprise, although the company had never been upright about its own finances. To date it has not presented a consolidated balance sheet to the Treuhand, as required.
It originally was to take over only 60 percent of Eko, but pressured the agency to handing over the other 40 percent.
As politicians pointed fingers at each other Monday, the question of what will happen to Eko Stahl couldn't be answered, but the prospects do not look good.
Production at EKO stopped Monday afternoon, leading to a flurry of rumors, including a report on Germany's television, that it was the first step in the dismantling of production at the plant.
The company's chairman said the production halt was needed to change one of the mills on the production line.
A consortium of ThyssenStahl and Preussen AG, which had previously lost out to Riva in its bid for Eko, put out conflicting statements as to whether it would be interested in reactivating its bid.
First Thyssen said it would, but then over the weekend it said the money it would have invested in Eko had been spent elsewhere.
Neither Thyssen nor Preussen has been contacted by the Treuhand yet, spokesmen from the companies said. In any case, the consortium's original idea was to retain only 1,000 employees, compared to Riva's 2,300, and just to keep the cold steel mill production and not invest in a hot rolling steel mill.
Even if a new investor were found, it is likely that the new plans for a takeover would have to be approved anew by the European Commission. Brussels is concerned not only with state aid, but with capacity reductions in the steel industry.
Economics Minister Guenther Rexrodt said Monday that under no circumstances would the government take over Eko. "Brussels will accept subsidies only when a true privatization is realized," he said.