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British Steel plans more cutbacks to reduce deficit

By Rushworth M. KidderStaff correspondent of The Christian Science Monitor / December 16, 1980



London

The British government's most agonizing industrial problem, the future of the mammoth British Steel Corporation (BSC), may be headed for resolution -- but only by spilling 20,000 more workers into the nation's already- swollen unemployment registers.

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BSC's Ian MacGregor, brought in from the United States as chairman by Industry Secretary Sir Keith Joseph last spring for upward of L2 million pounds (4.7 million), has just announced his survival plan. The goal is to get BSC into the black by 1983. But this will require of the corporation's 140,000 jobs. It comes on top of a 15-month-old program aimed at shedding 52,000 jobs, which is already well under way.

Observers of Britain's money-losing nationalized industries say they have heard these predictions of profitability many times before. But with world steelmaking capacity far outstripping demand, with developing countries like South Korea producing steel more cheaply than Europe or the United States, and with BSC's output down by 40 percent from last year, they agree that some! thing has to happen.

The earlier cutbacks at BSC brought capacity down from 21.5 to 15 million tons annually. However, the latest plan (still to be approved by the government) reduces capacity only slightly -- to 14.4 million tons -- suggesting that Mr. MacGregor now aims to slice away what many observers here regard as BSC's overstuffed bureacracy.

Overmanning and low productivity, how! ever, are not the corporation's only internal problems. BSC, which has recently invested heavily in new and sophisticated facilities, is also entangled in a poor financial structure. "By any standards [BSC] is bankrupt and should be liquidated," its chairman told reporters recently. The firm lost L279 million ($656 million) in the first half of the year. It now loses L20 million ($4.7 million) a week -- or, as the popular press here puts it, about L30 ($70) a second -- and anticipates worse to come.

But the 12-year-old government-funded group of plants in England, Scotland, and Wales is actually nonbankruptable. This year it hsa soaked up some L1 billion ($2.35 billion) of taxpayers' money, and may need another L700 million ( Thatcher, who is no mood to go on propping it up.

Nor is Mr. MacGregor. "Some L50 to L60 [$1120 to $140] for each taxpayer has been poured into British Steel" this year, he said as he announced his salvage plan Dec. 12, "and I do not think the taxpayers will go for that much longer."

Union response has so far been muted -- partly because union leaders expected much worse cuts and have bee promised them if they don't cooperate now, and partly because "redundancy" "severance) payments can reach lump sums approaching L20,000 ($47,000) per worker. But Joe Gormley, leader of the new "triple alliance" of steel, mining, and railway unions, predicted a "great row" unless the government changed its policies.

Opposition leader Michael Foot has called for a parliamentary debate on the plan. A statement from the Labour Party registered fears that the present 15 -million-ton capacity was already "dangerously low" and that further reductions could leave Britain "without the resources or the capability to take advantage of any upturn in the world economy."

But the plan does appear to recognize political realities. Major "integrated" plants (taking in coal and iron ore and turning out finished steel) in South Wales and Scotland will be spared this round: they bore heavy cuts earlier, and unemployment in their areas now stands at 12.4 percent and 11.3 percent respectively. Most cuts will fall in England, where unemployment is 8.4 percent.

what lies ahead for BSC? European Community measures to impose production quotas and end the current steelprice war are still thought to be at least a year away. Meanwhile, Mr. MacGregor has been out selling -- most recently at Vauxhall (General Motors) here -- in an effort to reverse BSC's reputation for unreliability.

He is also eager to come to terms with Britain's private steelmakers in areas where they compete -- perhaps, it is suggested, by forming joint-venture companies with private shareholders in the majority.