Ispat - Sidbec: Entering North America

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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. Sidbec-Dosco was the only steel producer in Canada to use internally-produced directly reduced iron (DRI) as its principal feedstock, and had developed unparalleled know-how in DRI production. DRI was critical to Ispat's groupwide strategy to increase sales of higher-value products.

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...

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