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Thyssenkrupp union raises alarm over JV with Tata Steel

Thyssenkrupp AG’s labor representatives reiterated their concern over the company’s plans for JV with Tata Steel. Wilhelm Segerath, a senior official at the IG Metall labor union who sits on Thyssenkrupp’s supervisory board, said “We are still concerned that the JV is a sensible solution given the circumstances. The diverging development at both companies emphasizes our concerns about the viability of Tata’s European operations, specifically the UK plant.”

Since Thyssenkrupp and Tata have agreed to the preliminary terms of a tie-up of their European steel operations, the Tata business has been under pressure. Earnings at Tata Steel Europe have dropped on rising raw-material costs, while Thyssenkrupp’s profit rose. Tata and Thyssenkrupp are currently putting the final touches on the deal that is to be inked in the coming weeks

The diverging performance between the two businesses would affect the outcome of the joint venture. The 50-50 split between Tata and Thyssenkrupp is based on both companies’ earnings before interest, tax, depreciation and amortization of the twelve months prior to last June.

Another sticking point of the deal is a plan to give Tata’s Dutch plant certain operational privileges after the merger, according to people familiar with the matter. The special rights would allow management at Tata’s Ijmuiden plant to retain cash flow and keep the current setup of the operations after the joint venture is completed, according to documents seen by Bloomberg.
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