Tata Steel has refused to guarantee the future of the Port Talbot works, saying there are “multiple elements” that need to be overcome in order to secure a rescue deal for its UK business.
Koushik Chatterjee, executive director of Tata Steel Europe, warned on Monday that the steel industry faced immense challenges and the company needed to build a sustainable business.
The Indian company announced on Friday night that it was halting the sale of its UK business, which employs 11,000 people. Instead it is looking to keep Tata Steel UK by merging its European steel operations with another steel company and is in talks with German conglomerate ThyssenKrupp.
However, Chatterjee said the future of the Port Tablot plant and its 4,000 employees could not be guaranteed even if a joint venture was agreed.
“I think it is important to look at it from the prism of a competitive business rather than sitting on any firm guarantees because at the end of the day the volatility of the market and the risks to performance have to be mitigated by building a structurally competitive business … There are a lot of stakeholders in this whole issue and we would like to find a balance in ensuring that we find the right outcome.”
Chatterjee declined to put a time frame on completing a joint venture with ThyssenKrupp or another steel company. He warned that any deal is subject to reaching an agreement with the UK government about financial support and restructuring its pension scheme, which has a deficit of £700m and liabilities of almost £15bn.He denied that Tata Steel was waiting for the government to confirm its financial support before guaranteeing the future of Port Talbot.
“It is about three or four things together,” he said. “It is about own internal plan being made more robust, it is about the government policy of both the Welsh government and the UK government, and then we have to get to the answer on pensions and look at a satisfactory conclusion to our engagements with the unions.”
Asked if he had a message for workers at the plant, Chatterjee said: “I think from a Port Talbot employee perspective, it’s best that they continue to work as hard as they always do, ensuring the performance of the business makes a great case for the future sustainability of Port Talbot.”
He also played down the threat of Brexit harming the future of its UK business, saying it is “too early to make a call on whether it is good, bad or otherwise”.
Tata Steel announced in March it was considering pulling out of its UK business, sparking heavy criticism of the government for not dealing with the crisis in the steel industry.
The company began a sales process and seven potential bidders were shortlisted. However, it decided to work on a deal to keep its UK concern after the government pledged to offer financial support.
Chatterjee said the talks with ThyssenKrupp did not represent a change of strategy because Tata had always said it would look at all options.
The government has said a package of financial aid worth hundreds of millions of pounds is still available to the Port Talbot works despite Tata Steel scrapping plans to sell the site.
Sajid Javid, the business secretary, said the government was committed to securing the future of the steelworks in south Wales and was in “close contact” with Tata Steel.
In a written statement to parliament, Javid said he had met the chairman of Tata, Cyrus Mistry, in Mumbai on Friday and been assured that the company was committed to securing a deal with “the best long-term prospects for a competitive and sustainable future” for Port Talbot and the rest of its UK business.
The government has offered loans on commercial terms of up to £1bn to support Tata Steel UK, potentially in return for a 25% stake in the business. Javid has also revealed plans to restructure the pension scheme.
The government has drawn up a plan with trustees and trade unions that would see the scheme spun off into a new shell company and the inflation-linked annual increase benchmarked against the consumer price index rather than the retail price index, potentially saving billions of pounds in future liabilities.
However, the Pension Protection Fund and some MPs have said this could create a dangerous precedent and encourage other companies to walk away from their pension liabilities. A consultation on the changes finished last month, but the government is yet to make a further announcement.
Stephen Kinnock, the Labour MP whose constituency covers Port Talbot, said: “Steelworkers and their families have been put through hell over the last weeks and months, and they will be forgiven for greeting today’s announcement with a degree of scepticism, and concern.
“Any developments that offer the possibility of investment and engagement that would secure a sustainable future for the British steel industry are welcome, in principle. However, in practice there are serious questions to be answered around the joint venture proposal.”