Newspaper article The Christian Science Monitor

British Steel Faces More Competition Via Chunnel Britons Worry about Lingering Industry Subsidies on the Continent

Newspaper article The Christian Science Monitor

British Steel Faces More Competition Via Chunnel Britons Worry about Lingering Industry Subsidies on the Continent

Article excerpt

BRITISH Steel is bracing itself to meet tougher competition when the Channel Tunnel linking Britain and France becomes fully operational in the spring.

Not long ago, the company suffered huge losses year after year. Nowadays it is Europe's most profitable major steel producer.

What troubles British Steel is that its competitors in Germany, Italy, and Spain are likely to go on enjoying big subsidies and resisting labor-force cutbacks, despite last December's European Community agreement to curb state aid to the industry and cut steel production.

Managers of British Steel, which was privatized in 1988, say the earliest direct challenge via the "Chunnel" is expected to come from French steel companies. They will easily be able to put their product on freight trains running under the Channel to Britain. France's Usinor Sacillor company is the largest steel producer in Europe.

Brian Moffat, British Steel's chairman and chief executive, also anticipates that manufacturers in Eastern and Central Europe will try to gain a foothold in Britain.

If they do, the company, which racked up net profits of 27 million ($40 million) in the first half of 1993, is likely to come under renewed pressure to cut its operating costs to compete in a world still over-supplied with steel.

Mr. Moffat and earlier British Steel chiefs are no strangers to wielding the knife in pursuit of greater efficiency. In the last 15 years British Steel's workforce has been slashed from 180,000 to 41,000. Only four of the 37 facilities which used to operate when the company was government-owned are still turning out steel.

"Ours is a much sharper, leaner company than it used to be," Moffat says. "Some of the steps we had to take were painful, but they were necessary."

Under the EC's December deal, industry ministers agreed to total production cuts of 5 million tons. But they also approved state subsidies of $7.6 billion.

British Steel gets no subsidies. Its executives say that there is an overcapacity of 30 million tons in the EC's steel industry. …

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