Ispat-Sidbec : Entering North America
 |
Introduction
When Lakshmi Mittal acquired Sidbec Dosco in
1994, he was already well known in America, having successfully turned
around two loss making steel mills in Trinidad and Tobago and Mexico.
Sidbec-Dosco, was Canada's fourth largest steel producer in 1994.
Headquartered in Montreal, with its principal steel mill located in
Contrecoeur, Sidbec’s product portfolio included hot- and cold-rolled
sheet, strip, rods, bars, shapes, pipe, wire rod and wire. |
|
Background Note
Mittal acquired poorly run plants, and thus invested less for each tonne of steel-making capacity than any other firm in the world. Analysts calculated that Ispat was spending half of what Nucor or Steel Dynamics (another American mini-mill firm that was reckoned to be the world's lowest-cost builder of new steel plants) spent on a similar exercise. Mittal realized that simply buying “dud firms” was not enough. They had to be turned around too. The turnaround strategy included cutting purchase costs and laying off workers. More interestingly, Ispat was also prepared to invest when others were reluctant. In addition to the quality of technology and management, Ispat’s geographical spread was emerging as Mittals’ third strength. As soon as Mittal acquired a firm, he redirected sales and purchasing internationally in order to strike the best deals.
The Acquisition
Soon after acquiring government owned Sircasta steel mills in Mexico in 1992,
Mittal had started scouting for acquisitions in the US. In November 1992, he
signed a letter of intent to purchase Bethlehem Steel’s Bar, Rod and Wire (BRW)
division based in Johnstown. The division had electric furnaces, ingot teeming,
blooming, and rolling at Johnstown and bar mills in Lackawanna and Sparrows
Point.
Mittal contacted potential customers before negotiating a new labor contract
with the United Steelworkers of America (USWA). The union, which represented
workers at the three plants, believed it was being taken too lightly. After
three months of very public and contentious bargaining, the sale collapsed
despite the last ditch efforts of the Pennsylvania governor and a congressional
representative. An investment group subsequently purchased the Johnstown and
Lackawanna plants and restarted operations there under the name Bar
Technologies. It was at this point that Mittal began to look seriously at
Canada.
Sidbec-Dosco had been established in 1968 by the Qu?ec government. By 1994, the
government was eager to withdraw from the steel business. The facilities at
Sidbec included two DRI modules, electric arc furnaces (EAFs), and continuous
casters. The plant received iron ore from Qu?ec's North Shore and Brazil. In
1996, Sidbec-Dosco's shipments amounted to 1.5 million tons and net sales were
$846 million. The company employed over 2000 people.
Advertisement...
