Union-hired consultant asks Tata Steel not to sell division

French consultancy Syndex insists long products unit is viable, needs more investments

France-based consultancy agency Syndex, hired by unions representing workers at Tata Steel Europe (TSE), has advised the latter against selling its long products division.

“Syndex's study has confirmed the long products business is viable as long as it gets some investment and remains under the Tata Group,” Harish Patel, acting national officer at Unite, the biggest workers' union in Britain, told Business Standard.

“The study has clearly indicated the division cannot exit independently and should be kept under arm's-length management, within the Tata family.”

The arm's-length principle is used mainly in contract law, to arrange an equitable agreement that will stand up to legal scrutiny, though the parties might have shared interests.

In October, Tata Steel had said it wished to sell the division, signing a memorandum of understanding for this with the Geneva-based Klesch group. In Britain, the agreement covers the Scunthorpe steelworks, mills at Teesside, Dalzell and Clydebridge in Scotland, an engineering workshop in Workington and a rail consultancy in York. And, operations in France and Germany.

“Tata Steel is looking into the report of Syndex. Though we do not know what the company has decided, we are hopeful it will not sell,” said Patel. He said they expected the company to make an announcement in a day or two.

Group executive director Koushik Chatterjee had earlier told Business Standard, “We communicate only through disclosure and the update on this will be in the next one, scheduled mid-May.”

TSE's long products business employs about 6,500 people. The unions say if the employees with contractors and the rest of the supply chain are included, the total could go up to 15,000. The division accounts for a fourth of Tata Steel’s European operations and produces about five million tonnes a year of long products, such as billets, wire rods and rails.

Tata Steel had invested £1.2 billion in its UK operations since acquiring Corus in 2007. Since then, it has been struggling to reap benefits from the huge investment made in the pre-global crisis period.