Dec. 3 (Bloomberg) -- French Socialists defended Industry Minister Arnaud Montebourg’s threat to nationalize an ArcelorMittal steel plant, saying the tactic spurred the company to maintain jobs and invest.
“Without the action of Montebourg, the issue wouldn’t have attained such a high profile,” Claude Bartolone, the Socialist president of the National Assembly, said late yesterday on France Inter radio. Montebourg helped “twist Mittal’s arm.” Environment Minister Delphine Batho on Europe 1 radio said Montebourg played a “decisive” role in preserving jobs and showed that the government will hold Mittal to his promises.
President Francois Hollande’s government reached a compromise with Lakshmi Mittal, chief executive officer of ArcelorMittal, the world’s largest steelmaker. While the government backed off from the nationalization call, the steelmaker agreed to keep 600 jobs even as it shuts down furnaces at its Florange plant in northeast France and will invest 180 million euros ($234 million) over five years at the site’s other processing facilities.
The agreement put economic and legal considerations over political commitments, drawing criticism from unions who wanted the steel furnaces themselves preserved. Montebourg, who a week ago declared that Mittal is no longer wanted in France, said he won’t resign in light of the compromise.
“If it was a personal question, I must tell you I would have seriously considered it,” Montebourg said on TF1 television. “But this is a fight for France and for rebuilding our industry.”
Hollande met with Mittal three days ago to discuss the site in northeastern France. The complex includes two blast furnaces, which Mittal wants to close, as well as a rolling mill producing steel, notably for the car industry, which he wants to keep. Across France, ArcelorMittal employs about 20,000 people.
Prime Minister Jean-Marc Ayrault said low steel demand in Europe ruled out the immediate re-opening of the two blast furnaces. ArcelorMittal agreed to keep them mothballed for a carbon capture plan being worked on by the European Union, the prime minister said.
“The government has demonstrated that the capacity of the state to produce solutions that are positive for employment, investment and industrial projects,” Ayrault said in a statement. “The commitments of ArcelorMittal are without conditions. The government will see to it that they are respected scrupulously.”
The government’s decision shows the balancing act Hollande is trying to accomplish, appeasing his union supporters while not scaring off foreign investors at a time when jobless claims are at a 14-year high and Europe’s second-largest economy is barely growing. He may have done neither.
“What kind of signals are you sending to companies, French and foreign, with such nationalization calls?” Frederic Oudea, CEO of Societe Generale SA said late yesterday on RTL radio. “It’s an atomic weapon. You are telling a company that if in two or three years you face problems, this is the fate that awaits you. What would a foreign company think about France’s welcome, of France as a place for their investment?”
Some union leaders said they weren’t satisfied with Ayrault’s announcement.
“It’s not what we expected from a Socialist government,” Frederic Maris, a representative of the CGT union, said in a live interview on BFM television. “We were expecting a new buyer or nationalization. We don’t want to see ArcelorMittal any more. It’s a huge disappointment.”
The government’s earlier pronouncements about nationalization and ArcelorMittal not being welcome had a disastrous impact on France’s image, said Laurence Parisot, the head of the French employers’ association, Medef. She characterized the nationalization call as “scandalous.”
“I was in Hong Kong this week and can tell you investors don’t understand France anymore,” she told RTL radio. “Planning to nationalize, starting a debate on it, is scandalous. One should remember that nationalization is expropriation.”
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