Eckhard Cordes, Metro Group’s controversial CEO, has decided to step down at the end of his current contract in October 2012. Cordes will remain in function until then, but he stated that a new, younger generation of managers should take over and continue Metro Group’s positive evolution.
“Company before own interests”
Despite his capitulation, the CEO made clear he claims the honours for Metro Group’s record profits the group published last March – a party that was crashed by Erich Kellerhals, Cordes’s nemesis and important minority stockholder of Metro Group. His plead for a younger generation at the top of Metro Group is therefore an overt signal against the 72 year old Kellerhals towards the supervisory board and Metro’s shareholders: “The company’s interests should always take precedence over individual interests, even over mine”, he said (while meaning: “and certainly over his”).
Even though Kellerhals now gets his way, he will have to wait another year for Cordes’s exit – a year that the current CEO can use to contain Kellerhals’s influence in Metro Group’s decision-making. Apart from that, it remains an open question what Cordes can accomplish during his last year at the top of Metro: he ended the harmful speculations regarding his own position, but the fact remains that he failed to sell both department store chain Kaufhof and hypermarket chain Real, two parts of the Metro Group that are continuously under-achieving.
Metro to become a pure player?
“The most obvious choice for Metro would be to focus only on its cash & carry activities”, says German Lebensmittel Zeitung’s Mike Dawson. “It would make Metro a ‘pure player’, which analysts now favour immensely – even though they had been demanding diversification for years, as to reduce risks. If Metro focuses on cash & carry only, the group would become more vulnerable, but the department stores are simply not viable and the hypermarkets are not competitive on an international level.
As a pure cash & carry company, Metro is an interesting target for a Wal-Mart takeover. “Especially because of Metro’s market shares in emerging markets”, says Dawson. “Wal-Mart is not interested in Western Europe any more, it changed its attention to China, Russia and similar growth markets. Metro still has to float consumer electronics division Media-Saturn and sell both the dying department store division Kaufhof and the resuscitated hypermarket chain Real before becoming a real pure player.”
Spanish talks failed
The Spanish group El Corte Inglés is not going to help with the Kaufhof sale any more, despite three rounds of negotiations and a lot of rumours. The family business finds itself in financial and economic trouble on its Spanish home market, and decided not to risk any German adventure.
Dawson meanwhile states that the selling of Real was only delayed because Metro wanted to sell the hypermarkets in one big deal. “There are many cherry pickers, like Kaufland, that are only interested in the best parts of Real. Despite the slightly higher profitability, Real is still a dead division that Metro Group wants to sell as a whole.”
Legacy or no legacy?
The possibility that Eckhard Cordes is able to solve these problems in his last year is negligible. It will be up to the new management at the end of next year to solve these three issues, but probably they will only have a chance if the internal relations and the decision making processes are completely revised. It is very well possible that Cordes will dedicate his last year in office to that end, in order to create a lasting legacy as chairman at Metro Group.
