Further supplementary memorandum submitted
by the Iron and Steel Trades Confederation
1.1 ISTC is the UK's largest steel union
and the largest union in Corus.
1.2 When Corus was created in 1999 it employed
33,000 people in the UK. Following the redundancy announcements
of June 2000 and February 2001 this will be reduced to 22,000
by 2003a reduction of over a third.
1.3 UK steelworkers are the most productive
in Europe, and at least as productive as the best American and
1.4 Corus has rejected offers from the ISTC
and other trade unions to work in partnership for the good of
the company, its employees and its shareholders.
1.5 Corus has not engaged in discussions
with the ISTC about possible action to weather its short-term
difficulties. The ISTC calls on Corus to think again.
1.6 Corus rejected discussions with an ISTC-led
consortium to take-over Llanwern.
1.7 Corus had made no significant investment
in the UK since the merger. Its restructuring review contained
no plansit merely intends to "sweat" its UK assets.
This places a question mark over the company's long-term commitment
to steel making in the UK.
1.8 The reversal of strategy by Corus towards
its Workington rail plant shows both its lack of understanding
of likely future demand and how quickly market conditions can
1.9 Corus have adopted a contradictory position
on the Euro. Corus has stated publicly that it has not been their
major business concern on some occasions and subsequently that
the Euro was dramatically affecting their business position. The
company cannot appear to make up its mind on the issue.
1.10 Corus have rejected all offers by the
ISTC to make joint representations on the Sterling-Euro imbalance.
1.11 Corus should be seeking to compete
in the Single European Steel market, not merely trying to protect
its own UK dominance.
1.12 The ISTC believes that the ease with
which UK employees can be dismissed promotes overtime and redundancy
as the flexibility adapted by bad employers. This "boom and
bust" approach is hampering the UK's international competitiveness.
1.13 The UK Government needs to adopt a
strategy to preserve this important strategic industry.
1.14 All the promises made by the ISTC and
the other unions since the merger have been kept: all the promises
made by the company have been broken.
2.1 The ISTCthe Community Union welcomes
the opportunity to submit a supplementary memorandum of evidence
to the House of Commons Trade and Industry Select Committee's
inquiry into the future of the UK Steel Industry.
2.2 The ISTC is the UK steel industry's
major trade union, representing between 70 and 80 per cent of
the UK steelworkers. The union represents the largest number of
workers employed by Corus.
The ISTC and other unions representing Corus employees have pressed
consistently for consultations with the company in advance of
the announcement of major restructuring plans. However, despite
promises that consultation would be extended, the unions have
never had the opportunity to see or to discuss the company's proposals
before they were announced publicly.
2.3 The ISTC have previously submitted written
and oral evidence to the Select Committee during the course of
its inquiry. However, the major upheavals affecting Corus, the
UK's dominant steel company, since the resignation of the Joint
Chief Executive John Bryant and Fokko van Duyne on 5 December
threaten the future development of the company and the strategic
interests of the United Kingdom in having a modern efficient steel
industry capable of providing competitively a full range of steel
products for other manufacturing industries and for the defence
sector. Consequently the union felt it appropriate to submit further
2.4 Corus is the UK's largest steel producer,
with a market share of between 52 per cent to 54 per cent in carbon
steel products in the United Kingdom (UK). Prior to the 4,500
redundancies it announced on 16 June 2000, Corus employed 33,000
people in the UK.
2.5 On 1 February 2001 Corus announced a
further 6,050 redundancies in its UK operations by 2003. This
does not include former Corus employees whose posts have been
contracted out in the last several years. These redundancies,
if put into effect, will reduce Corus' UK workforce to 22,000a
reduction of over a third within three years.
3.1 Following the resignation of Corus'
Joint Chief Executives on 5 December, the company Chairman Sir
Brian Moffat was appointed acting Chief Executive and announced
a "radical restructuring" review of its UK operations.
