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Tata Steel cuts 800 jobs in Europe

Cut in workforce part of the larger transformation program announced last year

February 13, 2020 / 01:51 PM IST
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Tata Steel has cut 800 jobs in its European unit as part of a 'transformation program' that intends to make the operations in the continent cash positive.

The company in 2019 announced its intention to shed 3,000 of its Europe workforce. It had added that about two-thirds of the cuts are expected to be office-based ('white-collar') roles. Tata Steel employs close to 20,000 people in Europe.

"We have, since the beginning of the year, reduced our workforce by 800 already. There are obviously some difficult discussions going on as well because it's never easy to reduce the workforce, and we've done a lot of that in the past as well," said Tata Steel Global CEO and Managing Director TV Narendran.

The unions are unhappy about the plans. European Works Council (EWC), had last year said 'employees should not pay the price for Tata's failures' despite the challenges that the company is facing due to the current economic slowdown. They had even threatened to go on strike or approach the European Parliament.

Tata Steel had announced the transformation program in 2019, after its plan to merge European operations to the steel unit of German conglomerate ThyssenKrupp, was blocked by the European Commission.

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Reducing workforce was one of four transformation areas, "to ensure the business can thrive despite severe market headwinds which have led to a sharp decline in profitability," the steelmaker had said in November.

The other three, the company had then said, are:

  • Increasing sales of higher-value steels by improving product mix and customer focus;

  • Efficiency gains by optimising production processes, supported by the application of big data and advanced analytics;

  • Reduction of procurement costs through smarter sourcing and strengthening cooperation with companies within the Tata Steel group.

Narendran though talked about "five workstreams," and each will lead to a saving of up to 150 million Euros.

"If it (the transformation program) progresses as it has so far and continues for the next 12 months and the spreads come to around Euros 220-odd levels next year, then I think we will be cash positive for next year," Narendran said.

The 'spread' right now is at about Euros 180, a far cry from the Euros 270-280 levels a year ago.

Much of the program's success would hinge on how the company performs in the last quarter of the present financial year, and in the next fiscal. The recent third-quarter results were not a happy read.

The European operations suffered from a decline in demand, and EBITDA loss per ton was higher than estimates. Overall, Tata Steel reported a net loss of Rs 1,228 crore.
Prince Mathews Thomas heads the corporate bureau of Moneycontrol. He has been covering the business world for 16 years, having worked in The Hindu Business Line, Forbes India, Dow Jones Newswires, The Economic Times, Business Standard and The Week. A Chevening scholar, Prince has also authored The Consolidators, a book on second generation entrepreneurs.
first published: Feb 13, 2020 01:49 pm

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