After focusing on raw material integration, Tata Steel’s Indian and European operations will now work towards developing new generation products and technology for both domestic and export markets.
But for Karl Kohler, Tata Steel Europe is also not a finished business, yet. The days of cash losses are certainly over and the turnaround is slowly, but painstakingly, taking a firm shape. “We are lagging behind. Still to position ourselves in the right area of competition. This gap has to close,” he admitted.
In his first interaction with the Indian media, Kohler, Tata Steel Europe’s CEO and MD, shared his future plan to stabilise operations further. "We are striving for customer focus, technology leadership, operational excellence and rightsizing manpower and costs. We are going to try to achieve an Ebitda (earnings before interest, taxes, depreciation, and amortisation) of $100 per tonne. That is our target in a five years,” he said.
The company will pump in 400 million pounds every year to reposition itself in the market and stay competitive and relevant in terms of products, manpower skill sets and costs. This investment will be more than the total depreciation of its European assets, pegged at 300 million pounds, a clear indication that improving productivity is the cornerstone of the blueprint.
Much of this investment will be channeled towards repositioning of the long steel business, which forms 28 per cent of the company’s total steel-making capacity of 18 million tonnes in Europe. “It’s still not stable as the operations, even after the economic slowdown, are not easily coming back to the previous levels,” he said.
In retrospect, recalibrating the long steel portfolio has been one of his top agenda since he took charge nine months back. But even though production will be adjusted to match the gradual uptick in demand, especially in railways and construction, Kohler emphasised there will not be any cut in capacity.
There is still scope for rightsizing manpower for a leaner structure. In the last two years, the company has had to let go of 7,000 employees across Europe, but the Dutch operations at Ijmuiden may see a further reduction by 1,000, although Kohler is unwilling to put a number.
Europe is one half of the story. Equally strategic will be India and other emerging markets. The process of integration has already begun with common projects getting identified.
It’s a two pronged strategy. “It means early access in developing markets with products and processes that we have,” he said. So Tata Steel Europe will supply higher grade steel to its Indian arm, which the latter doesn’t produce and also help in upgrading the existing product lines with more evolved technology. “We will provide bridge support until a new investment hits the market and then Tata Steel can build it and take it over,” he said.
Such integration will span the flat products category and also in speciality steel. Smaller Indian product categories such as packaging and special plating are already witnessing such migration. The upgraded technology will now help them target the fast growing industrial packaging and food and beverage segments locally.
Auto steel is another big area. Here the focus will be similar to the European blueprint of engaging with OEMs (original equipment manufacturers) at the product development stage itself. Further value addition such as large diameter tubes for oil and gas sector, auto and construction have also begun in India, riding piggyback on this European knowhow.
