Splitting the materials and energy business into JSW M&E — and merging it back six years later (2020)

The form of the organisation follows the state of the business

The 2020 separation was not a device for pushing a loss-making business away from the consolidated accounts. The condition set out in the disclosure was to "establish a stable profit structure at the business's present scale" — that is, to reach profit without shrinking. Against a Muroran where structural losses had survived cumulative job cuts of 900 between 1986 and 1998, the answer to a search for a remedy other than cutting people appears to have been this: bind manufacturing, inspection and maintenance into one company and make it answer for its own results.

That it was folded back within six years shows, though, that separation was never the object. The reasons given for the reversal — the return to nuclear power, defence-related equipment, gallium-nitride crystals — were none of them demands visible to the company in 2020. When demand comes back, people and plant are easier to move if they sit inside the parent. The form of the organisation follows the state of the business, not the other way round; that is how this decision reads. The improper inspection practices that came to light in May 2022 show, however, that governance at the separated company did not come right as quickly as the profits did.