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Same old Story

Following the takeover of their employer, Port Talbot steelworkers face an unsure future but the shareholders are happy.

When approaching the South Wales town of Port Talbot it becomes immediately obvious that this is a community long dedicated to the production of steel. The mile long Abbey Works and surrounding buildings that contain the steel-producing equipment occupy a vast tract of land to the south of the town and form an instantly recognisable landmark, not just from the M4 motorway but for many miles along the coast in both directions.

The town’s 50,000 population cannot remember a time before the steelworks. The enormous buildings and chimneys that blight the skyline have become a familiar and accepted part of the landscape. Even the clouds of water vapour, the smoke, and the smell of sulphur that lingers over the rows of terraced houses have become an unquestioned part of daily life. But now a different – yet familiar – cloud has returned to hang over the community – the threat to the jobs of the town’s remaining 3,100 steelworkers.

Port Talbot’s association with iron and steel dates back to the early industrial revolution. Ideally sited to harness the ample waterpower of the River Afan, the town lay at the centre of the cluster of mines that sprang up in the vicinity and utilised the port to transport the coal. The wealthy Talbot family gave the town its new name and Christopher Rice Mansel Talbot (1803-90), a prominent landowner and Liberal Member of Parliament from 1830, opened the original iron works in 1831. The town developed with extensive investment in the port and railways network and by 1923 the dock was annually exporting over three million tons of coal. The town’s privately owned steel works was nationalised in 1951 and again in 1967, and within a few years the British Steel Corporation (BSC) had emerged as one of the world’s largest steel producers.

But after the oil crisis of 1973 it struggled to stay competitive and the rise in energy costs compelled many of its customers to look elsewhere for cheaper materials, such as plastic. The 1979 recession triggered a slump in steel consumption and in a programme known as ‘Slim-line’, 25,000 steelworkers across Wales lost their jobs, including 5,000 from the works at Port Talbot.

Following a return to profit in 1986 the steel industry was again de-nationalised. It struggled through the 1990s until in 1999 the privately owned BSC plc merged with the Dutch company Hoogovens to form the multi-metals Corus Group in a deal worth £4 billion. The merger was fated from the start, as the company, for all its size, was too small to successfully compete in high volume markets. Annual output had lumped from a UK figure of 55 million tonnes of steel in the 1970s to 19 million tonnes for the whole of Corus Group in 2006 and jobs had been slashed from 270,000 to less than 24,000.

Business review

Already in March 2003 Corus was in crisis as its share price sank and losses mounted. A new management was installed to initiate a three-year plan, called ‘Restoring Success’, which reduced Corus’s debt (involving a share issue and the sale of aluminium interests) and cut UK operations from five major sites to four — Port Talbot, Teesside, Scunthorpe and Rotherham. A later business review concluded that as a high-cost steel producer whose main markets were in Europe its position was unsustainable in the long term and the future lay in low-cost production in high growth markets, which meant finding a suitable partner to merge with.

This search involved visits to Russian and Brazilian steel producers and finally led to India and a meeting with the Indian capitalist Ratan Tata. Tata is chairman of Tata Industries, a group of companies first established in the 1860s by Jamsetji Nusserwanji Tata to cultivate and sell opium to China and later to export tea. Tata is Indian’s largest private company with interests in chemicals, commercial vehicle manufacture, computer software and a hotel chain. It is also the owner of Tetley Tea, acquired in 2000. With headquarters in Mumbai the 96 Tata operating companies employ over 230,000 workers. Its owner has amassed an enormous personal fortune and has recently become a member of Chancellor Gordon Brown’s ‘Globalisation Advisory Committee’. Though small by world standards, Tata Steel produces 5 million tonnes of steel per year at its plant in Jamshedpur and, claiming to be among the lowest-cost steel makers in the world, had ambitions to expand through consolidation to become a global player.

The process of the consolidation of the world’s steel producers has been a rapid one. In June 2006 the Mittal Company merged with European manufacturer Arcelor to create the world’s biggest steel maker. Fearing that his steel-producing company might be Mittal’s next take-over target, Ratan Tata readily accepted an invitation from Corus’s chief executive Phillipe Varin to ‘exploratory’ discussions in July 2006. Three months later in October, Tata made an offer to buy the Corus Group, which was four times its size, at 455p per share, valuing Corus at £5.1 billion.

But the story doesn’t end there. A rival suitor for Corus was the Brazilian steel producer Companhia Siderurgica Nacional SA (CSN), which quickly stepped in with counter offers that trumped the Tata bid. The City Take-Over Panel then proposed that it should conduct an auction where Corus would be sold to the highest bidder. This was, according to the Independent (6 February), ‘only the third such occasion in which a company has been sold in this way - the previous two auctions involved the property group Canary Wharf and the internet company QXL Ricardo’.

