TATA STEEL AND CORUS MERGER CASE STUDY

Topics: European Union, United Kingdom, Steel Pages: 4 (1096 words) Published: March 27, 2014
Tata Steel and Corus Deal
Tata Steel Europe (formerly Corus), a subsidiary of Tata Steel, last fortnight announced that it is restructuring its construction steel business, which will affect 500 jobs. This sent out another signal that Tata Steel is grappling with an acquisition which -at $13 billion- was too expensive and came at the wrong time. In 2007, the demand for steel was at its peak in Europe. A little over a year later, it plummeted, thanks to the economic meltdown triggered by the collapse ofLehman Borthers. Tata Steel Europe catered to Europe. It wasn't possible for the company to make steel there and ship it to China, the largest consumer of steel in the world, because it was adding fresh capacity at a feverish pace.

In the last few years, Tata Steel has undertaken several initiatives to save costs and to align supply with the falling demand. While these initiatives have resulted in thousands of job cuts, the worsening demand in Europe has far outpaced the benefits on the cost side. The latest restructuring will affect management and administrative functions at its plants in Scunthorpe, Teesside and Workington in the United Kingdom. "The proposals come amid a prolonged downturn in demand for some of the key products made by the Scunthorpe-based business, including the UK market for construction steel, which is about half of 2007 levels," the company said in a release. Earlier this year, Tata Steel announced a $1.6 billion write-down, primarily on account of its European business.

But the recent downsizing is also a part of the plan to save the business. Some analysts see it as Tata Steel Europe shuttering businesses that are no longer competitive and reallocating resources to specialty, higher-grade and value-added steel. Thus, the company has announced that it will build a new £15-million furnace at its Stocksbridge site in the UK, which it expects to commission in early 2015. The new furnace will enable Tata Steel Europe to address demand...
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