Welcome to the new Independent website. We hope you enjoy it and we value your feedback. Please contact us here.

Business News

UK steel industry faces threat from Russian investors in Corus

A major Russian shareholder in Corus yesterday called on the steel maker to consider abandoning the UK if it fails to turn around its losses.

The plea from the aluminium tycoon Oleg Deripaska came as a fellow Russian businessman, Alisher Usmanov - the metals entrepreneur who has built up a 13 per cent stake in Corus - put forward a candidate to sit on the board. He believes Corus's British arm is mismanaged and wants to see more Dutch influence on the way it is run.

Mr Usmanov, known as the "hard man of Russia", has proposed Aad Van der Velden, a former manager at Corus, as a non-executive director, to improve performance. Mr Deripaska, a business associate of Mr Usmanov, supports his appointment. It is understood that the backing of Brandes, a 15 per cent US shareholder in Corus, has also been sought.

"We are not very impressed with the performance of the UK business. I can't think of a better environment for the steel industry at the moment - it is the only steel company we have been able to find in the world that has generated such poor results," said David Geovanis, the managing director of Basic Element, which manages Mr Deripaska's assets. He said an exit or sale of all or part of Corus's business in the UK should be considered by the board if there was not a dramatic improvement in results. "If they can't figure out how to make money from it then maybe they shouldn't be doing it. It's not rocket science. It's steel production," Mr Geovanis said.

Five years after British Steel merged with the Dutch company Koninklijke Hoogovens to create Corus, the company is still unprofitable. The merger was supposed to create economies of scale, but since then losses of some £2bn have piled up and it is the company's UK arm that is seen to be dragging down the group while the Dutch division powers ahead. The group last month reported a £208m loss for 2003, despite huge demand for steel from China and India.

The two Russian shareholders, although not acting together, are preparing to grill the board over the performance of the UK business at its annual meeting next week. "Mr Usmanov is concerned that the British arm is not run as efficiently as it could be and value could be unlocked by introducing the Dutch management style," a spokesman for Mr Usmanov in Moscow said yesterday. "He thinks the big picture put forward by the management is blurred. He wants to know what the real financial situation of the business is.

"You can't tell how each division is performing - how much the Dutch are making and how much the British are losing. We do have confidence in the chief executive, but by putting a Dutch representative on the board, Mr Usmanov wants the whole group to share in the experience of the successful Dutch operations." Mr Usmanov yesterday insisted Mr Van der Velden would be an independent board member.

A number of changes have already taken place at the company that have reduced its British influence. Philippe Varin, the chief executive, last month replaced a third of his top 50 executives, resulting in a 12 per cent drop in the number of Britons among its senior team.

Mr Usmanov is said to have no plans to insist on the closure or sale of Corus's UK operations, but Farhad Moshiri, who runs Gallagher Holdings, the investment vehicle that holds Mr Usmanov's Corus stake, said Mr Usmanov did want to see overheads reduced and the company streamlined.

Some analysts believe it would be too costly for the company to exit the UK. But the mystery surrounding Mr Usmanov's investment has raised alarm among unions. Its Teesside plant is thought to be most at risk. Michael Leahy, the general secretary of the ISTC, has written to Mr Usmanov asking for a meeting to discuss his intentions for his investment. Corus made 1,300 redundancies in the UK last year but still employs 25,400 people here.