April 29 was a largely clear, if occasionally cloudy, day in London. But the father and son team that walked into the bleakest moment of their career had seen fairer weather. It was just a conference call with analysts and journalists from around the globe, one of the scores of such events they address with ease each year. But this one was rather difficult. They had the unpleasant job of announcing the second straight quarter of losses in their business empire that had never made a loss before. It would come as a sharp contrast to the euphoria that marked their conferences in the past. They mustered some courage and started the call after a three-and-a-half hour delay.
Mittal has lots and lots of steel making capacity, but not all of it efficient in terms of cost or proximity to high-growth markets. ArcelorMittal is a giant patchwork of steel operations bought over 22 years. His plants in the United States and Europe account for 60 percent of the total capacity, but are also the costlier ones. He will have to scale down production there and utilise other plants in places like Kazakhstan, Ukraine and Mexico. For instance, the Kazakh plant has its own iron ore mines and is a cash cow with a core profit of $100 million a month. “If Mittal aims to shut down or prune capacities, it will be natural for him to start from the US plants, which also have high legacy costs,” an industry veteran who has worked with Mittal says.
What was the flash point that led to ArcelorMittal shifting gears?
(This story appears in the 05 June, 2009 issue of Forbes India. To visit our Archives, click here.)
Mittal Sr was assisted by an able team of professionals drawn from Indian Steel Mills and top management schools. They helped him in each part of his empire building exercise, whether it be operations or sales or Marketing
on Aug 27, 2009More on the Arcelor Mittal saga http://strat.in/2009/07/biggest-deal-in-steel-industry-1/
on Jul 28, 2009very well written. Will check for more such stuff
on May 27, 2009Good story,keep up the gud work.
on May 23, 2009Debt always creates problem, it has not spared even Mittals.
on May 22, 2009