_Russian firm buys the Point -- baltimoresun.com_
(http://www.baltimoresun.com/business/bal-te.bz.sparrows22mar22,0,243936.story)
Boy who would have thought a decade ago that well off Russian would be
buying the old Bethlehem Steel plant?
No American could run it profitably?
Will be strange to see all those steel worker lunch boxes with Russian flags
and adding blitzes and borsht to the cafeteria menu...
The American economy has come a long way......
Peace, Hugs, and Purrs,
Carolyn Rose Goyda
St. Louis, Missouri, USA
[EMAIL PROTECTED] (mailto:[EMAIL PROTECTED])
Russian firm buys the Point
Severstal plans to run steel mill at capacity
Workers produce slab steel at Sparrows Point's hot mill. John Cirri,
president of the United Steelworkers Local 9477, expects the plant to become
the
"beast in the East" as the result of new owners. (Sun photo by André F. Chung /
March 21, 2008)
By M. William Salganik and Paul Adams | Sun reporters
March 22, 2008
Russian steelmaker OAO Severstal announced yesterday that it is buying the
steel plant at Sparrows Point and says it plans to run the mill at full
capacity and invest up to half a billion dollars during the next five years to
improve productivity.
Severstal, led by a Russian billionaire who is one of the world's wealthiest
men, emerged as the successful bidder in the government-ordered sale, saying
it will pay $810 million in cash for the Baltimore County plant. An
agreement with an earlier buyer that would have paid Luxembourg-based
ArcelorMittal
$1.3 billion for the plant collapsed over a lack of financing.
Severstal plans to keep all of the plant's steel-making operations going,
both rough steel and finishing. Workers, whipsawed under a succession of
owners
in recent years, have feared that a buyer might cut back on the type of
products produced at the mill, throwing a chunk of the 2,500 employees out of
work.
Related links
* _Old, new owners bitter rivals_ (http://www.baltimoresun.com/busin
ess/bal-te.bz.severstal22mar22,0,1529382.story)
* _Sun coverage: Sparrows Point sale_
(http://www.baltimoresun.com/business/bal-point,0,7665168.storygallery)
*
____________________________________
Sparrows Point timeline
2001: _Bethlehem Steel_
(http://www.baltimoresun.com/topic/travel/bethlehem-steel-PLTRA000010.topic)
files for Chapter 11 bankruptcy protection.
2003: Financier Wilbur Ross founds International Steel Group and buys
_Bethlehem_
(http://www.baltimoresun.com/topic/us/pennsylvania/northampton-county-(pennsylvania)/bethlehem-(northampton-pennsylvania)/bethlehem-(bethlehem-pennsylv
ania)-PLGEO100101022010500.topic) 's assets for $1.5 billion.
2005: Indian-born billionaire Lakshmi N. Mittal merges his steel empire with
ISG and forms _Mittal Steel Co. NV_
(http://www.baltimoresun.com/topic/economy-business-finance/mittal-steel-company-nv-ORCRP010122.topic)
.
2006: Mittal announces a hostile bid for rival Arcelor SA in January, a $33
billion acquisition.
2006: Justice Department files suit in August to block the sale unless
Mittal sells Arcelor's Canadian subsidiary _Dofasco Inc._
(http://www.baltimoresun.com/topic/economy-business-finance/dofasco-incorporated-ORCRP004648.topic)
That sale is blocked by a Dutch trust that controls it. Mittal later offers to
sell its Weirton, W.Va., plant instead.
Feb., 2007: Justice Department orders Mittal to sell Sparrows Point to
maintain competition for tin-plated steel.
Aug., 2007: Sale of Sparrows Point for $1.35 billion to E2 Acquisition
Corp., a consortium led by Chicago-based Esmark Inc., is announced.
Dec., 2007: ArcelorMittal cancels the deal after E2 misses deadline to
secure financing and a labor agreement. Sparrows Point is put back on the
market
in a process overseen by the trustee.
March 21: Russian steelmaker OAO Severstal announces it will buy Sparrows
Point for $810 million.
*
____________________________________
The new owner: Severstal
CEO and 82 percent owner: Alexei Mordashov
History: Began operations as a Soviet-owned steel mill in 1951, privatized
in 1993
Headquarters: Cherepovets, Russia
Divisions: Russian Steel and Metalware, Severstal North America Inc.,
Lucchini SpA (Italy) and Severstal Mining.
