German heavy industry giant ThyssenKrupp AG and Indian group Tata yesterday agreed to merge their steel operations in Europe, sending governments and unions scrambling to ward off job cuts.
Once the deal is finalized next year, the two groups aim for efficiency savings of between 400 and 600 million euros (US$480 to US$720 million) per year — and are likely to shed 4,000 jobs in production and administration.
The combination would create Europe’s second-largest steelmaker after ArcelorMittal SA, expected to produce about 21 million tonnes of steel per year for sales of 15 billion euros.
Photo: AP
The two sides plan a 50-50 joint venture, named “ThyssenKrupp Tata Steel,” as a holding company in the Netherlands with joint management that will employ about 48,000 people across 34 sites.
“We will not be putting any measures into effect in the joint venture that we would not have had to adopt on our own,” ThyssenKrupp chief executive Heinrich Hiesinger said in a statement.
“The steel industry has faced massive challenges in Europe for many years,” said the conglomerate, whose products range from lifts to car parts and submarines.
“Steel demand is characterized by a lack of dynamic. There is structural overcapacity in supply and constantly high import pressure,” it said.
This meant that various stages in the value chain were operating well below capacity.
Unless industry players took action, ThyssenKrupp said, major steel assets would come “under threat of closure in the medium term.”
The “declaration of intent” signed between the two groups must still be approved by competition authorities.
Worker representatives in Germany, where ThyssenKrupp employs about 27,000 people in its steel division, were quick to voice fears over the planned tie-up.
“The board has bet everything on a single card in the face of all the warnings,” works council chief Guenter Back told Deutsche Presse-Agentur, adding that “significantly more” job cuts would likely follow those announced yesterday.
Trade unions at ThyssenKrupp have for months been fearing news of job losses, enlisting help from Berlin to put pressure on the firm.
The jobs tussle is set to intensify this weekend, as ThyssenKrupp must submit the proposal to its supervisory board — where worker representatives hold half of the seats — for approval.
However, British Secretary of State for Business, Energy and Industrial Strategy Greg Clark hailed an “important step” for Britain’s steel industry.
London hopes the deal will secure the future of Tata Steel Ltd’s 4,000-strong site at Port Talbot in Wales, which sits at the heart of the local economy.
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