Tata Steel and German industrial group Thyssenkrupp have signed a memorandum of understanding in what marks the first step towards a merger of the two companies.
An announcement on the move made on Wednesday morning said Thyssenkrupp and Tata’s European operations would join forces in a 50/50 venture which could see some job losses further down the line in the UK.
Tata Steel, which is Britain’s biggest steel producer, hit the headlines last year when it put its entire UK operations up for sale amid a deteriorating industry environment.
But the Indian-owned firm paused its plans after pledges of Government support and an agreement to restructure its hefty pension scheme.
The joint venture with Thyssenkrupp will result in a total workforce across Europe of around 48,000 employees.
It is expected the deal could be closed by the end of next year.
The announcement was met with cautious optimism by steel unions in the UK but they said they would be seeking commitments over job protections going forward.
Tata Steel and Thyssenkrupp said they would begin a review of their joint operations in 2020, provided the merger is officially agreed.
This could lead to as many as 4,000 job losses, with the burden expected to be equally shared between Thyssenkrupp’s German workforce and Tata’s European employees.
But Thyssenkrupp’s chief executive, Heinrich Hiesinger, was careful to point out that both companies would have had to make cuts regardless of the merger deal.
“We will not be putting any measures into effect in the joint venture that we would not have had to adopt on our own,” he said.
“On the contrary: by combining our steel activities, the burdens for each partner are lower than they would have been on a stand-alone basis.”
Business Secretary Greg Clark lauded the announcement as an “important step” in safeguarding the future of the steel industry in the UK.
“The Government has been working hard with the unions to secure a sustainable future for Tata Steel in the UK, its 4,000 employees at the Port Talbot site and its supply chain,” he said.
“Today’s agreement between Tata Steel and Thyssenkrupp is an important next step in establishing their shared ambition for Port Talbot as a world-class steel manufacturer, with a focus on quality, technology and innovation.”
Source: Sky News