Tata Steel has been accused of “bully boy” tactics after demanding its suppliers slash their prices by 30pc as it attempts to pass on the cost of the steel crisis.
The Indian-owned company has written to businesses in its supply chain telling them it requires an immediate 10pc price reduction on all purchases, and plans to increase the cuts to 30pc.
Either Tata gets cost reductions from its suppliers or it goes bust and the suppliers get £0 in business from Tata.
It’s the same with wages: sure, we’d all love it if the workers were paid more. But forcing that means that some of them will get paid £0.
Shrug
Well, they could raise prices. Presumably all steel providers are in the same boat.
Thanks to the slowing of the Chinese economy and the massive over-supply of Chinese steel, the world has a steel glut at the moment.
I would be more inclined to take the suppliers’ complaints seriously if we had not had a decade and a half or more of rising steel prices. Would they care to tell us what prices they were charging Tata when the price of steel was rising?
What SMFS said. It’s the same in the oil business, when we rode the decade of bumper prices the workers, contractors, and suppliers enjoyed huge pay rises and price increases. Now the price of oil has dropped and the industry is in the shit, we all have to accept the party is over and we need to get real again. Only in places like Nigeria, Norway, and Aberdeen the Unions are going apeshit and threatening to strike. These twats are happy to partake in the good times, but refuse to tighten the belt during the lean times. They think it’s a ratchet.
Same thing in the Aus coal industry. Wages went crazy in the boom years. In the present deep, long downturn, jobs are being shed, contractors and suppliers are cutting costs, but will the unions contemplate a wage cut that reflects the crash in prices from US$300/t to US$85/t in order to save jobs? Will they hell. The workers would vote to save jobs, but the union won’t give them the chance.
“But forcing that means that some of them will get paid £0.” Eh? In a totally free market wages would certainly fall, but not to zero. We COULD imitate that process by having an employment subsidy for firms in difficulties. It might prolong the life of the firm a bit and give employees time to find alternative jobs. The subsidy would have to be strictly limited time-wise, e.g. to two months or so.
Or perhaps that would just be a bureaucratic nightmare.
@Tim Newman – couldn’t agree more; have been told recently that the Aberdeen BMW franchise has been the most profitable in the UK (and possibly Northern Europe) for the last eight or nine years. Now, well, let’s just say it’s not doing so well. Aberdeen grew immensely fat on the oil boom and all kinds of fat-necked spivs raked in the cash. Now there have been 12,000 job losses already and Wood Group is predicting more than 15,000 more
Tata Steel has been accused of “bully boy” tactics after demanding its suppliers slash their prices by 30pc as it attempts to pass on the cost of the steel crisis.
This is the same tactic single-payer health care (or any other government monopsony) uses. When the private sector does it, it’s evil, but when government does it, it somehow suddenly, magically becomes virtuous.
/sarcasm
Now there have been 12,000 job losses already and Wood Group is predicting more than 15,000 more
I bet they’ll not touch the management, though. I worked for a subsidiary of Wood Group, the engineers were mainly okay but the management useless beyond belief, not to mention extremely petty. But they all knew each other and when one fucked up, he’d be ushered into another cushy job while the engineers would have to shoulder the cost-cutting.
Ralph Musgrave: A wage of £0 is what happens when a job does not exist because it’s been priced out of the market. And why would we want to prolong the inevitable when a firm is going bust? A couple of months’ subsidy is not going to save it, and the redundant workers will get unemployment benefit under whatever regime their country offers. That’s what UB is nominally touted as being: not an alternative to work but something to stop you dying of starvation while you find another job.
Ralph,
Didn’t the UK (or more specifically Labour) try that in the 70s with the likes of British Leyland and British Steel.
In Australia money was thrown at the car industry (always talk of “investment in jobs”). Workforce enjoyed superb employment conditions subsidised from taxpayers, final result was no car industry but handsome redundancy for workforce. Non-favoured companies / industries are allowed to pass into the long dark night without their life being artificially prolonged or generous redundancies financed by taxpayers.
If the market is sending you a message that it doesn’t want you then it is time to sod off, and governments should leave well alone.
DocBud
Actually there is a certain amount of evidence that government support for declining industries – to manage the decline – is a good thing. Pay for retraining, allow the change to happen gradually etc. The problem is when people think this should mean permanent support for an uncompetitive industry. And inevitably the beneficiaries want it to be permanent and cushy.
Tim Newman,
One hears the same complaint in every company, everywhere. Similarly, all managers complain about their staff.
One hears the same complaint in every company, everywhere. Similarly, all managers complain about their staff.
And I’m sure it’s true, I don’t for one minute believe my industry is different from others in this respect. I was a manager in 2 jobs, with staff reporting to me. The ones I complained about were the ones I got rid of, but looking back I was pretty pleased with my bunch in each place. If a manager is complaining about his staff, he’s probably not doing his job properly.
Tim, the answer seems to be, in the case of Caparo, jump out of your penthouse. Sad.