Copyright © 2005, Baltimore Sun Op/Ed, March 20, 2005
Break the silence on steel sale
By Mark Reutter
ACCORDING TO Warren Buffett, America is fast becoming a "sharecropper's
society." The investment guru was writing earlier this month about
America's soaring trade deficit, but he could just as well have been addressing
the careless, thoughtless transfer of America's manufacturing industries
to deep-pocket financiers abroad.
A case in point is steel, the industry that built America. For the first
time in history, a dominant share of the steel-making sector, including
the Sparrows Point mill in Baltimore, is about to fall into foreign hands.
Mittal Steel Co. NV is slated to become the largest steel producer in
the United States when it completes purchase of Ohio-based International
Steel Group (ISG) in mid-April.
Controlled by an Indian family based in London with corporate headquarters
in Rotterdam, the Netherlands, Mittal Steel will own mines and steel plants
from Maryland to Minnesota, including three of the four sprawling mills
on Lake Michigan southeast of Chicago.
While steel is no longer the kingpin of American manufacturing, it is
still a vital commodity, essential for the manufacture of thousands of
goods. The sale of so many facilities to a single owner raises a number
of issues, not the least of which is our national 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 congruent
with the expectations of the American public?
Remarkably, the Bush administration and Congress have sidestepped these
questions since Wilbur Ross, a Wall Street financier, said he would sell
his U.S. steel mills to Lakshmi N. Mittal - a transaction that would net
Mr. Ross a personal profit of $267 million.
Rather, the proposed takeover has sailed through the antitrust division
of the Justice Department and so far has elicited no objections from the
Pentagon or the Securities and Exchange Commission.
There is always a superficial attraction when a new owner swoops down
and promises "synergies" and other corporate balms to an anxious
community. Mr. Mittal, CEO and controlling stockholder 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 newly acquired 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,
echo Mr. Buffett's warning about placing our economic future in the hands
of investors with no loyalties to America.
Little is known about the Mittal family except that it expects enormous
profits from the Third World and Eastern European steel companies it purchases.
Lakshmi Mittal paid himself a $2 billion dividend from a family-owned
steel company, LNM Holdings NV, before merging it with Ispat International
NV to form Mittal Steel in December. 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
since Mittal purchased controlling interest of the country's steel mills.
The company is known as Ispat Iscor in South Africa.
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 resulting
from job cutbacks at Mittal's Karmet Works.
Recently named by Forbes as the third-richest person in the world, with
a net worth of $25 billion derived from his steel empire, Lakshmi Mittal
staged a $55 million wedding celebration for his daughter at the Palace
of Versailles in July. A month later, widows' benefits were eliminated
at an Indiana steel plant, Ispat Inland in East Chicago, that the family
acquired in 1998.
"Mittal Starves Widows" read a picket sign when union members
held a protest rally, and the company restored the benefits. But a Mittal
official told analysts last month that the company has no intention of
backing down from seeking concessions from the local unit of United Steelworkers
of America, which presumably includes eliminating the modest $62.50 monthly
widows' benefit.
Three years ago, President Bush - backed by Maryland's Sen. Paul S. Sarbanes,
Sen. Barbara A. Mikulski, both Democrats, and Republican Robert L. Ehrlich
Jr., then a congressman - promised steelworkers that they would protect
the industry from "unfair" foreign steel and dumping.
These voices have fallen silent since Mittal's bid for ISG, 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-away Netherlands takes hold.
Mark Reutter, a former Sun reporter, is the author of Making Steel:
Sparrows Point and the Rise and Ruin of American Industrial Might.
He lives in Urbana, Ill.