3.2 The ISTC requesting meetings with Corus
to discuss its plans. An initial meeting with Sir Brian Moffat,
Allan Johnstone, Corus' Human Resources Director and other senior
managers was held on 22 December, followed by a subsequent meeting
on 8 January. At both meetings ISTC requested the opportunity
to work in partnership with the company to overcome its short-term
difficulties before any firm decisions were taken. The Company
rejected these offers.
3.3 Throughout December and January, following
the restructuring review announcement, speculation, which apparently
came from sources close to the company, suggested that a number
of UK plants were at risk. The focus of the speculation centred
on the integration plant at Llanwern in Newport.
3.4 In the absence of any willingness on
the part of Corus to consult the ISTC or to the union's offer
of partnership, the ISTC explored contingency plans to preserve
the jobs of their members employed by Corus in the event of a
major redundancy announcement.
3.5 The Llanwern integrated steel plant
is one of five such Corus plants in the UK. Llanwern produces
crude steel and turns it into strip steel products. Because of
overcapacity in Western Europe and the imbalance between Sterling
and the Euro exchange rates, Llanwern is currently a major source
of losses for Corus on carbon steel production in the UK. The
ISTC believed that, should the company choose to close the whole
plant, it should explore the possibility of taking it over, in
the informed belief that the plant could be operated profitably
and the jobs secured. This would have had the additional effect
of stemming the company's major source of losses and allow it
to focus upon managing its other UK plants where they were making
3.6 The ISTC identified sources of industry
expertise and finances who believe that Llanwern has good prospects
of producing and selling three million tonnes per year of strip
steel products as an integrated plant. They agreed to form a consortium
with the union to take over the plant should Corus be willing
to discuss a transferral of ownership.
3.7 On 23 January the ISTC wrote to Corus
formally asking for discussions with the company in a co-operative
spirit about taking over the plant should Corus decide to close
it in full or in part.
3.8 On 29 January ISTC received a reply
from Sir Brian Moffat stating that:
"I do not think it appropriate to meet to
discuss a possible acquisition of Llanwern by you."
The reason given by Sir Brian for this was:
"We do not wish to invite any more competition
in the UK over that which is already present from imports."
3.9 On 1 February Corus announced the closure
of its Ebbw Vale and Bryngwyn works; closure of the pickle line,
cold mill and one electro-zinc line at Shotton, closure of the
coil plate mill on Teeside; and closure of iron and steel making
operations, of the annealing and tempering facilities, a reduction
in activity levels at the hot strip mill and cold mill operations,
at Llanwern. Corus projected losses for the 12 months is estimated
to be £1,050 million of which all but £23 million is
caused by redundancy payments and writing off capital assets.
3.10 The partial closure at Llanwern ruled
out ISTC's hope of being able to take over the plant. Even if
Corus felt forced by the weight of public opinion to offer the
steel-making facility to the ISTC consortium, it is clear that
the original consortium members would not feel confident that
Corus would not try to use its market dominance to damage their
current UK steel operations.
4. CORUS' BUSINESS
4.1 Corus was created from the merger of
British Steel and Hoogovens of the Netherlands in October 1999.
At its inception the company promised the steel unions, MPs and
local authorities that the present British plant configuration
would be maintained and promised to produce over 20 million tonnes
of steel per year at a time when the Sterling-Euro exchange rate
was very close to its current level. Since then it has closed
Shelton Works in the West Midlands and announced 11,000 job losses
in Britain alone.
4.2 Corus had no proposals for investing
in new plant or equipment in Britain when it made its restructuring
announcement on 1 February. In such a capital-intensive industry
this is clearly folly if one wishes to maintain and expand market
share. This fact adds weight to the contribution made by the flexibility
and efforts of Corus employees in making the company the most
efficient steel producer in Europe, at a time when the Corus board
have merely attempted to "sweat" the company's assets,
both capital and employees.
