WHEN Dutch steelmaker Hoogovens agreed merger terms with British Steel to form the Corus Group in 1999 it could hardly have expected the tangled financial mess that would erupt four years later.

Crystal balls and foretellers aside, however, someone on the Netherlands side must have had a gut feeling about the deal because they put in place checks and balances to stop their new British brethren running roughshod over their assets.

Under Dutch law, a workers council and supervisory board - a four-strong team including British chief executive Tony Pedder which has the final say on any decisions to sell Dutch assets - had to be created.

That may stop the UK board of directors selling the Dutch "crown jewels" - its aluminium works - to French firm Pechiney to clear part of its £1.2bn debts.

Supervisory board chairman Leo Berndsen is reportedly against the sale unless a guarantee is in place that the money will be invested back in the Netherlands.

The Central Works Council (CWC) last week reiterated its opposition to the aluminium sale.

A statement by Frits van Wieringen, CWC chairman, said: "The CWC has already indicated that the sale of the aluminium operations is not prompted by strategic considerations but by the serious financial situation faced by the Corus group."

The heightening opposition to Corus' principal get-out-of-jail-free card has left it with one almighty headache.

On March 13, Mr Pedder is expected to tell the London Stock Exchange that Corus lost £400m over the past financial year.

Meanwhile, he is in talks with the banks to renegotiate the hefty debts his firm has run up.

Somewhere along the line, he will also have to explain to Holland, the City and the banks how he plans to turn the situation around.

The wealth of opinion is that the problem will be rectified in one of two main ways - cutbacks, including job losses, or by selling assets.

More than 7,000 jobs - 1,100 from Teesside - went when in 2001 Corus announced its intention to turn its back on multi-metals in favour of concentrating on carbon steel.

Reports in national newspapers that a further 1,500 staff would be cut to curb rising debts were denied by Corus, a sentiment backed by steel analyst Roger Manser, of Steel Business Briefing.

He said: "I do not think they are new job cuts. Corus still has not finished the job cuts from the previous announcement."

The subject of selling British assets is a greyer area.

While many aspects of former British Steel operations are renowned among world leaders for their expertise and quality, Teesside stands head and shoulders above its Welsh counterparts in Port Talbot in the profitability stakes.

Experts in the Netherlands see the Port Talbot operations as the main area to be examined and, if necessary, scaled back. But, they see Teesside as the most vulnerable because it is responsible for the long products side of the business while the Welsh operations are in tune with the Dutch flat products.

Henk Engelenburg, business editor at Finceele Dagblad (Financial Daily), the Dutch equivalent of the Financial Times, said there was confusion in Holland over why more action was not being taken to cut costs in Wales.

He said: "The biggest mystery in the whole story is why they do not take their structural decisions in Wales. Maybe it is political because the whole region is living off steel?

"Teesside is profitable but if Corus wants to focus on one type of steel making they might look to split the east coast (Teesside) and west coast (Wales)."

Speculators suggested that German firm Salzgitter could show interest were Corus to indicate that the North-East works were available at a price.

That line of argument is muddied by reports from the plant yesterday that staff were on their best behaviour while a delegation from a French firm was shown around with a view to buying the operation.

That led to suggestions that French firm Arcelor may be interested - although competition rules may put pay to any approach - or the Gallic arms of Italian companies such as Lucchini (Ascometal) or Riva.

Corus denied that any French visitors were shown around the Teesside works.

Mr Manser said Teesside's status as world leaders in the manufacture of long products such as girders and tracks for Caterpillar vehicles had been eroded by lack of investment. And he argued that a potential buyout would not be the end of the world for workers.

He said: "Teesside just seems to get busier and busier and richer and richer. I do not think it would be detrimental at all.

"It might mean changes, but Teesside has taken a lot of hard hits over the years but I think it could handle it."

John Johnson, steel research manager at business analysts CRU International, said: "It is quite surprising and remarkable that Corus has done pretty badly over the last year when most companies should have done considerably better because prices did rise throughout the year.

"Something has to be done to change Corus' situation. A split between flat products in Wales and long products in Teesside could be the answer. It could be argued that it is not necessary that a successful steel company has a foot in both camps."

Corus yesterday reiterated its commitment to streamline to single metal operations.

In a statement the firm said: "Following recent media speculation, Corus wishes to make clear that management remains fully committed to the sale of the group's aluminium assets, as announced on 23 October, 2002."

The company has brought in management consultants McKinsey to find a solution that meets this aim without alienating Corus Netherlands.

While there were suggestions in the UK that Corus was appeasing the banks to get a new loan, critics in the Netherlands believed the choice of consultants was a random process. McKinsey was brought in by Hoogovens at the time of the original merger.

All eyes now will be on McKinsey's report, which is unlikely to beat the March 13 results announcement, and the subsequent response from the Dutch supervisory board.