German steel group ThyssenKrupp said on Friday that talks to create a broad joint venture with Abu Dhabi MAR had broken down, a setback for the German company's plans to reduce debt.

"Following two years of amicable talks and negotiations exploring the joint-venture both ThyssenKrupp Marine Systems and Abu Dhabi MAR have agreed to cease their efforts to form the envisaged joint-venture around the naval and non-naval shipbuilding business of Blohm+Voss in Hamburg," a statement said.

ThyssenKrupp wanted to spin off its Blohm+Voss unit into the joint venture but the talks will now focus on civilian shipbuilding activites run by another company, HDW Gaarden in Kiel, northern Germany, it added.

The German group said it would continue to search for someone to buy civilian activities owned by Blohm+Voss

"ThyssenKrupp Marine Systems will concentrate in the future on military shipbuilding," the statement said.

ThyssenKrupp has launched a restrucuturing programme expected to result in the sale of activites which generate one-quarter of its current total sales by 2012, and the elimination of 35,000 jobs.

That would represent the sale of some 10 billion euros ($14.5 billion) in assets.

ThyssenKrupp shares were hammered in morning trading on the Frankfurt stock exchange, losing 1.80 percent to 35.19 euros while the DAX index was essentially flat overall.