BHP Billiton merger update

THE new group has begun its restructuring process with plans to cut costs by $520 million.

Staff Reporter

Staff cuts and other head office and marketing changes are expected to contribute about one quarter of the cost savings in the merger. The transport and logistics business will be dramatically scaled back in part because of the company’s planned exit from steel through divestment of the BHP Steel division.

The new management structure places steam coal and coking coal in different operating groups. The carbon steel material group includes coking coal, iron ore and manganese, while thermal coal includes steaming coal.

Bob Kirkby, the former BHP minerals chief operating officer, will head up carbon steel materials, taking control of iron ore operations in Western Australia and Brazil, coal units in Queensland and New South Wales, as well as steel and ferroallay businesses based in Australia and South Africa.

Mike Oppenheimer is responsible for thermal coal operations in South Africa, Australia, the US and Indonesia. Both are expected to be located in Melbourne.

Dave Munro from Billiton becomes president of aluminum and Chris Pointon heads up the stainless steel materials business.

The marketing arm for the carbon steel minerals group is to be based in Singapore – far from both customers and the mines.

“The major problem with a Singapore base would be the long-term retention of experienced marketing people,” according to Clyde Henderson of Energy Economics.

Staff changes have meanwhile begun. The departure of the head of BHP's Queensland coal operations, Rick Gazzard, is believed to be related to corporate dissatisfaction with the way union problems were handled, and which cost BHP around $100 million. Gazzard is being replaced by David Murray, who ran Billiton's global coking coal operations from South Africa.

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