Outlook: BS indulges in a bit of double Dutch

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The Independent Online
THE CORPORATE governance police have clearly been through the British Steel-Hoogovens deal with a fine-tooth comb, judging by the amount of double Dutch contained in yesterday's merger announcement.

The two sides are coy about how this mix of Anglo-Saxon and continental management styles is going to combine ruthless cost cutting with high standards of stakeholder care. But as it is so much cheaper to sack people over here, the presumption must be that, bar the Hoogovens head office, the axe will fall largely on the British Steel workforce.

Dutch blushes have been spared by structuring the deal in such a way that it looks more like a merger than the takeover it really is and agreeing to junk the word "British" from the new, as yet undecided, name. However, the decision to run the business with joint chief executives looks dangerously like a concession too far. Thankfully, the whip hand will remain largely in London, since the new company will be incorporated in the UK. In addition to the chairman, three of the five executive directors will also be Brits.

The cost savings of pounds 194m that BSKH (its temporary name) has identified look pretty paltry against the pounds 10bn turnover of the enlarged business. But if there is not much for the City in this merger of metal makers, it promises even less for the workforce.

At this stage the management is being careful about owning up to more scope for rationalisation, for fear of giving the Welsh Assembly something to get its teeth into. But if Llanwern did not have a guaranteed future under the old British Steel, then it is hard to see how this deal enhances its prospects when Hoogovens has a state-of-the art plant in the Netherlands capable of servicing the same customers in the car industry.

As is often the case with mergers of scale such as this, the rationale for the deal begins to look a bit threadbare once the cost savings have been factored in.

BS and its new Dutch partner have devised a slogan about how they will provide "metals solutions" to the world on the strength of Hoogovens' interests in aluminium. Every one of the 66,000 employees has been issued with a manifesto introducing them to this brave new world.

Down in south Wales, they might be better off throwing them into the furnaces for all the job protection it affords them.