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New steel venture

First merger steps for Tata and Thyssenkrupp
Hajera Blagg, Wednesday, September 20th, 2017


German steel company Thyssenkrupp and Tata Steel today (September 20) announced that they had taken the first step in merging their European operations after signing a memorandum of understanding proposing a 50/50 joint venture.

 

An eventual merger will make the future joint company Europe’s second largest steel group after ArcelorMittal.

 

The joint venture, which will be called Thyssenkrupp Tata Steel, will have an annual turnover of £13.3bn, nearly 50,000 employees and annual shipments of about 21m tonnes of flat steel. The new merger will be based in Amsterdam.

 

Thyssenkrup and Tata have said they expect about 4,000 job losses between the two companies as they consolidate their operations, but Roy Rickhuss, chair of the National Trade Union Steel Co-ordinating Committee, of which Unite is a part, said he expected the “vast majority” of any job losses will not be in the UK.

 

“While a merger of this size will inevitably mean a review of support functions such as HR and IT, the vast majority of these roles are no longer located in the UK,” he explained.

 

“We have been assured there will be no asset closures or reductions in production capacities across the UK. If the company does seek to implement compulsory redundancies we will fight that using every necessary means.”

 

After taking further steps including due diligence and securing approval from shareholders and relevant authorities, the joint venture is expected to be up and running by late next year.

 

Steel unions Unite, Community and GMB said in a joint statement that they “cautiously welcome” the announcement.

 

‘Industrial logic’
“There is undoubtedly an industrial logic behind a partnership that would create the second biggest steel business in Europe with all the benefits that could bring for the UK,” the unions said.

 

“Measures to reduce the debt burden on the UK are extremely welcome, as is the proposed new £300m facility to fund working capital and free up money for capital investment,” the unions noted. “We also welcome Tata’s commitment that there will be no asset closures, or indeed any reductions in production capacities.”

 

The merger between ThyssenKrupp and Tata Steel was made possible in the first place after steel workers at Port Talbot and other UK sites agreed to a change in their pension scheme in exchange for assurances over jobs and long term investment.

 

No compulsory redundancies
As part of that deal, Tata Steel committed to £1bn in investment to modernise its operations over the next 10 years, and pledged to keep its two-blast furnace operation at Port Talbot steelworks for the next five years. Under the plan, no compulsory redundancies will be made also for the next five years, in effect preserving 8,000 jobs.

 

Now, Unite, GMB and Community are seeking further assurances as Tata Steel in Europe is set to merge with its German rival.

 

The unions said “as always, the devil will be in the detail” and that they are urgently seeking assurances on jobs, investment and future production across the UK operations.

 

“In particular we will be pressing Tata to demonstrate their long term commitment to steelmaking in the UK by confirming they will invest in the reline of Port Talbot’s blast furnace number 5,” the unions highlighted.

 

“We must also be assured that ThyssenKrupp’s pension liabilities will be ring-fenced with a cast-iron guarantee that UK steelworkers will never fund German pensions.

 

“We are now seeking an urgent meeting with Tata to fully understand their intentions for the UK in the context of the joint venture. We are also making arrangements to bring together senior representatives from across the UK to determine our approach to this significant new development.’

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