The Grey Chronicles

2009.July.28

The Steel Empires of Mittals



There is a great difference between the two Mittals: Pramod and Lakshmi. Richard Orange (2008) writing from Mumbai, quotes a former senior Mittal employee:

“Their father told me that Lakshmi and Pramod are equal geniuses. But he said that Lakshmi Mittal has the habit of reading each and everything before signing it. Pramod is more trusting.”

As one reader commented in this blog that:

“The real culprit is not Mittal. … The real offenders are the local management like the MD and CFO, who have no interest but to fill up their coffers.”

The root words of command responsibility are command—a position of highest authority— and responsibility—the trait of being answerable to someone for something or being responsible for one’s conduct.— Trust is a key word that binds command responsibility. Trust involves believing in the honesty and reliability of others or complete confidence in a person. Both brothers, Pramod and Lakshmi, are Chief Executive Officer [CEO] of Global Steel Holdings, Ltd. [GSHL] and Mittal Steel, respectively. Thus, both has command responsibility for whatever they do their business.

In 2005, Amit Roy wrote that Pramod was hardly known in the Asian community compared with his affable and personally charming elder brother, Lakshmi (Telegraph, 2005).

Lakshmi MittalDuring a 2005 presentation of Louis Schorsch, President and CEO, IspatInland, Inc. in the SBB Steel Market Conference, he (2005) outlined:

Mittal Steel will be the world’s largest steel producer, with over 70 million tons of steel producing capacity and pro forma 2004 revenue of $31.2 billion
Mittal Steel is the world’s most global steel company, with steel production in 14 countries
Mittal Steel is the world’s largest producer of wire rod, the largest supplier of merchant slabs, and, by a wide margin, the largest steel exporter
Mittal Steel is a major producer of raw materials, including 20 million tons of iron ore (40% of consumption) and 19 million tons of coke; the company is long in coke
Mittal Steel has net debt of less than $1 billion (12.31.04) vs.a total capitalization > $20 billion (2.28.05).

Schorsch also discussed the three integration principles of Mittal Steel, such as: Centralization of commercial functions and activities; Application of ISG labor model in the plants; and Maintenance of R&D capability to support value added and customer service.

Pramod MittalNo similar things can be said of Pramod’s GSHL. There are no published Investor Relations documents, as GSHL is purely a closed, privately-held company headquartered in Dubai, incorporated in 2005 in tax haven Isle of Man. But based on GSHL’s flagship company, Ispat Industries Ltd. [IIL] was about 80% in debt in March 2004 versus a total capitalization of about Rs8.6 crores; and about 67% in debt in March 2005 versus capitalization of Rs8.7 crores (see also: Understanding GSHL: Red Still Marks The Ispat).

Furthermore, there are no corporate publications that extolled the principles of integration for GSHL; except that the acquisitions focused on a synergy to “blend global strategy with local strengths,” and “optimize operations within limited resources” as its Culture of Management invokes.

In October 2008, The Innovation Circle [iCircle] published a case study (2008) on Merger and Acquisition [M&A] Strategy which focused on an in-depth strategic analysis about the merger between Arcelor and Mittal Steel. The case study states:

“The Mittal strategy was (and is) based on three elements — integrated business model, product diversity and geographic reach. … Mittal decided to be a consolidator and to drive the industry to higher levels of profitability (and multiples) — clearly, it has wealth creation as the main driving force … Throughout the M&A process (Jan 2005-Jun 2006), Mittal demonstrated stamina, determination and conviction about his vision of the steel industry and about the Arcelor Mittal business model”

Steel Giant in 15 YearsMittal Steel took 15 years (1990-05) to achieve 116 mm metric tons of steel (7.7 million metric tons per year) compared to the fact that it took the world 25 years (1970-95) to add 161 million metric tons per year of steel (6.5 million metric tons), roughly equivalent to adding Canada’s annual steel consumption every year, iCircle analyzed. In 2008, ArcelorMittal produced 101.6 million metric tons of crude steel versus 1,327 million metric tons worldwide. (World Steel Association, 2009). The duration—15 years—is reminiscent of the The Steely Dream of Pramod Mittal, whose “steel empire grew 15 times since he [Pramod] got into business 15 years ago” (India Inc., 2008). [Note: The Grey Chronicles was tempted to add a similar plot for GSHL, but deemed it would too small—Global Steel is not among its top 80 companies in 2008—to be displayed as the graph’s minimum scale is at 200 million metric tons per year].

Probably, genuises are much better reading each and everything before signing something than being more trusting.


Notes:

iCircle (2008). M&A Strategy: Lessons Learned from the field. Place: The Innovation Circle, 08-10 October 2008. p. 56-57, 64. back to text

India Inc (2008). Pramod Mittal: Beating industry expectation. Resurgent India Inc, 2008. back to text

Louis Schorsch, Louis (2005). The industry, the company, the acquisition: introducing Mittal Steel. Presented at SBB Steel Market Conference, Chicago, U.S.A. 01 March 2005. back to text

Orange, Richard (2008). He’s too heavy, he’s my brother: why India’s family firms are fated to become factions. London: Independent News and Media Limited, 22 June 2008. back to text

Roy, Amit (2005). Just business: Mittal. Calcutta: The Telegraph, 05 June 2005. back to text

World Steel Association (2009). World Steel in Figures 2009. Brussels: World Steel Association, July 2009. pp. 7-8. back to text

Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 LicenseDisclaimer: The posts on this site do not necessarily represent any organization’s positions, strategies or opinions; and unless otherwise expressly stated, are licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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1 Comment »

  1. […] achieve 116 mm metric tons reyadel.wordpress.com […]

    Pingback by Tons Vs Metric Tons | AllGraphicsOnline.com — 2011.March.14 @ 19:12 | Reply


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