Steelmakers Planning Joint Venture

German industrial giants Fried. Hoesch-Krupp and Thyssen reached a breakthrough Monday in the effort to combine their steelmaking units and said there will be no hostile-takeover battle.

The two companies said that on Thursday they will announce the details of plans for a joint venture that would create Europe’s largest and the world’s third-largest steel producer.

Krupp had set a Thursday deadline for progress on creating a joint venture and had threatened to resume its hostile bid, worth about $8.1 billion, for its larger rival.

But the companies said on Monday that a resumption of the unfriendly bid would be “superfluous” because talks were progressing well. Such a merger “makes possible the survival of the steel industry in Germany,” they said.

The deal is likely to mean that thousands of jobs will be in jeopardy in Germany, where the unemployment rate is above 12%, the highest in 64 years.

A protest by what may be as many as 50,000 steel workers was still planned for today outside Deutsche Bank’s Frankfurt headquarters. The union is angry at the bank, saying it backed Krupp’s move at the expense of workers.

Thyssen employs 111,000 people; Krupp employs 66,000. Workers at the companies’ steelworks in the Ruhr valley region have protested the idea of a merger.

Hostile mergers are rare in Germany’s cozy business world. Competitive problems are traditionally sorted out by consensus among labor, management, politicians and banks, which often are key shareholders.

Krupp says the two concerns’ activities overlap in steelmaking, automotive supplies, capital goods, manufacturing and trading. The firms also are involved in telecommunications and engineering.

Their combined steel operations would trail only Japan’s Nippon Steel and South Korea’s Pohang Iron & Steel in total output.

European Commission officials said a Krupp-Thyssen merger would probably face a European Union antitrust inquiry.

The commission, the EU’s executive agency, is required to investigate the effects on competition of any merger or acquisition involving companies whose foreign sales exceed a third of total sales. That is the case with the German steelmakers.

One area that will come under scrutiny is whether the united company would benefit from government aid--something that could give the Germans an unfair advantage in a European steel market plagued by overcapacity and shrinking profit margins, analysts said.