01-03-2007, 11:56 PM
Mittal seems to be rubbing the French elites wrong way
From The Telegraph
Mittal stirs up French elite, but there's no revolution on the shop floor
Reading the French press you might think that Lakshmi Mittal was imposing an Asian despotism on his European steel workers, fulfilling the worst fears of the Old World after snatching Arcelor from beneath the noses of the Paris establishment last summer.
<b>The Indian-born steel king is accused of tearing up the French "social model", shoving aside Arcelor's veterans and purging every last Frenchman from the combined Arcelor Mittal board. Top staff are said to be leaving in droves, offended that their counsel counts for nothing in a regime ruled capriciously by decree.</b>
Mr Mittal has taken tight control of the 330,000-strong company, the world's number one steel group, with 10pc of global output in 60 countries. By replacing a hapless Luxembourger as chief executive within four months of his conquest, he is accused of breaching the spirit, if not the letter, of the memorandum of understanding, in which he agreed to take a back seat.
<b>The promised "merger of equals" has become a sick joke, says Le Canard Enchaîné magazine, while research and IT operations are already being moved, as feared, from Europe to Brazil and Dubai.</b>
That, broadly, is the indictment, fleshed out with leaks deploring the use of twin helicopters by Mr Mittal and his boy-faced son, Aditya, the chief financial officer, even when visiting the same plant: parvenus, goes the grumbling, with airs of royalty.
<b>In short, nothing much has changed in elite French attitudes since the ex-Arcelor chief Guy Dollé first said a merger was unthinkable because Arcelor distilled perfume while the Mittals made cheap eau de Cologne. The reality on the ground is subtly different, not least because the shop-floor workers are deeply cynical about Paris ideology and the qualities of their own governing elite.</b>
While it would be too strong to say that Lakshmi Mittal has become a hero in the Lorraine rust-belt, French workers are far from hostile to a man viewed as a better long-term bet than the last lot.
"I am amazed to say it, but Mittal has given us hope," said Edouard Martin, a union chief at the CFDT labour federation in Florange.
Here in the Valle de la Fensch, where mills supply Peugeot, Volkswagen, Mercedes, and Toyota â the most demanding, say the workers â with flat steel, the 4,000 employees were already on death watch before the Mittal takeover.
The mills were to be run down over the next three years, more or less ending Lorraine's 200-year role as the hub of Franco-European steel production and the strategic prize of both the Franco-Prussian War and First World War.
The work was to go to the coastal mills of Dunkirk and Ghent, closer to iron ore supplies from Brazil. But that decision was taken before China's industrial take-off pushed prices of coiled steel from $250 to $640 a tonne in four years.
"It is a monumental error to close these plants, but we couldn't stop it. The first thing Mittal did was to take a fresh look," said Mr Martin.
"Everybody here knows that he took over a mill down the road that was about to be closed and it's still going seven years later. He hasn't turned it into a hell-hole, the workers haven't lost their social rights, so we don't believe these scare stories. The old managers hate the changes, of course, because he takes snap decisions, and doesn't listen to them. Nobody knew that Mittal was selling one of our plants to the Americans until it came out in the newspapers, and that rubbed people up the wrong way."
Clearly, the Mittal team needs to smooth a few rough edges. At the furnaces where layers of coke and ore are cooked at 1,350 degrees centrigrade, <b>the staff glower malevolently at a technical instruction chart on the wall written in English.</b>
"I hope Mr Mittal is now going to pay for us all to have English lessons," said an irascible steelman in his control cockpit.
His full bitterness, however, was reserved for ex-bosses, accused of concocting a â¬6.5bn pay-out to shareholders to fend off the Mittal takeover.
<b>"The management went mad. They gave everything away to save their own skins. That was our investment treasure for the future, and we're the ones who'll suffer for that," he said.</b>
The result of Arcelor's bare-knuckle defence was a windfall for hedge funds which surfed the stock for the ride, to the detriment of stakeholders â exactly the opposite of French social rhetoric.
