Peace, Love, and Understanding: What Mittal Promises Europe

Excerpts from the six-page business plan submitted by Mittal Steel to ministers in Luxembourg, France, and Spain justifying the business logic of the Arcelor takeover:

The combined group will be a world-class employer with an open culture and leading management, social and HR policies.

• The operating model of the combined company will promote a culture of openness, expertise, innovation, entrepreneurship, diversity and respect for employees.
  
• Attract and retain the best possible management talent.
• Providing maximum skill-development opportunities.

Mittal Steel and Arcelor share the same approach to integrating social, environmental and economic considerations into the business.

• A combined corporate sustainability strategy will build an organization that lives by its values, is deeply connected to the community, provides value to society and all of its stakeholders.
• The combined entity will have health and safety policies based on caring for people.
• The combined company will be strongly committed to its employees and their unions, (sub)contractors, shareholders, suppliers, communities and other stakeholders, and to conducting an open and transparent dialogue with them.

The creation of a European-based global leader will have a positive impact on the West European economies.

Employment:

• Employment in Europe in management, R&D and knowledge functions may increase.
• Mittal Steel will fully respect all of Arcelor’s existing social commitments.
• Employee representation on the Board will be preserved and the practice of the European works council maintained.

R&D:

• The role of R&D will be enhanced, with European centres becoming global centres of excellence.
• The new entity will maintain the current level of spending, or possibly raise it as the overall size and scope of the business increases.
  
  

Investment:

• Investment to maintain high performance levels of current facilities will continue, although more targeted and specialized for maximum, differentiating advantage.
• Duplication of investment in Central and East European facilities, distribution and Steel Service Centres networks will be avoided, leading to greater capital efficiency, with savings reinvested in other value-creating activities.

Mittal Steel does not envisage major restructuring programmes beyond Arcelor’s current plans.

• Both companies are complementary, therefore generating almost no “redundancy” in the combined footprint.

The merger of Mittal Steel and Arcelor will generate substantial annual benefits conservatively estimated at $1 billion. Three sources will generate these benefits by 2009:

• Purchasing: $600 million.
• Marketing and trading: $200 million
• Manufacturing and process optimization: $200 million.

In the medium term, the combined entity will see additional benefits (not yet quantified) such as capital expenditure optimisation, production efficiencies, supply chain improvements, revenue synergies, surplus capital availability, and working capital improvements.

We are confident that the post-merger integration will be successfully implemented and within a short period of time.

• The key ingredients of successful post-merger integration will be an open, balanced and fair approach, respecting both partners’ views, combined with disciplined project management and clear milestones.

From Mittal Steel-Arcelor Combination,
Key Features, Feb. 28, 2006