TATA to British Industry

On 2nd December 2011 the media announced the 'mothballing' of Llanwern Steel Works in Wales. It has been blamed by its owners Tata Steel on the current Eurozone crisis.

However, there may be other factors in the Way Tata finances its expansion which may have contributed to this closure and also the Tata group's plans for the future.

In August 2007, Tata Steel Bought U.K based Corus Steel. The cost was 12.9 Billion U.S. Dollars. The biggest ever acquisition by an Indian company.

Many companies in this industry have not grown due to their superior product or management but due to their ability to borrow vast amounts of money to buy other companies. In doing so conveniently eliminating competition. Tata Steel is one of many of these companies.

Immediately after completing the deal Tata were in debt to the tune of around 10 Billion U.S. Dollars as a result of the deal. Of this total $6.14 Billion dollars was with U.K. Banks.

Tata were only able to finance this deal as they could feed off the needs of investors into shares via their pension funds and investment accounts who were just trying to save for the future. The banks willingness to lend the money to Tata was because of the availability of money to be leant which belonged to investors, With the added incentive of a few hundred million dollars interest per year plus the set up fees.

Although Tata Steel is cutting back in the U.K. it has big expansion plans else where;

1..India....Orissa-New 6 million tonne plant.
2..India....Jarkhand-6.8 million tonne plant.
3..India...Chhattisgarh-5 million tonne plant.
4..Iran                          3 million tonne plant.
5..Bangladesh               2.4 million tonne plant.
6..India....Jamshedpur- 5 million tonne expansion.
7..Vietnam                   10.5 million tonne plant.

Also of interest is that the Tata Group also own 50% of the recently constructed Dhamra Port which which is expected to handle 100 million tonnes of cargo per year.

It is likely that the debt which has been added to the british steel industry combined with what are clearly going to be lower costs at the new Tata plants is going to create market conditions which could affect the future of other British steel plants. Conditions which will have been contributed by Tata along with the banks that provided the initial finance.

You have to ask why does a company like Tata need to buy up steel companies like Corus and Land Rover when it is quite capable of setting up new steel plants and car manufacturing plants.

Should the British steel plants now owned by Tata close, this would very possibly lead to the closure of Land Rover and Jaguar, both owned by Tata. Tata have produced vehicles of the type Land Rover build for some time in India. Closing the British car plants would make business sence. You don't need entrepeneurial skills to work out that they could be produced cheaper in India than in the U.K. Tatas profits would surely increase, pleasing the banks no end  and encouraging them to lend again for buyouts.

By lending vast amounts of cash to multi-national companies the banks are creating what is an endless recession in the developed world. Until the governments work together to control the way banks invest our money while it is in their hands we will not see any significant improvement in the economy which has a positive affect on the lives of ordinary people. The only beneficiaries will be the managers of these companies and the bankers who make fortunes from the debt they burden the companies with. The interest on the investments which are paid to the individual investors is of little significance when weighed up against the damage being done by putting workers jobs at risk.

Most disapointing of all is that there will be workers paying into pension funds at Tata Steel and Land Rover who have been mis-led by investment companies and banks about the way the money they pay into their investment is used by banks, stock brokers, investment managers etc. The fact is many people have lost jobs in the U.K., the U.S., and many other developed countries as a result of the mis-use of these pension funds and this has contributed to the current crisis. Companies have been bought up by conglomerates in developed countries only to be closed down as the conglomerate owns similar plants where labour is cheaper, where health and safety rules are less stringent, and where there are generally lower standards of working conditions.

Democratic nations need to be run by Presidents and Prime Ministers who will prioritize the policing of the financial system. There are apparently regulators and Ombudsman which we are all paying for through taxes who are supposed prevent abuse of the system but they would appear to be highly over paid and totally un-affective.