The upshot of the epic takover battle is that the combined group now has debts of â¬20bn, compared with â¬5.9bn for Arcelor, with a gearing of 48pc. The group refinanced â¬17bn of debt with a syndicate of 26 banks in December.
Lakshmi Mittal seems to take pleasure in ruffling French feathers, contrasting Europe's decadent attitudes with the willingness of the Japanese to commit "hari-kiri" to meet deadlines.
<b>"What frightens us is that Mittal is a financier rather than an industrialist," </b>said Mr Martin.
"The man is obviously brilliant. But there is a feeling that we're all working just to make him richer."
The fear is echoed through every level of the machine Arcelor. "Yes, there is perhaps greater emphasis on profit," said one manager of the Florange operations. "We are marrying the two cultures of dollars and euros, and that takes time, but it is not true that there is some sort of French rebellion against Mr Mittal. On the contrary, there's a new feeling of hope."
Michel Wurth, a member of the management board, said the scars left by the takeover war would heal with time, while fears of the debt mountain were overblown.
"Our style has changed," he said. "The management is much closer to day-to-day business than it ever was, and we have a proper budget at last. A few of the old guard are leaving, but I have a lot of French in my team and they are very happy.
"Our debt ratio to EBITDA [earnings] is only 1.5, falling to 1.3 by 2010, and that is quite reasonable even in a cyclical industry." The debt is coming down fast. Net cash flow in the third quarter was â¬1.7bn.
As for the historic mills of Fensch Valley, he offered no promises.
"They're making money, and they're very well placed near the heart of Europe's car industry. If the business cycle allows, they may have a useful life beyond 2010."
Of course, family dynasties are nothing new to French steel. The de Wendel family owned the valley for 200 years, running their mills with autocratic severity.
But then that is the problem. The de Wendel mills were nationalised to ensure that a strategic industry employing thousands of workers was run for the benefit of French society.
And, for all their faults, the de Wendels were at least sons of Lorraine, rising to the patriotic cause when push came to shove. The French are entitled to ask whether the Mittals will defend their Florange fiefdom with same fervour if the chips are ever down.
From The Telegraph
Mittal stirs up French elite, but there's no revolution on the shop floor
Reading the French press you might think that Lakshmi Mittal was imposing an Asian despotism on his European steel workers, fulfilling the worst fears of the Old World after snatching Arcelor from beneath the noses of the Paris establishment last summer.
<b>The Indian-born steel king is accused of tearing up the French "social model", shoving aside Arcelor's veterans and purging every last Frenchman from the combined Arcelor Mittal board. Top staff are said to be leaving in droves, offended that their counsel counts for nothing in a regime ruled capriciously by decree.</b>
Mr Mittal has taken tight control of the 330,000-strong company, the world's number one steel group, with 10pc of global output in 60 countries. By replacing a hapless Luxembourger as chief executive within four months of his conquest, he is accused of breaching the spirit, if not the letter, of the memorandum of understanding, in which he agreed to take a back seat.
<b>The promised "merger of equals" has become a sick joke, says Le Canard Enchaîné magazine, while research and IT operations are already being moved, as feared, from Europe to Brazil and Dubai.</b>
That, broadly, is the indictment, fleshed out with leaks deploring the use of twin helicopters by Mr Mittal and his boy-faced son, Aditya, the chief financial officer, even when visiting the same plant: parvenus, goes the grumbling, with airs of royalty.
<b>In short, nothing much has changed in elite French attitudes since the ex-Arcelor chief Guy Dollé first said a merger was unthinkable because Arcelor distilled perfume while the Mittals made cheap eau de Cologne. The reality on the ground is subtly different, not least because the shop-floor workers are deeply cynical about Paris ideology and the qualities of their own governing elite.</b>
While it would be too strong to say that Lakshmi Mittal has become a hero in the Lorraine rust-belt, French workers are far from hostile to a man viewed as a better long-term bet than the last lot.
"I am amazed to say it, but Mittal has given us hope," said Edouard Martin, a union chief at the CFDT labour federation in Florange.
