Timmy’s still right

Mr Gupta, executive chairman of commodity group Liberty House, quickly came forward as a potential white knight, with a plan to return it to profit in months. His aim is to replace the Port Talbot blast furnaces – which make steel from raw materials – with electric arc furnaces that melt scrap, a process he says will be more efficient.

And there’s more of course. He won’t take on the environmental nor pension liabilities. Wants a break on energy prices. And it’s not obvious that he’s willing to pay for the arc furnaces, seems to be angling for the government to provide that cash.

But that basic contention, that it’s all about the blast furnaces, does seem to be true, doesn’t it?

11 thoughts on “Timmy’s still right”

  1. Sort of – but not really.

    You’re right in that the blast furnaces are the primary problem here and that’s its *potentially* possible to convert to arc and stay in business that way.

    But Gupta isn’t *showing* that. He’s showing that if you start off fresh (dumping the pension and environmental liabilities built up by previous operations) and get the government to foot the bill for your new capital and subsidizing your power consumption then it *might* be possible to make a go of things.

    But this is not slam dunk evidence for converting over closing.

  2. The Inimitable Steve

    Seems Gupta’s business plan involves him trousering large wedges of taxpayer cash in exchange for keeping a few steel jobs going in Wales. Until he needs more taxpayer cash.

    No thanks.

    BTW, if we want to keep some heavy industry in Britain, let’s get rid of the green taxes on energy and frack the shit out of Lancashire until power is as cheap as water.

  3. The whole principle of company-backed pensions is once again revealed for the idiocy that it is. Why put all your eggs – including your job – in the same basket?

  4. The Inimitable Steve

    ‘Seems Gupta’s business plan involves him trousering large wedges of taxpayer cash in exchange for keeping a few steel jobs going in Wales. Until he needs more taxpayer cash.’

    As a business plan, it’s rubbish, singularly lacking in scope and ambition.

    My plan would be…

    Create new British Steel and give directorships to Gov Grandees.
    Separate business into units (furnace, rolling etc.) and hive off pension obligations to each, sell downstream equipment to Indian company for pennies and lease it back.
    Get Gov cash to build arc furnaces and buildings to house them.
    Melt down blast furnace and buildings to keep downstream business occupied.
    Pay directors big bonus.
    Get Gov cash to build new buildings ostensibly to house downstream businesses, meanwhile ship rolling mills etc. to India.
    Melt down old buildings.
    Pay directors big bonus.
    Ship new Arc furnaces to India.
    Disassemble Arc building and ship to India for scrap.
    Liquidate the whole lot and throw the pension liabilities onto the State.
    Pay directors big bonus.
    Buy the new downstream business buildings from the liquidator for pennies and ship that to India for scrap.
    Pay directors big bonus.

    Come back in 5 years and rinse/repeat with another industry.

  5. What sort of idiot business builts a pension fund that falls apart if the company goes out of existance? I thought the whole point of pensions schemes was they were self-contained systems.

  6. BobRocket,

    Isn’t that what we already have happening?

    How are you going to do this more efficiently than the current lot?

  7. jgh: that’s probably the case with lots of businesses, even when they’ve not suffered a Cap’n Bob raid. The pension scheme that pays me has been in deficit for a long time though the actual reported deficit fluctuates wildly according to the current (silly) reporting rules. If my previous employer ever went bankrupt (fairly unlikely) then absent a certain special circumstance it would struggle to meet its commitments in the long term. The employer does pay quite a lot extra into the fund from time to time to control the deficit.

  8. jgh,
    ‘What sort of idiot’
    The sort of idiot who has left the building with the proceeds weel before the bomb goes off.

    when the bosses set up the fund they sold it to the employees as in

    You forego some wages now for a firm commitment to a fully funded pension later, the company will make payments each year equivalent to your lost wages (like a savings club)
    Because you don’t pay tax on non-earned income and we don’t pay tax on dividends on our profits that we pay into pensions*, we will pay the same proportionate dividends into your pension fund (like a savings club with interest)
    (ie. we will pay your own money plus some of your tax into your fund that you will pay full tax on when you redeem it.)

    We won’t bother telling you that we will buy shares in the company that inflates the price that my bonus (and pension) is based on nor that we will use your pension fund as an asset to borrow against so we can pump up the share price (and my pension) even more.

    *Top Team pension is separate to employee pension

    Ooh look a squirrel

    And if you don’t mind, I have a title now.

    Anyway, you don’t want to do a company scheme, look how badly it is performing, you can get your NI back if you go the private way, get the Government to pay, have I got a scheme for you.

  9. ‘And a lot less lucrative than it used to be.’

    Yeah, sorry about that, we invested it in a tax efficient offshore entity and someone did a runner with the bearer shares and we can’t find out where it went cuz of all that secrecy (maybe the redacted leaks will shed a (dim) light)

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