More trouble could be brewing for Tata Steel in Europe, where a job cut announcement has riled workers, especially at the Netherlands unit, prompting trade unions to consider approaching the European Parliament, and even an industrial action.
The company had on November 18 announced 3,000 job cuts across its operations in Europe. Half of the losses would be in the Netherlands unit, which has otherwise been the most profitable part of Tata Steel's operations in the continent.
The job cut is part of a 'transformation programme,' which the company said was needed to urgently make the European operations cash positive in what is becoming an increasingly difficult market. Apart from the Netherlands, Tata Steel has units in Wales and other parts of Europe.
But the announcement seems to have taken workers in the Netherlands and Britain by shock. "The unions fear that the final number of job cuts may go higher," said an industry executive.
Union leaders, added another executive, are expected to make a presentation at the European Parliament on November 27. "They will voice against the job cuts. After this, there would be a voting among workers on whether to opt for an industrial action," added the official.
If they do vote for it, the workers could go on an industrial action, another term for strike.
What has also angered the workers is the belief that Tata Steel's management is going against a promise of job guarantee until 2021. The guarantee was made after the planned joint venture with German steelmaker thyssenkrupp had to be dropped after it was blocked by the European Commission.
A Reuters report quoted President of Tata Steel's European works council Frits van Wieringen warning of "a very serious confrontation in the Netherlands."
In 2015, members of four unions had voted in favour of going on a strike against the management's decision to stop the British Steel Pension Scheme. The unions eventually suspended the proposed industrial action after the two sides agreed to changes in the pension scheme.Tough market conditionsIn the second quarter, Tata Steel managed to hold on to profitability thanks to a tax write-back. Its consolidated revenue from operations fell 15.44 percent year-on-year to Rs 34,579.2 crore.
Globally, the industry has been facing a slump in demand and prices, even as raw material costs remain high.
The European operations have also suffered. "In the first six months of the current fiscal (starting April), Tata Steel Europe reported a 90 percent drop in EBITDA to 31 million pounds," the company said in a statement.
It also underlined the challenging market environment: "Stagnant EU steel demand and global overcapacity have been compounded by trade conflicts which have turned the European market into a dumping ground for the world’s excess steel capacity."
The proposed transformation plan has Tata Steel Europe targeting a positive cash flow by FY21-end. "It is also aiming for an EBITDA margin of around 10 percent throughout the market cycle. Based on FY19 revenue, this would equate to an EBITDA of 750 million pounds," the company said.
It's not just Tata Steel. ArcelorMittal, the world's largest steelmaker, also has been forced to shut plants, cut production and withdraw from acquisitions.But none of this would calm the nerves of the Tata Steel's workforce in the continent.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.