Here in the Valle de la Fensch, where mills supply Peugeot, Volkswagen, Mercedes, and Toyota â the most demanding, say the workers â with flat steel, the 4,000 employees were already on death watch before the Mittal takeover.
The mills were to be run down over the next three years, more or less ending Lorraine's 200-year role as the hub of Franco-European steel production and the strategic prize of both the Franco-Prussian War and First World War.
The work was to go to the coastal mills of Dunkirk and Ghent, closer to iron ore supplies from Brazil. But that decision was taken before China's industrial take-off pushed prices of coiled steel from $250 to $640 a tonne in four years.
"It is a monumental error to close these plants, but we couldn't stop it. The first thing Mittal did was to take a fresh look," said Mr Martin.
"Everybody here knows that he took over a mill down the road that was about to be closed and it's still going seven years later. He hasn't turned it into a hell-hole, the workers haven't lost their social rights, so we don't believe these scare stories. The old managers hate the changes, of course, because he takes snap decisions, and doesn't listen to them. Nobody knew that Mittal was selling one of our plants to the Americans until it came out in the newspapers, and that rubbed people up the wrong way."
Clearly, the Mittal team needs to smooth a few rough edges. At the furnaces where layers of coke and ore are cooked at 1,350 degrees centrigrade, <b>the staff glower malevolently at a technical instruction chart on the wall written in English.</b>
"I hope Mr Mittal is now going to pay for us all to have English lessons," said an irascible steelman in his control cockpit.
His full bitterness, however, was reserved for ex-bosses, accused of concocting a â¬6.5bn pay-out to shareholders to fend off the Mittal takeover.
<b>"The management went mad. They gave everything away to save their own skins. That was our investment treasure for the future, and we're the ones who'll suffer for that," he said.</b>
The result of Arcelor's bare-knuckle defence was a windfall for hedge funds which surfed the stock for the ride, to the detriment of stakeholders â exactly the opposite of French social rhetoric.
The upshot of the epic takover battle is that the combined group now has debts of â¬20bn, compared with â¬5.9bn for Arcelor, with a gearing of 48pc. The group refinanced â¬17bn of debt with a syndicate of 26 banks in December.
Lakshmi Mittal seems to take pleasure in ruffling French feathers, contrasting Europe's decadent attitudes with the willingness of the Japanese to commit "hari-kiri" to meet deadlines.
<b>"What frightens us is that Mittal is a financier rather than an industrialist," </b>said Mr Martin.
"The man is obviously brilliant. But there is a feeling that we're all working just to make him richer."
The fear is echoed through every level of the machine Arcelor. "Yes, there is perhaps greater emphasis on profit," said one manager of the Florange operations. "We are marrying the two cultures of dollars and euros, and that takes time, but it is not true that there is some sort of French rebellion against Mr Mittal. On the contrary, there's a new feeling of hope."
Michel Wurth, a member of the management board, said the scars left by the takeover war would heal with time, while fears of the debt mountain were overblown.
"Our style has changed," he said. "The management is much closer to day-to-day business than it ever was, and we have a proper budget at last. A few of the old guard are leaving, but I have a lot of French in my team and they are very happy.
"Our debt ratio to EBITDA [earnings] is only 1.5, falling to 1.3 by 2010, and that is quite reasonable even in a cyclical industry." The debt is coming down fast. Net cash flow in the third quarter was â¬1.7bn.
As for the historic mills of Fensch Valley, he offered no promises.
"They're making money, and they're very well placed near the heart of Europe's car industry. If the business cycle allows, they may have a useful life beyond 2010."
Of course, family dynasties are nothing new to French steel. The de Wendel family owned the valley for 200 years, running their mills with autocratic severity.
But then that is the problem. The de Wendel mills were nationalised to ensure that a strategic industry employing thousands of workers was run for the benefit of French society.
And, for all their faults, the de Wendels were at least sons of Lorraine, rising to the patriotic cause when push came to shove. The French are entitled to ask whether the Mittals will defend their Florange fiefdom with same fervour if the chips are ever down.