French steelmaker Usinor makes inroads in North American market.
Usinor Group, the $14 billion-a-year French steel-making giant, has been selling its products in the U.S. market since the late 1930s. But until the world's calendars flipped over to the year 2000, its North American operations didn't fly the corporate parent's colors. Instead, the company's New York-based sales and marketing arm did business as Francosteel Corp. That all changed on Jan. 1, when the U.S. sales unit was rechristened Usinor Steel Corp. -- in line with a branding strategy designed to extend the Usinor name to diverse units of the increasingly globalized steel company. Roughly half of Paris-based Usinor's steel production now comes from facilities located outside France, thanks to an aggressive acquisition strategy adopted after the company was privatized in 1995. One major step in implementing that strategy was the late-1998 acquisition of a 75% interest in Belgium's Cockerill Sambre SA, which nearly doubled Usinor Group's capacity in flat-rolled carbon steel and elevated it to the No. 5 position among the world's largest steel producers (see chart). In gaining control of Cockerill, Usinor boosted its share of the European market for automotive steel to an estimated 35%. Although the majority of its sales are to European customers, Usinor Group derived 9% of its first-half 1999 revenues from the U.S. and Canada and took several steps last year to strengthen its foothold in North America. It acquired 100% ownership of Pittsburgh-based J&L Specialty Steel Inc. -- in which it previously had held a 53.6% stake -- and teamed with Canada's Dofasco Inc. to launch a joint-venture hot-dip galvanizing plant in Hamilton, Ont. Known as DoSol Galva Ltd., the joint-venture facility went into operation last July, using new galvanizing technology developed by Usinor subsidiary Sollac SA. The operation, which is 80% owned by Dofasco, is expected to turn out 450,000 tons of galvanized steel annually when it reaches full capacity later this year. It already has contracts to supply steel for fenders and doors for Ford Motor Co.'s Windstar minivan, which is assembled in Ford's Oakville, Ont., plant. "This galvanizing line is a first step toward selling very-high-value products to the North American automobile industry for use in exposed parts," explains Gerard Picard, president of Usinor Steel Corp., who also serves as chairman of the firm's Canadian sales unit, Usinor Canada Inc. In view of the current globalization trend, steel industry observers have speculated about the possibility of a significant merger or other alliance involving a major European steelmaker and a U.S. partner in the flat-rolled segment of the market. Given Usinor's global vision, the French company would seem to be a prime candidate for such a scenario. Indeed, Picard doesn't rule out the possibility that Usinor Group might eventually want to build or acquire additional production facilities in the U.S. "It depends," he says, "on whether it would make sense for our shareholders -- and whether it would be a good answer to our customers who are becoming more and more global. We could develop a new partnership or a new investment in the future if this is required by customers like the big OEMs." However, any such move isn't likely to be a countermeasure in response to the persistent calls by American producers for tougher enforcement of antidumping laws, since the carbon steel products that Usinor imports from Europe have not been among those targeted in the most recent series of U.S. trade cases. "We don't sell commodity products here," Picard points out. "We are less concerned [about anti-dumping suits] because we try to have high-value products. So the risk of dumping is very low." In addition to the automotive industry, Usinor Group has targeted such growth industries as appliance makers, packaging, and -- in Europe, at least -- the construction market. Among its major customers are service centers that cater to the automotive market. "We have established a very tight relationship with the car makers in Europe," Picard says, "and we are trying to extend this good relationship elsewhere in the world. And that could include North or South America. "Our main strategic goal is to become a global player with some selected customers," he adds. "We have more than 200 [technical] working groups that work with our customers on a worldwide basis to find steel solutions -- not only to find the best price for steel, but also to find the best solutions for their precise needs." In addition to Cockerill Sambre and J&L Specialty, Usinor Group's acquisitions in recent years have included 100% ownership of La Magona d'Italia, a leading processor of flat carbon steel, as well as significant stakes in Italy's Arvedi Group (which has a minimill-type thin-slab casting facility), Brazil's Companhia Siderrgica de Tubaro and Acesita SA (a stainless producer), and a galvanizing line in Spain. It also is building a stainless finishing unit in China, near Shanghai. As part of the Cockerill deal, it also acquired Eko Stahl GmbH, a German flat-carbon producer with a plant near the Polish border. The string of acquisitions created a global entity operating under a variety of different names -- which prompted the decision to begin using the Usinor name more widely. (Besides the U.S. sales arm, several other company units have been renamed.) "Our long-term goal is to promote one group identity across many cultures," Picard explains. "As we enter a new millennium, one driven by globalization, it is now appropriate that steel buyers know us by our family name -- Usinor." However, the J&L Specialty unit, which accounts for most of Usinor's employment in the U.S., will continue to operate under the J&L name -- for the time being, anyway. "They have their own sales unit and their customers know the company by that name," Picard points out. Another key element of Usinor Group's global strategy was a major reorganization, effective last July, that carved 23 different production and sales units out of what had been three large corporate divisions -- flat carbon, stainless and alloys, and specialty steels. Under the new structure, for example, there are now nine separate flat-carbon units, including six established on a geographic basis and two that focus on specific markets -- Usinor Packaging and Usinor Auto. In the flat-products segment, Picard notes, "instead of having one very big monster selling more than 15 million tons, we decided to split the organization into business units dedicated to specific markets or products. . . . Each unit has its own profit-and-loss account and its own approach to the customer. But the business units share the same back office [support], so we have cost savings in terms of administrative or information-system costs."