France, Nationalization and ArcelorMittal
If there was one word that would have shown a big “say NO to investing here” sign in black and white to foreign investors and companies interested in the world’s fifth largest economy France, it was ‘Nationalization’. Yet, this was precisely the word that accompanied France in almost every sentence for a month so last year. The other word that accompanied both France and Nationalization was ArcelorMittal.
World’s biggest steelmaker by volume, ArcelorMittal wanted to close its two furnaces in Florange, located near the German border in the former industrial heartland of France, citing its distance from raw materials and smallness, which renders it unviable economically. This would have meant unemployment for the 600 workers at the furnace. The company, however, wanted to keep the rest of the plant in Florange in operation which employs about 2,700 people. The employees were angered when the multinational announced this plan in October giving the government a grace period of 60 days to look for a new owner.
The matter intensified when the minister for Industrial Recovery, Mr. Arnaud Montebourg accused Mr. Lakshmi Mittal, whose family owns 40% of the multinational, of ‘lying’ and ‘disrespecting’ the country. Mr. Montebourg alleged that chief executive Mr. Mittal had broken his promise made during the Mittal Steel’s 26.9bn-euro (£21.8bn) takeover of Arcelor in 2006 by declaring the closure of Florange. The takeover itself had been opposed strongly by French ministers. He further threatened with the nationalization of the whole plant.
The Mittal family said they were “shocked” by the remarks. One person close to the group said, “These are pretty violent comments towards a group that employs 20,000 people in France.” (As reported in the BBC news).
With foreign investors viewing the situation and a possible stalemate—France’s socialist President Francois Hollande threatening to temporary nationalize the whole plant and ArcelorMittal refusing to sell the whole operation—with apprehension, a compromise was reached on November 30th. The French government struck a deal with ArcelorMittal , by which the multinational will invest 180 million euros or $230 million in its Florange steelworks and save the 600 jobs.
Jean-Marc Ayrault, the French prime minister, stated that though the two furnaces will not be restarted, they will be employed in a test project for environmentally friendly steel production in future by ArcelorMittal.
Steel tycoon Mittal later hit out at the “irrational” French minister saying he was surprised at being told he was “not welcome” in France by Montebourg when the country represented 35 percent of ArcelorMittal’s steel production in Europe and they had invested two billion euros in France since 2006. He added that nationalization would be “backward leap” for France considering the drop 27% in steel consumption in europe since 2007. He also said that “no threats are necessary”. Terming the deal “fair”, he promised to stick by the deal in response to apprehensions by the French socialists.
Nationalization or not, France has now made the investors think twice before putting their money in France. At the same time, the union members and workers remain unappeased by the deal. Instead of pleasing everyone, the government might have given solace to none as members of trade unions and business groups, both voice their dissatisfaction.