Tata merger threatens thousands of jobs
THOUSANDS of jobs could be lost after the UK’s largest steel employer agreed to merge with a German rival.
Tata Steel Europe, which employs about 8,000 in the UK – including 4,000 at Port Talbot in South Wales – is teaming up with Thyssen Krupp to battle cheap Chinese steel flooding the market.
Bosses said they would focus on making better-quality products to help them survive, but there could be about 4,000 job losses split between the two firms’ European workforce of 48,000.
It is not yet clear how many British jobs could be threatened.
The future of Port Talbot has been up in the air since 2016 when India-based Tata put its UK businesses up for sale amid heavy losses. It changed plans amid public outcry and political fallout.
Roy Rickhuss, general secretary of the Community union, welcomed the merger, but added: ‘We are seeking assurances on jobs and investment.’
LESS than 24 hours after The Takeover Panel set out a new wish for foreign takeovers, the shape of the longawaited deal between Germany’s Thyssenkrupp and India’s Tata Steel – owners of Port Talbot steelworks – has been unveiled.
This transaction tells us all that is not to like about foreign takeovers, and loss of command and control over a strategic industry.
The history is complex but, essentially, at the peak of the overseas takeover boom in the run-up to the financial crisis of 2007 Tata Steel paid a full price of £6.2bn to buy UK-based Corus, a combination of British Steel and the Dutch steel maker Hoogovens. It has been downhill ever since and decisions affecting the future of steel making and thousands of jobs in Britain have been taken far away in Mumbai.
It was there that the infamous decision to close Port Talbot was taken in the spring of 2016 when the then Business Secretary Sajid Javid happened to be in Australia.
The reasons behind the closure announcement were obscure and partly connected to a dispute between Cyrus Mistry, then running much of the Tata empire, and the founding Tata family. Authoritative accounts suggest that Anglophile Ratan Tata, a big inward investor in Britain, was less than happy with the decision and the suggestion that somehow his family were seeking to dump the obligations to British Steel’s 130,000 pension fund members.
When Mistry was displaced, miraculously, the world steel price recovered. Port Talbot was no longer an albatross and negotiations with The Pensions Regulator and the Pension Protection Fund began.
The goal was to plug the pension fund deficit so that a commercial restructuring could be done. A year later, we are now seeing the outlines of the deal.
Thyssenkrupp and Tata Steel plan to pool resources creating a new champion, Europa – rather than Champions League – for steel. That seems very neat and forward-looking but the detail is less encouraging.
The merger of two steel companies, being drowned by cheap Chinese competition, requires the loss of 4,000 jobs – 8pc of the joint workforce – if savings are to be made.
And the headquarters of the new company will be in Holland not the UK, so many of the back office cutbacks could well occur in Britain.
The loss of headquarters was precisely one of the issues raised by The Takeover Panel in its proposed code amendments.
As the recent IPPR Commission on Economic Justice noted ‘companies headquartered overseas are more at risk’ than those ‘at home’.
The main blockage to a deal with Thyssenkrupp has been the shortfall in the £15bn British Steel Pension Scheme.
This looked to have been resolved in August when Tata made a Sir Philip Greenstyle gesture and agreed to pump £550m into the scheme, which would be transferred into the Pension Protection Fund.
As part of that deal the heritage pension scheme would also become 33pc owner of Tata Steel.
Now that Tata Steel is to be absorbed into a new joint venture with Thyssenkrupp the assumption is that it will take on this commitment. But the Tata-Thyssen spin- off raises a number of secondary questions. It looks as if Thyssenkrupp also is seeking to offload pension liabilities into the new company. What impact this will have on covenants or guarantees of the new company to Port Talbot is unclear.
And if the jobs axe were to fall more heavily on administrative and steel jobs in Britain, how sensitive would the new owners, based in Holland, be to commitments made by Tata Steel?
There is a long distance to travel before all of this is fully settled.
But the last vestiges of control over a strategic industry and the security of pensioners will be in the hands of absent overseas landlords. Reprehensible.
Drink driving
DIAGEO is enormously upbeat about its top Indian whisky brand McDowell’s, which it is now marketing in Africa.
So it is a little disconcerting to hear the world’s top spirits group whingeing about changes in the law which sensibly means selling spirits near Indian motorways has been banned.
No fear, however: the return of growth in Europe and a renewed taste for Johnnie Walker and brown spirits in Trump’s America should see it gain momentum in the second half of the year. Cheers!