Job cuts in distressed economy pit Hollande against ArcelorMittal

Nov 29 2012, 03:07 IST
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SummaryIt has been only a month since the French government, concerned about the countryís declining competitiveness, began its 'Say Oui to France' advertising campaign to attract foreign investment.

by Hollandeís Socialist government, Montebourgís talk of nationalisation has now garnered support from across the French political spectrum. On Tuesday, Henri Guaino, a close political associate of Hollandeís predecessor, Nicolas Sarkozy, revealed in an interview with the business newspaper Les …chos that Sarkozy had himself grappled with the question of whether to temporarily nationalise another ArcelorMittal facility, in the eastern city of Gandrange, in 2008.

The Sarkozy government ultimately failed to find a suitable private investor to take over the Gandrange plant and ArcelorMittal closed the site a year later, resulting in the loss of nearly 600 jobs ó and no small amount of political face for Sarkozy.

In the interview, Guaino said the steel maker had acted in bad faith, adding: ďOne can ask the question of whether we were right to have trusted Mittal.Ē

There are precedents for nationalisation, including the late Socialist President FranÁois Mitterrandís takeover of most of the banking sector in 1982, fulfilling a longstanding Socialist policy goal, and analysts said there was no legal impediment to such a move.

Asked in 2011, as ArcelorMittal was discussing the closure of a plant in LiŤge, Belgium, if European Union treaties prohibited nationalisation, the European competition commissioner, JoaquŪn Almunia, said that the rules required only that the state act as a private enterprise would in the market, paying the owner the full value of the nationalised property and seeking to make a profit.

The most likely obstacles might be financial: At a time when France is raising taxes and freezing spending to meet budget targets, an open-ended commitment to a potential financial sinkhole would seem to be a risky proposition.

Whatever the outcome of the dispute over Florange, no one doubts the gravity of the problems faced by ArcelorMittal. Since the companyís creation in the easy-credit days of 2006, it has been beset by the financial crisis and now the current slump in Europe. Its steel shipments fell 8.3% in the third quarter of this year from the previous three months, and it reported an operating loss of 643 million euros for the first nine months of 2012.

Analysts do not expect any significant improvement in European steel demand before 2014.

ArcelorMittal, which accounts for about 6% of world steel production, is trying to return to profitability by shutting down excess capacity. The Florange site, it argues, is too far from sea transport and too costly to supply under current conditions.

The company says it

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