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Unease among UK unions as Tata Steel looks for options after collapse of JV with thyssenkrupp

Unions want assurance that European units will not be broken up.

May 14, 2019 / 03:55 PM IST
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There is unease at the UK units of Tata Steel with unions demanding  assurance that the operations will not be split and sold off after the proposed joint venture with thyssenkrupp collapsed last week.

The unions had been unhappy about the remedies proposed by Tata Steel to get a nod from the European Commission for the JV. But the Commission, which was probing if the JV would hurt competition, blocked the deal.

"The Tatas offered three units totaling nearly a million tons of annual capacity. And thyssenkrupp offered only one small unit. Tata's European unions  felt it was no longer a JV, but a takeover," a senior London-based official told Moneycontrol. 

"If Thyssenkrupp had put forward a remedy then the JV would have been accepted by the Commission... It’s disappointing and frustrating from Unions view, but we did not agree with the remedies they put forward," the official added.

Though the joint venture is no longer on the horizon, the workers now fear Tata Steel will look for options to sell the units and that will lead to job losses.


"They want assurances that the European operations are not broken up and units are not sold off individually," said another executive.

"The Tatas now have to commit to the investment programme for Europe and with the right leadership the European businesses will be successful," said the first official quoted above.

Tata Steel's European operations include units in the UK and Netherlands, and employ about 20,000 people. The Netherlands-based unit are said to among the most profitable ones in Europe. But the UK operations have been constrained under high energy costs in the country, and legacy issues.

Tata Steel didn't respond to queries from Moneycontrol. 

Looking at options

Addressing the media on a conference call on May 10, after the JV was called off, Tata Steel CEO & MD TV Narendran reiterated that the company has a few options, and is exploring them.

He also added that the UK operations should improve upon their performance this year, after a blast furnace shutdown dented numbers in 2018.

At the same time, he underlined that the units in Europe need to be cash positive.

While Executive Director & CFO Koushik Chatterjee said that the volumes in Europe should increase by 5 percent this year, the demand outlook in the continent is dim.

The management was hoping to bring some stability to the units under the JV, which would have also taken over about 15 percent of Tata Steel debt of nearly Rs 1 lakh crore.

But the circumstances have now turned.

The union leaders may again seek an appointment with Tata Steel Chairman N Chandrasekaran, whom they had met in April.

Chandrasekaran had mandated the Tata Steel leadership to get a solution for the European units. But with the JV now a failure, the management has to come up with viable options.
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: May 14, 2019 03:55 pm

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