4.3 An example of Corus' inability to assess
future market conditions is its approach towards its Workington
rail track plant, the only one of its kind in the UK. On 19 May
2000 Corus announced that it intended to reduce the number of
manned shifts at the plant, causing a reduction in the 400 strong
workforce by 168. This was viewed as an inevitable precursor to
the winding down of the plant in the eyes of steel unions, who
had seen this pattern on numerous occasions. Corus had purchased
the Sogerail railway track plant in France in 1999 for a sum in
excess of £100 million: upgrading the Workington plant so
that it could produce both long and short rail wouldthe
ISTC have calculatedhave cost only £35 million and
would also have enhanced the capacity of the company to compete
at home and in the expanding European market.
4.4 The ISTC and other trade union representatives
informed Corus that they did not believe that reducing the shifts
with a view to closing down the plant was a sensible business
decision. This was especially true in light of the expected large
increase in railway infrastructure that was likely to occur as
a result of the Government's forthcoming 10-year transport plan.
Corus management rejected the ISTC's views out of hand.
4.5 An intensive campaign was launched by
the steel unions, the local authority in Workington, and Dale
Campbell-Savours MP. Following Corus' appearance before the Trade
and Industry Select Committee, as part of a UK Steel Association
delegation in November, it now appears that they have reversed
the run down of the Workington plant and it is now operating at
full capacity thanks to the flexibility and co-operation of its
skilled workforce. The ISTC understands that 90 per cent of the
£120 million order that Corus secured from Railtrack in May
2000 is now being produced at Workington.
4.6 Another area where Corus have adopted
an illogical and ever changing business strategy is in their approach
to transport costs. For example, in the strategy that Corus announced
on 1 February it proposes to close the steel-making capacity at
Llanwern. This will entail transporting steel from Teeside and
reheating it before transporting it back to Teeside and other
4.7 Teeside to Newport is 280 miles (by
road). Corus is intending to change a round trip of one mile from
the Steel Mill and Llanwern to one of 580 miles from Teeside and
back again. This must involve additional costs of at least £10
per tonne for the transport alone. This does not suggest that
this operation is sustainable and the ISTC believe that it may
well lead to the eventual closure of the entire Llanwern site.
4.8 In the case of the Workington plant,
Corus suggested that it was the transport costs within the UK
that diminished its competitiveness. Corus cannot have it both
4.9 The evidence shows that Corus' position
on transport costs within the UK have not been consistent even
within a 12-month period. The ISTC believe that they have attempted
to use transport costs to cover pre-determined planning decisions.
4.10 What is certain is that UK companies
dependant on steel for manufacturing would have to pay about £40
per tonne in extra transport costs to import steel products into
the UK if the cuts planned by Corus are implemented. By taking
long-term action to tackle a short-term problem, Corus are imposing
long-term costs burdens on the UK manufacturing sector.
4.11 UK steel workers, including those employed
by Corus, have made tremendous sacrifices in the past two decades,
with latest figures showing that they produce 571 tonnes per person,
up from 533 in the past year. This makes them the most productive
steel workers in Europe and as competitive as the most productive
steel workers in North America and Asia. The employees feel that
their efforts and flexibility have not been matched by equivalent
leadership, ability to make decisions and business acumen by the
Corus board, who have turned the cash-rich British Steel into
a company with debts of £1.8 billion that is dependant on
bank support to service its debt.
5. STERLING AND
5.1 The ISTC has been proactive in lobbying
the Government to take action to reduce the imbalance between
Sterling and the Euro. The ISTC has met Cabinet Ministers on several
occasions, including the Chancellor of the Exchequer and the Prime
5.2 The ISTC has proposed to Corus on numerous
occasions that there should be a joint approach to the Government
on this issue. Corus has refused to do and has not stated publicly
that it favours UK accession to the Euro.
5.3 The ISTC would draw the Committee's
attention to comments made by Sir Brian Moffat following the latest
redundancy announcements that:
"This adverse situation has been worsened
dramatically by the weakness of the Euro and as a result very
significant losses have been incurred."
