The Hindu Business Line : Tata Steel, Corus begin joint sourcing

Synergies
Both companies plan sourcing iron ore in Africa, Australia and Brazil.
20 separate groups are working to bring about synergy and integration between both the companies.
Accenture has been appointed to look into performance issues.

N. K. Kurup

London, Oct. 4

As part of the integration process, Tata Steel and Corus have started joint sourcing and purchase of materials, including ore, coal and refractories. Both the companies have also decided to jointly explore new iron-ore sources in Africa, Australia and Brazil, a senior Corus official said.

Mr Philippe Varin, CEO, said that the integration process aimed at achieving the $450 million synergy was already on from April and 20 separate groups with representatives from both sides are working on it to identify ‘best’ practices from both the companies.

Talking to a group of visiting journalists from India, Mr Varin said the integration process is currently focused on areas such as manufacturing, purchasing, performance and finances. “We are already in the market as one large buyer,” he said.

Gradual process

Mr Varin pointed out that integration would be a gradual process and he would not be able to set a time frame now. However, later an official said the target is to achieve the $450-million synergy by 2009.

In purchase alone a saving of $70 million is estimated. One of the objectives is to achieve self-sufficiency in raw materials for Corus. Tata Steel is 80 per cent self-sufficient in raw materials.

The integration group is also examining how to leverage the strength of the other Tata group companies in UK such as Brunner Mond and TCS, the officials said.

When asked about the ranking of Tata Steel-Corus combine as global player, Mr Varin said size is not an important issue. He pointed that it was important to become a more profitable steel manufacturer.

“I am not saying we are going to remain in sixth position. But I don’t have any numbers now.” Tata Steel is implementing two projects in India that would significantly expand its capacity.

Mr Varin said the integration is mostly being done internally but international consultant Accenture has been appointed to look at the performance issues.

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