Corus to sue consortium executives for breaking contract
23 June 2009
Tata Steel's UK-based European subsidiary, Corus, is planning to sue the individual executives of a consortium of four steel companies for millions of pounds for backing out of a 10-year contract to supply slab steel, thereby risking the closure of its Teesside Cast Products plant.
Last month, a consortium comprising Marcegaglia, Dongkuk Steel Mills, Duferco Participations Holding and Alvory, which had a 10-year contract to lift around 78 per cent of Teesside's 3.5 million tonnes of the steel it produces every year, pulled out of the contract, leading to the prospect of plant closure and 2,000 redundancies. (See: Consortium deal pull out may hit 2,000 jobs at Corus)
Lawyers for the Tata Steel-owned steel company plan to initiate legal proceedings against the top executives of these four steel companies including Antonio Marcegaglia, brother of the CEO of the Italian Marcegaglia SpA, Emma Marcegaglia'
The company hopes that by ramping up legal pressure on individual company executives, the consortium could be forced to reverse its earlier decision of pulling out of the contract.
Corus chief executive Kirby Adams had earlier warned that the company would do everything legally and with the UK government's assistance to reinstate the agreement.
He added that it was unacceptable that a development of the kind be allowed to threaten jobs on such as scale as to have a potentially devastating impact on the area.
The leader of the consortium, Europe's largest independent consumer of steel, Marcegaglia and South Korean steel re-roller Dongkuk Steel Mill had in January agreed to acquire a 75-per cent stake in Teesside Cast Products steel plant in the North East England for approximately $450 million. (See: Corus may sell majority stake in UK steel plant for $450 million)
According to the UK's Mail Online, a consortium spokesperson said that although they were willing to discuss, the new aggressive posture adopted by Corus is blocking the talks, as they have no appetite to conduct negotiations across the table with a loaded gun.
While Corus says that the company has shown immense patience and flexibility already to the consortium and does not see any impediment to the talks, the consortium's backing out the contract automatically calls for arbitration.
Corus is miffed as prior to the global meltdown, the consortium made more than £500 million in the first four years of the contract, which made the lead two members of the consortium want to acquire a 75-per cent stake in Teesside Cast Products.
Corus has gone on record saying that it would not sell a stake to the two consortium members as it feels that the contract was deliberately scuppered by Marcegaglia to get a better deal in the Teesside Cast Products acquisition.