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Corus Strategic Initiative to Restructure Assets, Reduce Costs and Overhead

01/27/2009 - Corus announces a new series of strategic measures including divestments, asset restructuring and a company-wide efficiency and overhead review that could affect as many as 3500 jobs.

In its continued effort to improve its competitive position, Corus has announced it will undertake a series of strategic measures including divestments, asset restructuring and a company-wide efficiency and overhead review.
 
The announced initiative is strategic and structural in nature, and its elements comprise long-term plans that had already been under consideration. The company expects it to result in more than £200 million in annual improvements to operating profit, and to put around 3500 of the company’s approximately 42,000 jobs at risk. 
 
One key feature of the announced initiative, Divestments, has already included the sale of Corus’ aluminum smelters in Germany and the Netherlands (announced Jan 21). The company is also continuing advanced discussions on the sale of a majority stake in Teesside Cast Products, which the company said would bring further clarity to the future of the Teesside operations beyond the current off take agreement.
 
The initiative also addresses Asset Restructuring,  including mothballing the Llanwern hot strip mill; and the restructuring of engineering steels into two businesses: a specialty steels business at Stocksbridge (fed by electric furnace steel from Rotherham) and a bar business at Rotherham with steel sourced from the integrated works at Scunthorpe. The company also intends to streamline downstream facilities in Distribution, Building Systems and Tubes.
 
As part of the Efficiency and Overhead Review aspect of the announced initiative, Corus will undertake a company-wide efficiency improvement review, including a review of support functions such as IT, Finance and Human Resources. The company is targeting cost reductions in these areas of around 20%.
 
The company said that it also intends to make changes to the British Steel Pension Scheme. Although the scheme is currently in a healthy position, the company will, in line with market practice, close the Defined Benefit scheme to new recruits, who will be offered a Defined Contribution scheme. The company will take steps to ensure that the company contribution to future service for existing members remains at 12%.
 
“The structural changes we are proposing today have been carefully considered,” said Corus CEO Philippe Varin. “They are essential for the future of the business. The company will keep its focus on priority areas such as training, research and product development, which, together with today’s initiative, will ensure Corus is in the best possible shape to compete strongly in the future.”
 
The company said that it will make every effort to achieve the job losses through voluntary redundancies, while retaining critical skills within the business. The company also said it will offer a comprehensive range of redundancy packages and outplacement support services to those leaving the company, and intends to continue full consultations with employees and their representatives throughout the process. 
 
Corus had previously begun to address the effects of the economic downturn by launching a series of measures (4th quarter 2008) that are expected to yield about £600m in cash benefits in the six months to the end of March. In addition to these measures, the company has also been providing additional training to employees experiencing temporary work shortages. The company said it will continue to discuss with employee representatives options to match payroll costs with the new production and demand levels.
 
Corus is Europe's second-largest steel producer with annual revenues of more than £12 billion and crude steel production of about 20 million tonnes.  With main steelmaking operations primarily in the U.K. and the Netherlands, Corus supplies steel and related services to the construction, automotive, packaging, mechanical engineering and other markets worldwide.  Corus is a subsidiary of Tata Steel, one of the world’s top-ten steel producers. Following the acquisition of Corus in 2007, the combined enterprise has an aggregate crude steel capacity of more than 28 million tonnes and approximately 82,700 employees across four continents.