Tata Warned on Damage to Reputation Over Steel Plant Decision

28 March 2016

The British government has warned Tata Steel that it faces damage to its international reputation if it decides to close the UK’s biggest steelworks at a crunch board meeting in India on Tuesday.

Ministers hope the company will give some “breathing space” to help management of the Port Talbot plant in south Wales turn it round as it navigates an “extremely difficult” situation.

“But our fear is that they will simply close it,” said one senior government figure. “That would put Tata’s reputation through a shredding machine.”

A global supply glut and low prices have severely damaged the UK steel industry, which has shed thousands of jobs and is struggling to survive after decades of decline.

The Port Talbot site is the UK’s biggest steel plant, with a workforce of 4,000. It produces 4m tonnes a year for use in cars, white goods, food cans and coins.

Closure would harm the government’s hopes of rebalancing the economy towards manufacturing and would fuel criticism that ministers have not done enough after the Redcar steelworks in north-east England shut in October with the loss of 2,200 jobs.

The management at Port Talbot has put forward a restructuring package, with the target of moving from heavy losses into profit. The two-year plan involves cost savings of £350m — partly through 750 job cuts announced in January — and would require new investment.

The government is on standby to offer support but is first waiting for a commitment from Tata. Ministers also believe the business could raise money by selling land and making more use of the local port.

However, the steelworks is ultimately at the mercy of Tata’s board in India, which on Tuesday will discuss the matter and must sign off any plan. The group has ploughed about £3bn into its European operations since acquiring Anglo-Dutch steelmaker Corus for £6.2bn in 2007.

There are fears local management will be given only a year to turn around the business, which some employees believe is an unrealistic timeframe.

Possible options before the Tata Steel board include a full closure of the site, one of the UK’s last two remaining integrated steelworks that produce the metal from raw materials.

An alternative is to close the “heavy end” of raw steelmaking, keeping only rolling and pressing functions.

However, people familiar with the business said it was possible no final decision would be taken on Tuesday.

Stephen Kinnock, the local Labour MP for Aberavon, is travelling with trade union officials to Mumbai ahead of the meeting. He said: “There’s a turnround plan that has been in place for some time and the unions and I think the workforce can deliver that plan. Of course, there is some short-term pain for some long-term gain there. The workforce has done a fantastic job and they can make the plan work. The Tata Steel board has to hold its nerve and back the plan.”

Separately, the government is understood to be in talks to extend a commercial loan to help fund a £400m rescue plan for Tata’s long products business, based at the Scunthorpe steelworks, which it is selling to investment firm Greybull Capital.

Last week Scotland’s last two main steel mills were offloaded by Tata to commodities trader Liberty House. The steel industry says high energy prices and dumping at low prices by China have contributed to the crisis.

 

Source : ft.com

Tata Warned on Damage to Reputation Over Steel Plant Decision

28 March 2016

The British government has warned Tata Steel that it faces damage to its international reputation if it decides to close the UK’s biggest steelworks at a crunch board meeting in India on Tuesday.

Ministers hope the company will give some “breathing space” to help management of the Port Talbot plant in south Wales turn it round as it navigates an “extremely difficult” situation.

“But our fear is that they will simply close it,” said one senior government figure. “That would put Tata’s reputation through a shredding machine.”

A global supply glut and low prices have severely damaged the UK steel industry, which has shed thousands of jobs and is struggling to survive after decades of decline.

The Port Talbot site is the UK’s biggest steel plant, with a workforce of 4,000. It produces 4m tonnes a year for use in cars, white goods, food cans and coins.

Closure would harm the government’s hopes of rebalancing the economy towards manufacturing and would fuel criticism that ministers have not done enough after the Redcar steelworks in north-east England shut in October with the loss of 2,200 jobs.

The management at Port Talbot has put forward a restructuring package, with the target of moving from heavy losses into profit. The two-year plan involves cost savings of £350m — partly through 750 job cuts announced in January — and would require new investment.

The government is on standby to offer support but is first waiting for a commitment from Tata. Ministers also believe the business could raise money by selling land and making more use of the local port.

However, the steelworks is ultimately at the mercy of Tata’s board in India, which on Tuesday will discuss the matter and must sign off any plan. The group has ploughed about £3bn into its European operations since acquiring Anglo-Dutch steelmaker Corus for £6.2bn in 2007.

There are fears local management will be given only a year to turn around the business, which some employees believe is an unrealistic timeframe.

Possible options before the Tata Steel board include a full closure of the site, one of the UK’s last two remaining integrated steelworks that produce the metal from raw materials.

An alternative is to close the “heavy end” of raw steelmaking, keeping only rolling and pressing functions.

However, people familiar with the business said it was possible no final decision would be taken on Tuesday.

Stephen Kinnock, the local Labour MP for Aberavon, is travelling with trade union officials to Mumbai ahead of the meeting. He said: “There’s a turnround plan that has been in place for some time and the unions and I think the workforce can deliver that plan. Of course, there is some short-term pain for some long-term gain there. The workforce has done a fantastic job and they can make the plan work. The Tata Steel board has to hold its nerve and back the plan.”

Separately, the government is understood to be in talks to extend a commercial loan to help fund a £400m rescue plan for Tata’s long products business, based at the Scunthorpe steelworks, which it is selling to investment firm Greybull Capital.

Last week Scotland’s last two main steel mills were offloaded by Tata to commodities trader Liberty House. The steel industry says high energy prices and dumping at low prices by China have contributed to the crisis.

 

Source : ft.com