New Delhi: Tata Steel has said that it would reduce its workforce in Europe by up to 3,000 employees, in a bid to lower the company’s employee cost as part of its transformation measures.

The steel major released its proposals for a transformation programme of its Europe operations in which it also said that most of the employees to be laid off are likely to be white-collared or office employees.

The statement released on Monday said that the major focus areas for the transformation include “lowering employment costs, leading to an estimated reduction in employee numbers of up to 3,000 across Tata Steel Europe’s operations, about two-thirds of which are expected to be office-based (white collar) roles”.

The company would also focus on increasing sales of higher-value steels by improving product mix and customer focus, gaining efficiency by optimising production processes, supported by the application of big data and advanced analytics.

It said that it would reduce procurement costs through smarter sourcing and strengthening cooperation with companies within the Tata Steel group. The statement said that the programme is “needed to ensure the business can thrive despite severe market headwinds which have led to a sharp decline in profitability”.

At the same time, the company aims to secure the foundation for investments required to accelerate innovation and the company’s journey towards carbon-neutral steel production, it added.

Henrik Adam, CEO of Tata Steel in Europe, said: “Today we are highlighting important proposals towards building a financially strong and sustainable European business. We plan to change how we work together to enable better cooperation and faster decision-making. This will help us become self-sustaining and cash positive in the face of unprecedented severe market conditions, enabling us to lead the way towards a carbon-neutral future.”

As per the company, through its proposed transformation programme, Tata Steel Europe is initially targeting a positive cash flow by the end of its financial year ending March 2021. It is also aiming for an EBITDA margin of around 10 per cent throughout the market cycle. Based on full year 2019 revenue figures, this would equate to 750 million pounds in EBITDA, it said.

“With improved earnings and cash flows, Tata Steel Europe will be a financially self-sustaining business able to invest in asset reliability and improvements while also servicing its financial obligations to its lenders and shareholders,” the statement said.

Talking of the adverse market conditions, it said that stagnant steel demand in the European Union and global overcapacity have been compounded by trade conflicts which have turned the European market into a dumping ground for the world’s excess steel capacity.

Together with a significant increase in the cost of emission allowances, this has created an urgent need for improvements to the company’s financial performance, it added.