Industryweek 11797 083116 Europe Steel

ThyssenKrupp-Tata Talks Focusing on UK Unit Value

Aug. 31, 2016
Dinged by Chinese exports flooding the market, European steel companies are struggling with overcapacity. Combining forces could enable Europe’s second- and third-biggest steelmakers to better use their facilities and cut costs.

ThyssenKrupp AG and Tata Steel Ltd.’s attempts to combine their European steel operations are centered on how to value Tata’s troubled U.K. assets, according to people familiar with the matter.

While ThyssenKrupp is open to integrating Tata’s British unit in the joint venture, the Essen, Germany-based company wants Tata to find a way to fund its U.K. pension-scheme obligations as a precondition, the people said, asking not to be identified because the negotiations are private. Tata wants to include the U.K. division in the ThyssenKrupp project, which would give it a bigger stake in the overall venture, one of the people said.

A representative for Tata declined to comment. A spokesman for ThyssenKrupp reiterated the company’s July statement that it wouldn’t comment on talks with Tata until there are material developments.

The British Steel Pension Scheme had a deficit of about 300 million pounds ($393.88 million) as of March on a “consistent basis,” the fund said in a statement to members this month. That’s down from 485 million pounds ($636.77 million) a year earlier, according to its annual report.

Tata is looking for “more sustainable solutions” for its European business and it “would not be realistic to expect that a buyer of the U.K. business or a joint venture would take on responsibility for funding the current or future deficit,” the pension scheme said.

European steelmakers are struggling with overcapacity, worsened by Chinese exports flooding the market. Combining forces would enable Tata, Europe’s second-biggest steelmaker, and third-ranked ThyssenKrupp to better use their facilities and cut costs.

Mumbai-based Tata said last month that it’s in talks with companies, including ThyssenKrupp, about a joint venture. The German steelmaker has been pushing for consolidation in the European industry, which struggles with a “nightmare” of low prices, CEO Heinrich Hiesinger said in June.

Thousands of ThyssenKrupp workers demonstrated against consolidation and restructuring in front of the steel unit’s headquarters in Duisburg, Germany on Wednesday.

“The meaningfulness of a consolidation doesn’t explain itself,” Detlef Wetzel, who represents the IG Metall labor union as deputy chairman of the unit’s supervisory board, told the demonstration. He urged the company’s executives to justify why and how they plan to cut costs by as much as 1.6 billion euros ($1.78 billion), which may include site closures. “Take the staff’s concerns seriously!”

Tata said in March that it would consider selling its U.K. operations after years of losses.

By Tino Andresen, Siddharth Philip and Aaron Kirchfeld

Popular Sponsored Recommendations

Shop Floor Optimization Solves Manufacturers’ Labor Challenges

Dec. 27, 2023
Read this FAQ to learn how mid-market manufacturers can use technology to optimize their shop floors and make better use of their available labor forces.

Transformative Capabilities for XaaS Models in Manufacturing

Feb. 14, 2024
The manufacturing sector is undergoing a pivotal shift toward "servitization," or enhancing product offerings with services and embracing a subscription model. This transition...

How to Build a Predictive Maintenance Program: Lessons Learned from LSB Industries’ Success

Dec. 21, 2023
Register today and join this webinar to gain insight on best practices for setting up a predictive maintenance program from industry experts.

Sprint Implementation for Digital Transformation

Feb. 1, 2024
Discover a revolutionary approach to digital transformation. Uncover the flaws in current methods that cause 70% project failure rate. Learn how sprint implementation can maximize...

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!