Hollande Minister’s Mittal Nationalization Call Sparks Furor
Stock Chart for ArcelorMittal (MT)
French Industry Minister Arnaud Montebourg sparked a furor by calling for the nationalization of a troubled local unit of ArcelorMittal, the world’s largest steelmaker.
ArcelorMittal Chief Executive Officer Lakshmi Mittal is scheduled to meet today with French President Francois Hollande after Montebourg told Les Echos yesterday that “we don’t want Mittal in France anymore.” Montebourg accused the Indian CEO of going back on his word to protect jobs and said the company’s Florange site in north-eastern France should be under temporary state control.
“Montebourg’s comments on Mittal are rarely what we hear from ministers,” said Yves Marcais, an equity sales trader at Global Equities in Paris. “The word nationalization hasn’t been used in France since former President Francois Mitterrand in the early 1980s. The legitimacy here is that there are jobs they want to save.”
Mittal’s family told Le Monde dated today it was “extremely shocked” by Montebourg’s comments. In New Delhi, London Mayor Boris Johnson told Indian businessmen, “if France doesn’t want you, Britain does,” the Telegraph reported.
The 62-year-old steel tycoon, who lives in London, bought Arcelor SA in a hostile bid in 2006, after promising not to cut jobs and shift or cut investments. Former President Nicolas Sarkozy signed off on the deal. Luxembourg-based ArcelorMittal now wants to close the furnaces at the site and slash more than 600 jobs, blaming a slump in the steel industry.
ArcelorMittal shares rose as much as 1.9 percent and traded 0.1 percent higher at 11.54 euros at 3:08 p.m. in Amsterdam. The shares have fallen more than 18 percent this year.
The Hollande-Mittal meeting at the Elysee palace in Paris is slated to take place at 5:45 p.m. local time today.
Although Montebourg has toned down his remarks to say he is just opposed to “Mittal’s method” of not honoring the commitments he made to France, his comments are the first sign the government will hold industrial companies to commitments on jobs and long-term investments, said Karine Berger, a lawmaker from Hollande’s Socialist Party.
“Mittal is a symbol,” Berger said in an interview. “He’s a symbol of the failure of Sarkozy’s policies, and a sign that an industry minister can intervene. It would have been better to have sold Arcelor to Europeans.”
Florange is a plant located in the Lorraine region of France, making steel slabs, coils and plated sheets. The plant’s long-simmering conflict started in 2002 when it was being considered for a shutdown -- before Mittal Steel Co.’s takeover.
The Florange plant belonged to Sollac, which was merged into state-owned steelmaker Usinor-Sacilor (MT) in 1990. The group was privatized in 1995 and in turn merged with Luxembourg steelmaker Arbed and Spain’s Aceralia in 2001 to form Arcelor, which was bought by Mittal in 2006.
The government asked Mittal to find buyers for the site, with the two-month period for such a move ending on Dec. 1. While Montebourg claims to have potential buyers, none have been identified so far.
Berger said that Hollande’s government wants to mark a break from former Socialist Prime Minister Lionel Jospin, who famously said in 1999 that “you can’t expect the state to do everything.”
The last Socialist leader in power, Jospin, who headed the government from 1997 to 2002, told Michelin SA workers the state couldn’t help prevent the 7,500 job cuts the tire-maker planned.
“The message being sent now is that the state will negotiate as an equal with economic power,” Berger said.
Hollande’s government has mediated in several industrial negotiations, including on carmaker PSA Peugeot Citroen (UG)’s jobs- cutting plan and to find Petroplus Holdings AG a buyer for a refinery in France.
It has sought to have a more hands-on industrial policy as the country grapples with unemployment at a 13-year high.
“My mission is to bring back growth and to cut unemployment,” Hollande said at a Nov. 13 press conference, conceding that the labor market would not pick up before the end of next year. “These should be the only results French people should judge me on.”
Laurence Parisot, the head of the French business lobby Medef, who’s traveling in China, called Montebourg yesterday to “caution him against such nationalization talk,” her spokesman Anton Molina said in an interview. Parisot, who is meeting with foreign investors and French CEOs in Hong Kong, was queried about the minister’s comments, the spokesman said.
French Finance Minister Pierre Moscovici, who today met with representatives of firms including Morgan Stanley, JPMorgan Chase & Co. and Blackrock Inc., said international investors have confidence in the government’s policies and that the ArcelorMittal case has to do with Mittal honoring commitments.
Montebourg sought to tone down his comments, saying, “when I said I don’t want Mittal in France anymore, I meant to say that I didn’t want Mittal’s method of not honoring commitments in France,” Agence France-Presse reported.
He said he was not questioning the presence of ArcelorMittal in France. “What’s in question is Florange, just Florange,” he said.
While ArcelorMittal wants to shut down the furnaces at Florange, it wants to continue operating other activities at the site. It is opposing the sale of the whole of the Florange site, saying that would risk the viability of the rest of its operations in France, where the company employs 20,000 people.
“Mittal is a very important group for France,” Prime Minister Jean-Marc Ayrault said in Paris today. “At the same time, the French government pays particular attention to our country’s industrial sites. It’s important that we can have frank discussions with the company, and it’s important that companies keep their promises. We need to come up with a solution, not just throw ideas around.”
Montebourg says he wants the company to accept one of the two offers that he has for the whole of the Florange site.
On Nov. 22, Montebourg also told senators the steelmaker had “a fiscal debt that we consider to be astronomical,” without giving more details.
In 2008, Mittal slashed about 600 jobs at the Gandrange plant in eastern France. Mittal had bought the plant, which makes long steel products for the automotive industry, from Arcelor in 1999.
On Oct. 31, Mittal reported the lowest quarterly profit in almost three years and cut its 2013 dividend to save $1 billion as slowing Asian demand sinks steel prices and the company attempts to cut debt. ArcelorMittal plans the temporary closure of its Luxembourg headquarters in 2013 to save money, Les Echos said yesterday without citing anyone.
Mittal is the world’s 41st richest man, with a net worth of $17.1 billion, according to the Bloomberg Billionaires Index.
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