ThyssenKrupp-Tata steel merger sets scene for jobs battle

Frankfurt am Main : 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 will not be putting any measures into effect in the joint venture that we would not have had to adopt on our own," ThyssenKrupp chief executive Heinrich Hiesinger insisted in a statement.

"The steel industry has faced massive challenges in Europe for many years," the German industrial conglomerate, whose products range from lifts to car parts and submarines, explained.

"Steel demand is characterised by a lack of dynamic. There is structural overcapacity in supply and constantly high import pressure," it continued.

This meant that various stages in the value chain were operating well below capacity.

Unless industry players took action, ThyssenKrupp warned, major steel assets would come "under threat of closure in the medium term".

The "declaration of intent" signed between the two groups must still be approved by competition authorities.