Tata Steel and German steel manufacturer ThyssenKrupp have agreed the first stage of a deal to merge the two companies.
The companies have signed a Memorandum of Understanding (MoU) in 50:50 joint venture for their European assets.
The new entity is set to have sales of around €15 billion and a workforce of about 48,000, currently at 34 locations.
Dr. Heinrich Hiesinger, CEO of thyssenkrupp AG:
“Under the planned joint venture, we are giving the European steel activities of thyssenkrupp and Tata a lasting future. We are tackling the structural challenges of the European steel industry and creating a strong No. 2. In Tata, we have found a partner with a very good strategic and cultural fit. Not only do we share a clear performance orientation, but also the same understanding of entrepreneurial responsibility toward workforce and society.”
The proposed joint-venture aims to create a more efficient and competitive steel making business, however, there will be a reduction of ‘overlapping roles’.
“The two joint venture partners expect that leveraging the cost synergies across the entire entity will require a reduction in workforce over the years ahead by up to 2,000 jobs in administration and potentially up to 2,000 jobs in production. This burden is expected to be shared roughly evenly between the two parties, which means a total of about 2,000 jobs at thyssenkrupp.’ A statement from the German company says.
Tata Steel say:
“One of the reasons for working towards the realisation of the proposed joint-venture is the opportunity to be more efficient by reducing overlapping roles. According to our current estimate, around 2,000 jobs in administration and support services and potentially up to 2,000 jobs in the downstream sites or standalone businesses are in scope.
Those would be jointly shared between Tata Steel and thyssenkrupp. Both partners are committed to undertake the appropriate consultation process with the relevant unions and works councils in the most responsible way.”
Unions have reacted to this mornings announcement, the National Trade Union Steel Coordinating Committee said in a statement:
‘We cautiously welcome the announcement that Tata has signed an MOU with ThyssenKrupp regarding a potential joint venture. There is undoubtedly an industrial logic behind a partnership which would create the second biggest steel business in Europe with all the benefits that could bring for the UK.
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. We also welcome Tata’s commitment that there will be no asset closures, or indeed any reductions in production capacities.
However of course, as always, the devil will be in the detail and we are seeking further 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 No.5. 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.’
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. 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.’