German heavy industry giant ThyssenKrupp and Indian group Tata agreed Wednesday to merge their steel operations in Europe, sending governments and unions scrambling to ward off job cuts. Once the deal is finalised in 2018, the two groups aim for efficiency savings of between 400 and 600 million euros ($480-720 million) per year - and are likely to shed 4,000 jobs in production and administration.
The combination would create Europe's second-largest steelmaker after ArcelorMittal, expected to produce around 21 million tonnes of steel per year for sales of 15 billion euros. The two sides plan a 50-50 joint venture, named "ThyssenKrupp Tata Steel", as a holding company in the Netherlands with joint management that will employ some 48,000 people across 34 sites. "We have found a European solution for a European industry," ThyssenKrupp chief executive Heinrich Hiesinger told reporters. He said the planned job cuts would be shared evenly with Tata, with ThyssenKrupp shedding a thousand jobs in production and another thousand in administration.
"This is not a pretty number, and it would not have been any better if we had stayed on our own," Hiesinger said. The merger comes as Europe and the United States have long complained of massive gluts in the world steel market caused by overproduction in China, with Washington launching investigations into the national security implications of Chinese competition.
"The steel industry has faced massive challenges in Europe for many years," ThyssenKrupp, a industrial conglomerate whose products range from lifts to car parts and submarines, said in a statement. "Steel demand is characterised by a lack of dynamic. There is structural overcapacity in supply and constantly high import pressure," it said, which has led to various stages in the value chain operating well below capacity.
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