Minimising job losses in an unprecedented downturn
The year under review was truly exceptional for the Tata Steel Group, in which we witnessed the best of times and the worst of times.
After achieving numerous production and financial records in the first half, we – along with our competitors and every other global industry – saw a dramatic reversal in the second half.
As demand for steel fell sharply around the world, this inevitably had a major impact on our profitability and required us to reduce our operating costs in order to weather the economic storm and position the Group so it can emerge from the downturn an even stronger and more competitive global steelmaker.
Tata Steel Group's Indian operations were able to make the necessary adjustments without significant lay-offs and reductions in working hours, and by the end of March 2009, there were encouraging signs that the Indian economy was beginning to recover.
In Europe, however, the effect of the economic crisis has been much more severe, with steel demand collapsing in the fourth quarter by 57% in the UK and 44% in continental Europe from the previous year.
In the early stages of the downturn, Tata Steel Europe quickly implemented a number of initiatives to align its output and cost structure with falling demand. These included cuts in steel production and stock levels, and a rigorous cost reduction and value enhancement programme to make up for the impact of lower production, in which employees throughout the company contributed valuable ideas and shared best practices to generate savings.
As the speed and intensity of the downturn intensified, further production cuts were implemented and a number of payroll savings were also introduced. These included reducing overtime working, adjusting shift patterns, implementing flexible work agreements that allowed the company to temporarily reduce the hours of employees who were experiencing shortages of work, and replacing outside contractors with employees wherever possible.
We also reaffirmed our commitment to ongoing personal development by introducing additional skills training programmes for employees affected by the cuts in production.
Despite generating cost savings of more than £700 million (US $1 billion) through these ‘Weathering the Storm’ measures, it became clear that a number of the company’s less competitive operations and assets in Europe could not survive in their current structure, making job losses unavoidable. Following a detailed strategic assessment known as ‘Fit for the Future’, a number of plants and assets were identified for divestment or restructuring. This led to the loss of around 4,000 jobs out of Tata Steel Europe’s 40,000-strong workforce.
The company is doing everything possible to handle this difficult but unavoidable situation honestly and sensitively, and is making every effort to achieve the reductions through voluntary redundancies while ensuring that critical skills are retained.
We are committed to consulting with employees collectively and individually during the process. A comprehensive range of redundancy benefits and outplacement support services is provided to all those leaving the company.
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