Tata Steel and the German conglomerate ThyssenKrupp could close one of two blast furnaces at the UK's largest steelworks at Port Talbot following their proposed merger, Reuters reports.
The agency cites two "industry sources", one of whom is "close to ThyssenKrupp's board", as saying the companies expect "the struggling plant to be downsized" if the tie-up goes ahead.
Port Talbot accounts for around 4,000 steel workers. That's almost half of the 9,000 or so that will still be employed by Tata in the UK after the sale of its speciality and pipes unit, which was announced yesterday.
Reuters cited an email sent by two senior officials at the Community steel union that says that Tata has only pledged to keep the two blast furnaces at Port Talbot running for three years.
A union source said: "Three years is nowhere near enough. Our line in the sand has always been keeping two blast furnaces running. We want guarantees and besides, they've given us guarantees before that haven't materialised."
Separately, Wilhelm Segerath, who represents the works council on ThyssenKrupp's supervisory board, said in an interview this week that "workers would resist shutting down capacity in any merger", says CNBC.
Segerath added: "We have capacities that are worth preserving, and we will fight for that. I don't see any strengthening through a merger with Tata."
Commitments to retaining staff at Port Talbot could be part of any government-back rescue deal. Plans to include concessions on energy costs and cheap loans were mooted earlier this year.
Critically, the government is involved in talks to resolve an impasse relating to Tata's £15bn pension scheme, which is said to be £700m in deficit. ThyssenKrupp has said it does not want to take on the pension scheme in its current form.
Richard Farr, managing director at Lincoln Pensions, said: "There has to be some sort of compromise over the [pension] deficit. They [Tata] are doing their bit, now it's the government's turn."
Tata announced on Monday that it would invest £85m in its UK operations, "but the plan did not include any investment in Port Talbot, other than funds for an environmental scheme for its power plants", says Reuters.
Source: THe Week