It ain't no tea party: London Calling on Tata's European entwinementPublished by MAC on 2007-03-18
It ain't no tea party: London Calling on Tata's European entwinement
18th March 2007
In what sense can Tata now be counted as European, after its purchase of UK-Dutch owned Corus, Europe's second biggest steel maker ?
On March 7th Corus shareholders at a London meeting overwhelmingly (96%) voted in favour of the takeover - by which time Tata had already acquired 22% of Corus through stock market dealings.
We know a little of what this will mean in the near future. Tata aims to provide cheaply mined iron ore to Corus’ downstream processing and finished product marketing. The raw material will come from India and there's no doubt that it's part of Tata's grand plan to seize even more greenfield (mainly tribal) land, to feed its globalization strategy
Corus workers and technology may well "migrate" outside of Europe but no plan for this has yet been announced. There's some doubt - despite vague assurances - that Corus workers will have job security, certainly at current wages. Of equal concern is whether Corus will turn a profit, in an uncertain steel market and with growing competition from other European, and Chinese, manufacturers.
As well as being the senior partner in the Tata-Tetley tea combine, based in the UK, Tata also has 50/50 joint venture with Italy's Fiat. The scheme has been the subject of massive opposition in recent weeks at Singur in West Bengal; and a scattering of protests from leftwing parliamentarians in Italy itself.
This joint venture will cover distribution of a new "peoples'" car, not only within Italy but in Latin America. Doyen of the company, the eponymous Ratan Tata, now sits among the directors of the Fiat group.
Tata Ltd, based in London, celebrates its 100th anniversary (sic) this year. It's already established as a prime base from which Tata does its global deals, fixes finance and distributes its products worldwide. It's therefore British-based in a real sense. As we noted on the MAC website last year, Ratan Tata is a bosom-buddy of UK Chancellor of the Exchequer, Gordon Brown, while Tata Steel chief, B Mutharaman, is on the UN’s Global Compact advisory committee.
However, Corus will be completely absorbed into Tata and lose its listing on the London Stock Exchange; hence there will no longer be any Corus annual general meetings in London, into which dissident activists or betrayed workers can pour their anger.
In early March Tata said that it expected to finance the highly over-priced takeover ( no wonder Corus shareholders are beaming with delight!) with 40% equity and 60% debt.
So far the Indian company has not issued any statement indicating which investment institutions have expressed interest in acquiring equity (shares). When the deal was announced, the general assumption was that Tata would use Corus' profits to reduce the ensuing debt Even if this were feasible, it could be some time before these profits were churning over; meanwhile, the debt gearing is likely to rise.
The Indian government may step in with public finance to bulwark its favourite private enterprise. P Chidambaram, the country's finance minister and a great friend of big businesses (such as Vedanta) has already said he'd consider this. Leading financial institutions, such as the Export-Import Bank, the Bank of India, Bank of Baroda, ICICI Bank are said to be talking with Credit Suisse, ABN Amro and Deutsche Bank, about further debt funding, while the UK's Standard Chartered Bank is to provide $375.24 million subordinated debt.
All in all, the deal will inevitably result in direct exploitation of Indian rural communities by a UK-based company (and Italy's Tata) communities and the further trampling of their rights and livelihoods.
[Sources: UK/UN-Tata links: see: http://www.minesandcommunities.org/Action/press1054.htm; Indian banks queue to finance Tata's Steel Buyout: Economic Times, 12 February 2007]