Nine Years and Billions of Dollars Later, Tata Steel Calls it Quits in the United Kingdom
03/30/2016 - After spending billions to buy Anglo-Dutch steelmaker Corus in 2007, and then losing millions more on the investment, India’s Tata Steel has announced plans to sell its U.K. business, leaving thousands of jobs at risk.
Tata Steel’s board met on 29 March in Mumbai and agreed that the best course for the struggling business is to begin exploring restructuring options, “including the potential divestment of Tata Steel U.K., in whole or in parts.”
In a statement, the company said that while global steel demand, especially in developed markets like Europe, has remained muted following the financial crisis of 2008, the U.K. and European markets have rapidly deteriorated as of late owing to global overcapacity, competition from imports, high manufacturing costs, and continued weakness in domestic market demand.
“These factors are likely to continue into the future and have significantly impacted the long-term competitive position of the U.K. operations in spite of several initiatives undertaken by the management and the workers of the business in recent years,” the company said.
Tata Steel Europe’s U.K. operations include its integrated Port Talbot and Scunthorpe steel works' and its mini-mill in Rotherham, England. The Scunthorpe works is associated with Tata’s European long products business, which the company is looking to sell to investment firm Greybull Capital.
Union leaders had traveled to Mumbai to present a turnaround plan for the rest of the business. The board, however, rejected the plan, saying it had a low likelihood of success.
“Based on the review conducted, the Tata Steel board came to a unanimous conclusion that the plan is unaffordable; requires material funding support in the next two years in addition to significant capital commitments over the long term; the assumptions behind it are inherently very risky; and its likelihood of delivery is highly uncertain. Therefore, the board concluded that it would not be able to support the investment necessary to proceed,” it said in a statement.
Len McCluskey, the general secretary of the Unite union, said workers undoubtedly will feel betrayed by the decision, according to the Belfast Telegraph newspaper.
“This news will leave workers and families not just in Port Talbot but in Rotherham and Stocksbridge reeling. Steel is in the veins of these communities. These workers make some of the best steel in the world and have worked hard to deliver for Tata, through thick and thin times,” he said.
“This is a dark day for the proud communities and a proud industry which is now on the verge of extinction.”
Member of Parliament and Industry minister Anna Soubry said the British government would consider temporarily nationalizing the business and running it until a buyer could found
"That is an option. We have looked at all options. I don't know whether 'own' would be the right word, but we continue to look at all options, and I do mean all options," she told The (London) Telegraph newspaper.
Tata said it has been in talks with the British government to achieve “the best possible outcome” for the business.
“These discussions are ongoing and will continue,” it said.
Tata bought Corus Steel in 2007, just a year before the global economic crisis. The deal made Tata the world’s fifth-largest steelmaker, taking its capacity from 8.7 million metric tons to 25 million metric tons, according to the online publication Quartz.
But in hindsight, the timing couldn’t have been worse, especially as Tata had to pay a premium for the business to overcome a competing offer from Brazil’s Companhia Siderurgica Nacional.
"If one had known there was going to be a meltdown, then yes (Tata went too far), but nobody knew,” Tata’s Ratan Tata told The (India) Economic Times in a 2009 interview.
The Telegraph described the announcement as a hammer blow to U.K. steelmaking. Member of Parliament and Labour Party leader Jeremy Corbyn has said Parliament, which is in Easter recess, should be recalled immediately to discuss the crisis.
“The news that Tata is preparing to pull out of steelmaking in Britain puts thousands of jobs across the country and a strategic U.K.-wide industry at risk. MPs must have the chance now to debate the future of steel and hold ministers to account for their failure to intervene," he said, according to The Guardian newspaper.
In a statement, the company said that while global steel demand, especially in developed markets like Europe, has remained muted following the financial crisis of 2008, the U.K. and European markets have rapidly deteriorated as of late owing to global overcapacity, competition from imports, high manufacturing costs, and continued weakness in domestic market demand.
“These factors are likely to continue into the future and have significantly impacted the long-term competitive position of the U.K. operations in spite of several initiatives undertaken by the management and the workers of the business in recent years,” the company said.
Tata Steel Europe’s U.K. operations include its integrated Port Talbot and Scunthorpe steel works' and its mini-mill in Rotherham, England. The Scunthorpe works is associated with Tata’s European long products business, which the company is looking to sell to investment firm Greybull Capital.
Union leaders had traveled to Mumbai to present a turnaround plan for the rest of the business. The board, however, rejected the plan, saying it had a low likelihood of success.
“Based on the review conducted, the Tata Steel board came to a unanimous conclusion that the plan is unaffordable; requires material funding support in the next two years in addition to significant capital commitments over the long term; the assumptions behind it are inherently very risky; and its likelihood of delivery is highly uncertain. Therefore, the board concluded that it would not be able to support the investment necessary to proceed,” it said in a statement.
Len McCluskey, the general secretary of the Unite union, said workers undoubtedly will feel betrayed by the decision, according to the Belfast Telegraph newspaper.
“This news will leave workers and families not just in Port Talbot but in Rotherham and Stocksbridge reeling. Steel is in the veins of these communities. These workers make some of the best steel in the world and have worked hard to deliver for Tata, through thick and thin times,” he said.
“This is a dark day for the proud communities and a proud industry which is now on the verge of extinction.”
Member of Parliament and Industry minister Anna Soubry said the British government would consider temporarily nationalizing the business and running it until a buyer could found
"That is an option. We have looked at all options. I don't know whether 'own' would be the right word, but we continue to look at all options, and I do mean all options," she told The (London) Telegraph newspaper.
Tata said it has been in talks with the British government to achieve “the best possible outcome” for the business.
“These discussions are ongoing and will continue,” it said.
Tata bought Corus Steel in 2007, just a year before the global economic crisis. The deal made Tata the world’s fifth-largest steelmaker, taking its capacity from 8.7 million metric tons to 25 million metric tons, according to the online publication Quartz.
But in hindsight, the timing couldn’t have been worse, especially as Tata had to pay a premium for the business to overcome a competing offer from Brazil’s Companhia Siderurgica Nacional.
"If one had known there was going to be a meltdown, then yes (Tata went too far), but nobody knew,” Tata’s Ratan Tata told The (India) Economic Times in a 2009 interview.
The Telegraph described the announcement as a hammer blow to U.K. steelmaking. Member of Parliament and Labour Party leader Jeremy Corbyn has said Parliament, which is in Easter recess, should be recalled immediately to discuss the crisis.
“The news that Tata is preparing to pull out of steelmaking in Britain puts thousands of jobs across the country and a strategic U.K.-wide industry at risk. MPs must have the chance now to debate the future of steel and hold ministers to account for their failure to intervene," he said, according to The Guardian newspaper.
