Tata must fix pension deficits before any deal: Thyssenkrupp CEO

The logo of German steel-to-elevators group ThyssenKrupp AG is pictured during the company's annual news conference in Essen, Germany, November 24, 2016. REUTERS/Wolfgang Rattay

BERLIN (Reuters) - India's Tata Steel TISC.NS must first resolve the pension deficit at its British and Dutch operations, before any merger of its steel operations with Thyssenkrupp TKAG.DE, the German company's chief executive told a German newspaper.

Thyssenkrupp and Tata have been in talks for about a year to merge their European steel operations to cut costs and overcapacity, but negotiations have been complicated by Tata’s huge pension deficit in the UK.

“Tata must find a way to decouple the pension deficits of the sites in Ijmuiden and Port Talbot. Only then can we talk,” Heinrich Hiesinger told German daily Handelsblatt in an advance excerpt of an interview due to be published on Friday.

Earlier on Thursday, Reuters reported that the trustee for Tata Steel UK’s pension scheme is set to tell its members it expects to report a scheme deficit of between 1 billion and 2 billion pounds at its next actuarial valuation at end-March.

The paper cited sources as saying that the earliest any deal would occur is the summer due to the complexities involved.

Hiesinger also repeated that consolidation is necessary to combat overcapacity in the European steel market and said Thyssenkrupp was doing everything it could to improve the competitiveness of our steel operations.

“Restructuring will come in any case,” he said, with an eye to staff. “If we consolidate, we meet the overcapacity challenge and can achieve improvements in efficiency that we couldn’t on our own.”

Thyssenkrupp will hold its annual general meeting on Friday.

Reporting by Victoria Bryan; Editing by Alexander Smith