5.4 This statement is not consistent with
the views outlined by Sir Brian only three days earlier, when
he said that:
"The future relative strength of sterling
against the Euro . . . the current situation is [only] an additional
5.5 The ISTC is extremely disappointed that
Corus management have not sought to engage with trade unions to
develop further short-term flexibility and identify savings that
would reduce the financial pressures on the company until market
5.6 The ISTC finds it strange that Corus
should make a decision to significantly reduce its UK workforce
and steel-making capacity at a time when Sterling has consistently
weakened against the Euro. Sterling has fallen 11.5 per cent from
its peak against the Euro in May 2000, and the UK Government has
given strong indications of its desire to join the single currency
should the conditions be right.
5.7 The ISTC finds it difficult to understand
the negative assessment of Corus concerning the long-term demand
for steel in the United Kingdom from UK manufacturing, considering
that the manufacturing bases of France and Italy are roughly similar
to that of the UK and they produce substantially greater tonnages
of steel each year. It is even more difficult to understand the
sense of these assessments in the light of the experience of Spain
where the manufacturing sector is much smaller than the UK's but
production of steel has overtaken that of Britain. The ISTC believes
that Corus should be trying to actively compete in the whole European
market rather than to merely maintain its UK dominance.
6.1 The ISTC believes that Corus have been
guilty of grave short sightedness in response to short-term pressures.
These have been made worse by imprudent management decisions,
for example the decision to return £683 million to shareholders
at the time of the merger and to accumulate debts of over £1.8
6.2 Steel is an industry notoriously vulnerable
to sharp cyclical fluctuations and it is sensible business practice
to keep reserves to tide a company over during low points in the
cycle. The ISTC made this clear to Corus when it decided to return
the £683 million to its shareholders: its views were ignored.
6.3 The ISTC believes that the efficiency
gains and sacrifices made by the British Steel, and then Corus
UK, workforce have not been matched by the standards one would
expect from visionary management intent on the company's growth.
Whilst there are pressures relating to the strength of Sterling
and demand in the UK, the union believes that these could be overcome
with greater entrepreneurial flair and strategic coherence.
6.4 The ISTC believes that it is perverse
for the UK Government to have a strategic approach to the maintenance
of key industries in the UK such as the power supply industryin
the form of coal, and shipbuilding industry, in case of national
emergency and yet not for steel. The UK steel industry is a national
strategic asset crucial to economic and defence interests.
6.5 Once steel capacity is lost it cannot
be reconstituted quickly and only at extreme cost to the Exchequer.
The ISTC believes that it is clear that Corus has no long-term
commitment to the retention of steel-making capacity in the UK
and that the Government must develop a strategy for the steel
industry in the UK before it loses critical mass and declines
6.6 Fundamentally the ISTC believes that
Corus can have a profitable long-term future as a steel producer
in the UK. However, no company can prosper if it does not trust
and utilise its major assetits workforce. It is clear to
the ISTC that rejection of partnership in favour of paternalism
is the major obstacle in the way of the company achieving this.
6.7 The ISTC welcomes the Government's commitment
to review the consultative rights of UK employees. The chimera
of flexibility has for too long been used to drive down standards
for UK employees. The situation at Corus, where the unions have
offered to discuss flexibility but have had their offers spurned,
shows that the only flexibility that some UK companies, such as
Corus, are interested in are those of greater overtime and greater
redundancy. The "boom and bust" approach within companies
must be eradicated if the UK is to be truly internationally competitive.
6.8 All the promises made by the ISTC and
the other unions since the merger have been kept: all the promises
made by the company have been broken.
1 Corus Press Release 8.1.01. Back
Letter to Michael Leahy, ISTC General Secretary, from Sir Brian
Moffat, Chairman and Acting Chief Executive of Corus, 23 January
Sir Brian Moffat, Corus Chairman, The Evening Standard
1 February 2001. Back
Sir Brian Moffat, letter to Michael Leahy, ISTC General Secretary,
29 January 2001. Back