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Foreign takeover of U.S. steel firms should
raise alarms
Copyright © 2005, The Sun-Times Company
Chicago Sun-Times, April 8, 2005
By Mark Reutter
Three years ago, President Bush, backed by congressional leaders in Illinois
and Indiana, promised to protect the steel industry from cheap foreign
imports that threatened high-paying jobs and potentially compromised our
post-9/11 security.
Now, without a peep of protest from the Bush administration or members
of Congress, a big chunk of the nation's -- and Chicago's -- steelmaking
is about to pass into foreign hands.
Mittal Steel Co. NV will exercise near dominance of key Midwest steel
markets upon purchase of Ohio-based International Steel Group (ISG), set
for April 12. This will include ownership of the ex-Acme Steel plant at
Riverdale, and three of the four sprawling mills on Lake Michigan in Indiana
-- ex-Inland Steel's East Chicago Works, ex-LTV Corp.'s Indiana Harbor
Works and ex-Bethlehem Steel's Burns Harbor Works. (Gary Works will still
be owned by U.S. Steel Corp.)
Controlled by an Indian family based in London with corporate headquarters
in Rotterdam, Netherlands, Mittal Steel also will own the last major mill
on Lake Erie at Cleveland and the nation's only tidewater plant at Baltimore.
While no longer the kingpin of American manufacturing, steel is still
a vital commodity, essential for the manufacture of thousands of goods,
and the sale of so many facilities to a single overseas company raises
a number of issues, not the least of which is our long-term security.
Is foreign control of 40 percent of U.S. production of flat-rolled steel,
used to make military equipment as well as cars, in the best interests
of the country? And are the business practices of the Mittal family in
keeping with the expectations of the American public?
The Bush administration and Congress have sidestepped these questions
since Wilbur Ross, a Wall Street financier, agreed to sell ISG to Lakshmi
N. Mittal -- a transaction that will net Ross a personal profit of $267
million, according to the Financial Times.
What's remarkable about this silence is that the government has a huge
stake in the steel industry. The Pension Benefit Guaranty Corp., for example,
is paying pensions of retired steelworkers at the companies that Ross
purchased out of bankruptcy in 2002-04. This alone will cost the federal
insurance agency more than $6 billion over time, while sheltering Mittal
Steel from future pension obligations to retirees from the bankrupt companies.
Equally remarkable is how little anyone knows about the new owners. Expanding
at warp speed from a single steel mill in Calcutta, the family has purchased
35 steelmaking facilities around the world, mostly in Third World and
ex-Soviet-bloc countries. Last December, Lakshmi Mittal paid himself a
$2 billion dividend from his private company, LNM Holdings, before merging
it with publicly traded Ispat International to form Mittal Steel. This
sparked protest by minority stockholders at Ispat, who said the dividend
should have been shared.
In South Africa, government officials have complained of price gouging
after Mittal bought controlling interest of the country's mills in 2002.
Faced with high prices, some of South Africa's steel exporters have been
forced out of business.
In Kazakhstan, where 23 miners died Dec. 5 in a coal mine operated by
a Mittal subsidiary, the trade union federation has protested "extremely
low wages and other acute problems," including work speedups and
job cutbacks at Mittal's Karmet Works.
Named by Forbes magazine the third-richest person in the world, with a
net worth of $25 billion derived from his steel empire, Lakshmi Mittal
staged a multimillion wedding celebration for his daughter at the Palace
of Versailles last July. A month later, widows' benefits were eliminated
at Ispat Inland in East Chicago, Ind., which the family acquired in 1998.
The company restored the benefits after the media covered a protest rally
by widows and union members. But a Mittal official told analysts last
month that the company will demand concessions from United Steelworkers
of America Local 1010 at Inland, which presumably includes eliminating
the modest $62.50 monthly widows' benefit.
At the same analysts' conference, Lakshmi Mittal announced plans to axe
45,000 steel jobs worldwide by 2010. How many of these jobs will be eliminated
or outsourced from U.S. mills after the merger is completed hasn't been
disclosed.
The future of steel isn't just a matter of maximum shareholder value.
It's about guaranteeing a minimum level of investment and employment in
our industrial infrastructure to keep this country strong. Political leaders
in Washington, as well as union members, business groups and local citizens,
ought to demand safeguards from international businessmen as the price
of entry into domestic markets.
And they should start with steel, the industry that built America. |