Tata Steel, the Indian group that has signed a joint venture with Germany’s ThyssenKrupp to combine their European steel businesses, says there will be 4,000 job losses in the combined business, that will create Europe’s second largest steelmaker.
Talks over the joint venture which will be second only in Europe, behind ArcelorMittal, with €15bn in revenues, have dragged on for more than two years, with a memorandum of understanding signed last September.
Since then, ThyssenKrupp has come under increasing pressure from activist hedge fund Elliott Management, which has reportedly taken a stake in it and voiced concern about whether the German industrial group, after moving too slowly for years, is now moving too hastily to finalise the Tata Steel venture.
Hans Fischer, Tata Steel’s European chief executive, said none of the job losses would be compulsory. He said 2,000 jobs would go through the sale of non-core businesses, such as electrical steel processor Cogent Power. The rest would be split equally between Tata Steel Europe and Krupp Steel as a result of “direct synergies”.
Tata announced it was looking to sell Cogent in May this year.
Mr Fischer said the redundancy split had yet to be developed, but added: “We have guaranteed no compulsory redundancies. If we are starving with executing that, we will have to find solutions for how to manage this at the end.”
Roy Rickhuss, General Secretary of Community, the UK steelworkers’ union, said the joint venture had the potential to safeguard jobs and steelmaking for a generation. “However, this joint venture will only succeed if the necessary strategic investments are made to allow the business to thrive,” he said.
Blast Furnace 5 at Port Talbot steelworks, one of the last vestiges of heavy industry in Wales, would receive mid-tens of millions of pounds in investment, Bimlendra Jha, UK chief executive of Tata Steel said.
Port Talbot’s local MP, Stephen Kinnock, said the joint venture was “good news for the steelworkers,” but he added that “sustained investment in the plant is needed over and above the currently committed work,” to ensure the future of the plant and of UK steel more broadly.
He welcomed the commitment to avoid compulsory redundancies before 2026 and to invest the first £200m of operating profits back into the business, but warned about the challenges that Brexit and Donald Trump’s steel tariffs posed.
In the Netherlands, where Tata runs the large IJmuiden plant, there also an employment pact to 2026 and a commitment to no compulsory redundancies.
Mr Jha said he hoped the UK and EU would reach an agreement on Brexit, but “nobody seems to know where we are going”. If they did not agree, “it will be a sorry state of affairs and we’ll cross that bridge when it comes”.
On US president Donald Trump’s steel tariffs, Mr Jha said: “We are hoping that the UK and EU put protective measures for any dumping that happens as a result of material not flowing into the US. Otherwise it does threaten our industry locally in Europe and the UK.”
The 50/50 joint venture is expected to create synergies of between €400m and €500m a year, ThyssenKrupp said on Friday. In the event of an initial public offering of the joint venture, ThyssenKrupp would receive a higher portion of the proceeds, with an economic relationship of 55/45 in its favour, the statement said.
The venture, which must be approved by relevant competition authorities — including those in the EU — would cap an eight-year restructuring of ThyssenKrupp, a 200-year-old conglomerate spanning elevators to submarines.
Since the memorandum of understanding was agreed last year, the German group’s earnings have risen while those from Tata Steel Europe have underwhelmed. The diverging performance of the two companies has upset ThyssenKrupp shareholders, which the 55/45 distribution in case of an IPO appeared to acknowledge.