Employees: More than 100,000, including 2,200 in U.S.
U.S. headquarters: Dearborn, Mich.
U.S. operations: Rouge Steel, Dearborn, Mich.; SeverCorr mini-mill in
Columbia, Miss.
2007 steel production: 17.5 million tons
2007 net income: $1.9 billion
But Gregory Mason, chief operating officer of Severstal, said that the
company has no plans to cut employment, wages or benefits and that it hopes to
keep the current management in place.
"We're not buying Sparrows to chop it up," Mason said.
Both labor and management at the 119-year-old plant expressed relief, saying
Severstal has the finances and global reach the mill needs to maintain
operations at peak capacity for years to come. Capable of producing 3.6
million
tons, the plant turned out 2.5 million last year, Mason said - Severstal wants
to see it operate at capacity.
By contrast, its current and previous two owners treated Sparrows Point as a
"swing plant," meaning employment and production were curtailed whenever the
steel market hit a rough patch.
"Under ArcelorMittal, we were a stepchild - that's how we were treated,"
said John Cirri, president of the United Steelworkers Local 9477, referring to
the plant's current owner. "So we're going from being a swing plant to being
the 'beast in the East,' and that's what we're going to be."
The plant has been buffeted by the change and uncertainty generated by a
worldwide consolidation of the steel industry. This marks the fourth time the
plant has been sold in five years. Once the world's largest steel mill, the
plant is now down to less than a 10th of its peak work force.
For Sparrows Point workers, the wait for a new owner has been filled with a
whirlwind of emotions: uncertainty with cautious optimism that the buyer
would honor their labor agreement and invest in building up the plant. Union
officials say worker protections in their current contract will remain.
Erin Kelly, 25, a cold mill crane operator from Baltimore who has worked at
the plant for more than five years, said yesterday that she doesn't know too
much about Severstal.
"As long as they know about our contracts ... and they could respect that
and are agreeable with the stipulations we have and they're willing to work
with you, that's all that matters," said Kelly, whose father is also an
employee
at Sparrows Point.
The USW contract says the union has the right to reject buyers it finds
objectionable. Sparrows Point has had so many owners come and go during the
past
few years that some workers joke about seeing a _Wal-Mart_
(http://www.baltimoresun.com/topic/economy-business-finance/wal-mart-stores-incorporated-ORCRP0164
87.topic) sign appearing next.
"We have always maintained that the union will not reach agreement with a
successor unless it includes a long-term business and operational strategy
that
produces security for our members, their families and our retirees," said
David McCall, chairman of the USW bargaining committee for ArcelorMittal in
North America, in an e-mailed statement. "We now have that at Severstal."
The recent uncertainty is a sharp contrast to the stability that
characterized Sparrows Point's run as an industrial icon of a lunch-pail city
for most
of its history. For 87 of those years - most of them prosperous - the plant
was operated by _Bethlehem Steel_
(http://www.baltimoresun.com/topic/travel/bethlehem-steel-PLTRA000010.topic) .
At peak employment in 1959, more than 30,000 worked at the plant - then the
largest steel mill in the world. And during World War II, the adjacent
_Bethlehem_
(http://www.baltimoresun.com/topic/us/pennsylvania/northampton-county-(pennsylvania)/bethlehem-(northampton-pennsylvania)/bethlehem-(bethlehem-pennsylv
ania)-PLGEO100101022010500.topic) shipyard, cranking out Liberty Ships for
the war effort, employed more than 45,000. A company town grew up around the
plant with schools, stores and workers' housing.
After years of decline, Bethlehem went bankrupt in 2001. In 2003, Ohio-based
International Steel Group paid $1.5 billion to add Beth Steel to its growing
portfolio of bankrupt steel companies. Almost overnight, it became the
largest steel company in the United States.
ISG cut costs, won labor concessions, and pushed itself into the black. Then
ISG, in turn, was snapped up by _Mittal Steel Co. NV_
(http://www.baltimoresun.com/topic/economy-business-finance/mittal-steel-company-nv-ORCRP010122.topic)
of the Netherlands for $4.5 billion in 2005.