So on 30 January, in the offices of their respective City lawyers, the two groups of rival bidders sat down to bid for Corus, described by Times online as ‘one of the most extraordinary bid battles for a British company’. After nine rounds of bidding, Tata Steel clinched the deal with an offer of 608p that valued Corus at £6.7 billion, including its £500 million debt. Tata had now become the world’s sixth largest steel producer. But the auction was more than a struggle over which group of shareholders would take control of a weakened steel company; it was a struggle that had and has the potential to decide the future of 41,000 Corus workers and in particular the fate of those employed at Port Talbot.

Vulnerable

The workers at the Port Talbot steelworks are vulnerable because Tata has said that it intends to import Indian unfinished steel (known as ‘slab’) for finishing in the UK. This imported slab costs £160 per tonne, with an additional £40 per tonne shipping costs, whereas Port Talbot produces the same commodity for £250 a tonne. Community, formerly the Iron and Steel Trades Confederation, the union representing 80 percent of the UK’s steelworkers, has said that without £200 million investment in the plant’s finishing capacity, the future of the Port Talbot plant is uncertain. A union official predicted that, if the investment does not materialise, ‘you are talking about death overnight or by a thousand cuts’ (Observer, 4 February).

Community general secretary Mike Leahy has warned that workers would strike to protect their jobs, saying: ‘What we are not prepared to accept is to see the accelerated or slow demise of the UK steel industry. Tata should be under no illusions that we will resist any attempt to achieve this using all the resources at our disposal.’ (Western Mail, 5 February). The uncertainty was been fuelled by a number of contributory factors. Firstly, Ratan Tata has refused to offer guarantees over jobs. He has said that his ‘plan would be to try to make the UK operations more profitable’ (Observer, 4 February), by which he means raising the new company’s profit margins from 7 percent under Corus to the 40 percent enjoyed by investors in the Indian plant.

Secondly, since Tata made its first offer in October, Corus’s shares have risen by 30 percent, so increasing the price that Tata has had to pay for Corus by £1.5 billion, which means that money is now tight for additional investment. Many believe that Tata has paid too much for Corus, and as soon as the take-over was announced Tata Steel’s share price fell by over 10 per cent. As well as this Tata Steel has plans to construct three new steel plants in India that may well make a continuation of production at the South Wales plant uneconomic.

So Tata has acquired a company with lucrative European contracts that command a 10-20 percent price premium and, according to the Observer, ‘the worry for Corus’s workers is that once Tata has acquired western know-how and technology, it could switch production to India’.

Happy

Corus Chief Executive Philippe Varin, who is set to pocket up to £11 million from shares and options from the deal and also retain his job as European chief executive of the new company, has recommended that shareholders accept the deal. The take-over is, of course, subject to shareholders’ approval although it is inconceivable that this will be withheld. Shares in Corus have risen from a low of 19p per share in 2003 to 608p in 2007 and investors are delighted. Standard Life Investments, which has a 7.9 percent stake in Corus, has applauded the merger, saying: ‘We would like to thank the Corus Management team and employees, particularly Phillippe Varin, for delivering the recovery that made this bid possible...We are happy with the outcome.’ (www.business-standard.com) During this ‘recovery’, ‘more than 10,000 people have been made redundant in the past seven years’ (Observer, 22 October 2006).

In capitalism business deals and mergers are concluded to benefit the owners and shareholders. The best the working class can ever expect is that the profit they produce at their workplace is sufficient for their employer to continue to provide them with a wage or salary to buy the things they need to live from week to week. Put a different way, the short-term wellbeing of workers is determined by the degree to which they submit and co-operate in the intensification of their own working conditions. Labour power is a marketable commodity that causes workers to globally compete for jobs; this carries the tacit acceptance that if greater profit can be made elsewhere then production should be switched to an alternative location.

This inevitably sets worker against worker in a downward scramble to offer the most ‘attractive’ conditions conducive to investment and future profitability. In these circumstances the working class should not be surprised when they become the ‘collateral damage’, the unfortunate but necessary casualties of a ‘war’ in pursuit of profit. The sectional interests of the owners and shareholders must always take precedence over the interests of workers, and the economic conflict that repeatedly flares up is but the expression of this underlying class struggle.

The activities of trade unions are important to defend the interests of workers against capital. But trade unions, like the politicians that many of them support, actively co-operate in the exploitation of their members by accepting the premise that the international capitalist class has the unquestioned and legally enforceable ‘right’ to exploit the working class. They therefore confine their role to attempting to limit the extent of worker exploitation to a level that is considered ‘fair’, instead of encouraging the spread of ideas that would end the economic system which dictates the condition of life to the whole of the working class.

The steelworkers of Port Talbot workers have little control over their future lives and must wait to see what their fate will be. But while resigning themselves to the ‘hope’ that at best would bring a continuation of employment and subordination to their new employers they should also – like workers everywhere – consider whether life under capitalism is really the future they want.

Steve Trott