Copyright © 2005, Northwest Indiana Times, March 13, 2005

Is the Mittal acquisition of ISG good for Indiana?

By Mark Reutter

For the first time in history, a dominant share of America's integrated steel sector is headed into the hands of a foreign owner.

Mittal Steel Co. NV will become the largest steelmaker in the United States when it completes purchase of International Steel Group. Owned by an Indian family based in London with corporate headquarters in Rotterdam, Netherlands, Mittal Steel will control 40 percent of U.S. production of flat-rolled steel, the benchmark product used to make cars.

It will own, among other properties, three of the four mills in Northwest 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 and the former National Steel plant in Portage will still be owned by U.S. Steel Corp.)

There is always a superficial attraction when a new owner swoops down and promises "synergies" and other corporate balms to an anxious community.

Lakshmi N. Mittal, CEO of Mittal Steel, did that last month in a presentation to analysts in Chicago, but with a decided twist. He and his son, Aditya, president of the company, boasted of the low-cost labor at their mills in Poland and Romania and announced plans to eliminate 45,000 steel jobs worldwide over the next five years in order to integrate ISG into their holdings.

These words, combined with the family's tough-fisted practices overseas, leave open the question of whether this takeover represents a turnaround for Indiana steelmakers or yet another phase of deindustrialization in which deep-pocket financiers, with no loyalties to the region, squeeze more toothpaste out of the tube.

Little is known about the Mittal family except that its patriarch, Lakshmi Mittal, expects enormous profits from the Third World and Eastern European steel companies he purchases.

Last year, he paid himself a $2 billion dividend from his family-owned company, LNM Holdings NV, before merging it with Ispat International NV to form Mittal Steel. His move 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 interests purchased the controlling interest in four steel mills in 2002. In Kazakhstan, where 23 miners died Dec. 5 in a coal mine operated by Mittal's Karmet Works, the trade union federation has protested "extremely low wages and other acute problems."

Reportedly the richest Indian in the world, Mittal paraded his gilded status last July by staging a $55 million wedding for his daughter at the Palace of Versailles in France. A month later, Ispat cut off widows' benefits at Inland Steel, which Mittal interests acquired in 1998.

"Mittal Starves Widows" read a picket sign when union members held a protest rally, The company restored the benefits. However, Mittal's Lou Schorsch told analysts last month that the company has no intention of backing down from seeking concessions from United Steelworkers of America Local 1010 at Inland, which presumably includes eliminating the modest $62.50 monthly widows' benefit.

Three years ago, Hoosier politicians joined steelworkers to protest low-cost foreign steel as a threat to national security and the livelihood of many state residents.

These voices have mostly fallen silent since the Mittal-ISG merger was announced, apparently quieted by the current wave of high prices and profitability in the steel industry resulting from unusual demand from China.

But steel has a history of lurching from boom to bust. Those who ought to be demanding safeguards from Mittal as the price for the company's entry into U.S. markets might rue the day when metal prices return to normal and the shock of cost cutting from far-off Netherlands takes hold.