Lakshmi N. Mittal was a leader in pushing steel from a series of national
industries to a global one undergoing rapid consolidation. But Mittal's global
ambitions forced Sparrows Point onto the market again. The Justice Department
had antitrust concerns about Mittal's acquisition of Arcelor SA of
Luxembourg, another large international steelmaker. To satisfy the regulators,
Mittal
agreed to sell off Sparrows Point, and completed the merger creating
ArcelorMittal.
In August, 2007, ArcelorMittal agreed to sell to E2 Acquisition Corp., a
consortium of steel companies led by Chicago-based Esmark Inc.
But "it became increasingly more apparent" that E2 couldn't pull together
the financing and never reached the necessary agreement with the United
Steelworkers, according to a court filing last month by the Justice
Department's
trustee, Joseph G. Krauss. At Krauss' direction, ArcelorMittal canceled the
deal, putting Sparrows Point back on the market.
Krauss, who led the sale process that ended yesterday with the Severstal
agreement, declined to comment. ArcelorMittal spokesman William C. Steers said
only that the company had cooperated in the process and thanked the Sparrows
Point employees "for their hard work and dedication to their jobs during this
transition."
Severstal - the name means "Northern Steel" in Russian - is fighting for a
place in the newly globalized steel world. It is big - it had revenue of $15.2
billion in 2007 - and getting bigger - revenue and profit were up about 22.5
percent last year from 2006. It owns a mining division and controlling
interest in an Italian-French iron and steel company, Grupo Lucchini. But
Severstal is still only one-seventh the size of ArcelorMittal.
Related links
*
(http://www.baltimoresun.com/business/bal-te.sparrows22p120080322052134,0,2207386.photo)
_Sparrows Point's hot mill_
(http://www.baltimoresun.com/business/bal-te.sparrows22p120080322052134,0,2207386.photo)
_Photo_
(http://www.baltimoresun.com/business/bal-te.sparrows22p120080322052134,0,2207386.phot
o)
* _Old, new owners bitter rivals_
(http://www.baltimoresun.com/business/bal-te.bz.severstal22mar22,0,1529382.story)
* _Sun coverage: Sparrows Point sale_
(http://www.baltimoresun.com/business/bal-point,0,7665168.storygallery)
*
____________________________________
"Severstal has a good reputation," said Mark Reutter, author of Making
Steel, a book about Sparrows Point. Severstal's principal owner, Alexei
Mordashov,
has a background in steel, as opposed to Ross and Mittal, who functioned
more as financiers, Reutter added. "He puts money into his mills," Reutter
said.
Mason said Severstal was interested in expanding its American production
because "domestic supplies can't fill the demand" here. At the same time, he
said, the falling value of the dollar and the cost of transportation have made
importing steel to the United States too expensive.
Severstal expects the deal to close during the next three months, and Mason
said he didn't anticipate either of the problems that sank the E2 sale - lack
of agreement with the union and difficulty in arranging financing.
"If we wish to borrow, we can borrow," Mason said. And if the company
decides to pay cash, with nearly $2 billion in cash on its balance sheet, "We
wouldn't have any problem."
Tom Russo, the plant's general manager, noted with some surprise that
yesterday's price tag was far below what E2 said it would pay last year. But
some
analysts said E2's bid was too high, which may have contributed to its failure
to close the deal.
And the price of critical raw materials - chiefly iron ore and metallurgical
coal - have soared during the past 12 months, hurting the prospects of
plants such as Sparrows Point. Such costs - combined with the slowing U.S.
economy
- factor in to the plant's worth, analysts said.
[EMAIL PROTECTED] [EMAIL PROTECTED]
Sun reporter Hanah Cho contributed to this article.
The new owner: Severstal
CEO and 82 percent owner: Alexei Mordashov
History: Began operations as a Soviet-owned steel mill in 1951, privatized
in 1993
Headquarters: Cherepovets, Russia
Divisions: Russian Steel and Metalware, Severstal North America Inc.,
Lucchini SpA (Italy) and Severstal Mining.
Employees: More than 100,000, including 2,200 in U.S.
U.S. headquarters: Dearborn, Mich.
U.S. operations: Rouge Steel, Dearborn, Mich.; SeverCorr mini-mill in
Columbia, Miss.
2007 steel production: 17.5 million tons
2007 net income: $1.9 billion
**************Create a Home Theater Like the Pros. Watch the video on AOL
Home.
(http://home.aol.com/diy/home-improvement-eric-stromer?video=15?ncid=aolhom00030000000001)
