MUMBAI: Under the chairmanship of Ratan Tata, steelmaker Tata SteelBSE 4.39 % has reached a deal with the agitating trade unions of Tata Steel UK plant to invest 1 billion pounds in the loss making Port Talbot steel plant over the next 10 years, and also to avoid any compulsory job redundancies.
Tata Steel also started a process to close the expensive British Pension Scheme replace it by defined contribution scheme, which will lower uncertainty in payouts. The new scheme will have a maximum contributions of 10% from the company and 6% from employees, the unions said in a statement.
The unions added that according to the deal, apart from the comprehensive ten year 1 billion pound investment plan to support steel making at Port Talbot, Tata Steel will also secure the future of the downstream sites. Tata Steel said the Port Talbot plant will continue the existing blast furnace configuration in Port Talbot until 2021. Future investments will continue based on financial performance in the next 5 years.
Tata Steel's new strategy to continue to invest in UK is in sharp contrast to former Chairman Cyrus Mistry's strategy to either exit or merge UK steelmaking operation without any commitment on jobs. The company did not give any clarity on the ongoing discussion to merge with Thyssenkrupp.
“Tata Steel UK has developed a long-term investment plan to make the business more competitive in the future," said Koushik Chatterjee, Group Executive Director at Tata Steel and Executive Director for its European business.
"These significant commitments on production, jobs and investment are welcome. However to close the British Steel Pension Scheme (BSPS) is of concern. After a detailed discussion, union reps have agreed to ballot all members on the proposal in the new year," said steel union Community in a statement.
Chatterjee added that the implementation of the transformation plan in the next couple of years, combined with a solution for the British Steel Pension Scheme fund, is essential to provide financial self-sufficiency for future investments and service financial obligation to stakeholders.
Tata Steel's UK operations have been saddled with a huge pension liability of 15 billion pounds for its 1.4 lakh employees including current and retired employees.
Tata Steel said it also offered an employment pact until 2021 which supports employees through future changes by investing in their skills to support further plant upgrades, automation and other digital initiatives.