The split in Tata Steel’s European operations promises to cut Tata’s losses in Europe, and show the British some corporate writing on the wall in the face of Brexit due to kick in soon now from January 1, 2021.
Tata’s loss-making operations at Port Talbot in south Wales in Britain, and at the Ijmuiden plant in The Netherlands have been under a single European umbrella. Now the company is in talks to sell the Dutch operations to the Scandinavian company SSAB, a deal it is likely to conclude profitably given the Dutch plant’s promising performance. That leaves Port Talbot, that Tata is clearly not keen to finance further from its India operations.
Over to the British government, with which Tata Steel has been in talks to save the plant, with its 4,000 jobs. "Tata Steel continues its dialogue with the UK government on potential measures to safeguard the long-term future of Tata Steel UK and is also reviewing all options to make the business self-sustaining without the need for any funding support from Tata Steel India in the future," Tata Steel said in a statement November 13. The writing on the wall.
The UK government has been looking for someone to buy the plant while it keeps talks going to keep the plant going. The Chinese-owned firm Jingye has shown some interest. Liberty Steel led by Sanjiv Gupta has been flirting with the Talbot plant for some years now. Neither has so far demonstrated a commitment to saving jobs to the extent the UK government will want.
Any new ownership of Port Talbot would need to make significant new investments. Managers at the plant have long said it needs to move from the blast furnace to an electric arc furnace to cut costs, improve the environment and launch new products. For that, any new buyer is likely to seek a heavy level of government support.
The UK government will soon be free to offer that away from restrictive EU rules—if it can find the money. The UK government has borrowed heavily this year to fund furlough and other support schemes through the COVID lockdown. Tata does not intend that to be its problem much longer.
On your electric bike
Anand Mahindra is moving fast to set up new opportunities in Britain through the production of electric motorcycles through the revived BSA company. This was the flagship of British motorcycles through the fifties and sixties, and the world’s largest motorcycle maker until a new generation of competing bikes from Japan and elsewhere drove it into extinction. Mahindra has now offered that old name a resurrection.
The planned expansion into the UK market could hardly have been more timely. Britain is preparing to phase out the sale of all petrol and diesel cars and vans within just nine years. Prime Minister Boris Johnson announced this week that those plans have been brought forward by a decade. Conventionally fuelled motorcycles are also within sight of the end of the road.
The Mahindra Group is already planning to set up an R&D centre, and then to start assembly of electric motorcycles in the Midlands as early as next year. The Midlands was the manufacturing home of the old BSA. The Mahindra venture is being helped along by a 4.6 million pounds (Rs 45 crore) grant from the UK government. A substantial part of the production is expected in India.
Mahindra has notched up considerable experience in small and light electric vehicles with its battery-run three-wheel autorickshaws. It owns also the Reva electric car, though that has not gone quite as far as once hoped. But new developments have driven new hopes under the drive to go electric everywhere.
Mahindra appears to have a particular fondness for reviving lost motorcycles. In 2016 it resumed production of Jawa, the defining bike of the cool and macho man through the seventies. And now BSA will be back, quietly.
That, if anything could be a problem for some motorcycle devotees. A motorcycle you cannot hear? That does not announce your approach, either enticingly or annoyingly? In the sound of the motorcycle engine lay much of its defining appeal. Jawa owners would take its silencers off to further that point. A stealth motorcycle would be of course be cleaner and greener but may get dangerously close to becoming another kind of scooter, an even quieter one. Unless someone adds on the old motorcycle sound, battery-powered of course.
—London Eye is a weekly column by CNBC-TV18’s Sanjay Suri, which gives a peek at business-as-unusual from London and around.
Read his columns here
(Edited by: By Ajay Vaishnav)