The steel magnate is set to get a spanking new plant financed mostly by France and the European Commission; the Minister who baited him, seen as a loudmouth by his party, has been put in his place

Round one has decisively gone to Lakshmi Mittal, the redoubtable Luxemburg-based Indian businessman who made his fortune by buying up failing steel plants and turning them around.

Despite brandishing the threat of nationalisation against the ArcelorMittal plant in Florange, northeastern France, the French government, run by social democrats had no stomach for it. So a compromise was reached. A compromise, that most political and economic observers remark, is far more favourable to the boss of ArcelorMittal than it is to the employees who were clamouring for a forcible public takeover.

The spin

French Prime Minister Jean-Marc Ayrault tried to put a positive spin on the operation: “There will be no job losses at Florange. Mr. Mittal has agreed to all our conditions. I had three main objectives in mind and all of them have been fulfilled: there should be no redundancies; the future of the steel industry in France should be assured and thirdly, there should be innovation and cleaner, greener technology. This agreement has all these elements. Nationalisation was not the best solution. Such a step can be taken in a historic situation for the safeguard of national interests but not when there is no demand and no competitive advantage.”

At first sight, it appears to be a truly successful operation for the French government with the subliminal message that the powers that be are still in a position to resist the infernal logic of globalisation and profitability. But examine the agreement closely and it is Mittal who emerges the winner.

He has promised not to sack the 630 workers employed on the blast furnaces in Florange. These men will be redeployed elsewhere. But while Mr. Mittal has agreed to keep the furnaces in working order, there is no question of restarting them for another two years at least, not until the European Union sponsored project for cleaner carbon capture and sequestration technology (ULCOS) is ready to go on stream at the plant. [ULCOS or Ultra–Low Carbon dioxide (CO) Steelmaking is a consortium of 48 European companies and organisations from 15 European countries that have launched a cooperative research & development initiative to enable drastic reduction in Carbon dioxide (CO) emissions from steel production.]

He has also promised to inject €180 million over the next five years into Florange. The French state through its regional and local instances will inject another €150 million while the European Commission will cough up the balance. Mr. Mittal will be getting the latest green technology and an almost spanking new plant at least for the “liquid steel “operations where ore and minerals are transformed into steel, for the bagatelle of €180 million. The rest of the operation will be bankrolled by the EU and the French state. For a company that posted last quarter operating profits of $1.1 billion, the sum of €180 million over five years is mere piffle. No wonder Mr. Mittal described it as “a good agreement.”

Montebourg used as a weapon

The biggest loser in this imbroglio over steel has been the Minister for Industrial Renewal, Arnaud Montebourg. Given to loud and often rude pronouncements, Mr. Montebourg, who has time and again embarrassed his own government, has been neatly lobbed into place. The Minister somewhat recklessly upped the ante, insulting Mr. Mittal by calling him a liar and a blackmailer and threatening him with expropriation saying he had found another “buyer, a steel man willing to put 400 million Euros of his own money into Florange.” As it turns out the mysterious buyer — several names were mentioned, including Tata Steel and Severstal of Russia — was more a mirage than reality. Mr. Montebourg stoked worker anger against Mr. Mittal, giving them false hopes by telling them that nationalisation was practically in the bag. The Minister’s bluff was called when Mr. Ayrault announced there had been no other serious buyer in sight.

The daily Le Monde wrote in its editorial: “Arnaud Montebourg has failed. Florange will not be nationalised or resold. The proposition of the Minister for Industrial Renewal was thus quickly swept aside by the Prime Minister, whose aide confided that Mr. Montebourg was “not credible.”

Arnaud Montebourg is a multi-recidivist who talks big and plays rough. In September he insulted the Korean automobile giant Hyundai by saying publicly at the French Automobile Show: “I shall not visit their stand. Although they do manufacture half their cars in Europe, the other half are produced in Korea and that amounts to social dumping. I am calling on all French buyers to boycott this Korean brand.”

On Sunday, the Minister, who was scheduled to be the chief guest on a high profile radio talk show, suddenly cancelled his appearance. He told the media he was “disappointed but not betrayed by the government” and vowed to fight on.

Le Monde quoted Eddy Fougier, a researcher and political commentator on the French Left as saying: “Montebourg’s role was to make much-needed noise for the negotiations. He seriously wished to nationalise, but not the others in the cabinet. So the government used him as a negotiating weapon.”

On nationalisation

Indeed, the Economy Minister Michel Sapin, admitted earlier last week: “We do not live in an epoch where it is easy to nationalise the steel industry. Such a move would be judicially difficult and economically unstable.”

Mr. Montebourg is thus being disowned by his own clan. He is an ungainly personality to have in the cabinet but he has a certain following and President Hollande cannot get rid of him without rocking the Socialist Party boat.

The Mittal affair was a god-sent opportunity for Mr. Hollande to cut down an unwieldy and hyperactive minister to size. But having raised the spectre of nationalisation, Mr. Montebourg has opened a Pandora’s box of troubles for the Hollande presidency.

The workers at Florange who had hoped to escape the grip of Mr. Mittal remain unhappy and discontented. Now others, from the shipyard at Saint-Nazaire (owned by the Korean company STX) or the refinery Petroplus, on the brink of closure, are all clamouring for the bitter medicine initially intended for Mr. Mittal. Also, in the past five years, foreign direct investment into France has halved. “The signals going out of France is that it is not an investor-friendly place, and that is dangerous,” Mark Gilbert, the head of Bloomberg News in London told The Hindu.

With a huge rise in the number of unemployed in France, these issues are bound to create more headaches to the government. President Hollande would be wise to replace his ambitious and uncontrollable Minister for Industrial Renewal at the first opportunity he gets.

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