ArcelorMittal welcomes 'good deal' to save French plant

ArcelorMittal welcomes 'good deal' to save French plant

ArcelorMittal, the world's top steelmaker, welcomed Saturday a deal over the future of one of its plants that the French government had threatened to nationalise.

ArcelorMittal, the world's top steelmaker, welcomed Saturday a deal over the future of one of its plants that the French government had threatened to nationalise.

The dispute over closing blast furnaces at the Florange plant had risked damaging France's image among investors, after a virulent attack by a minister on the company owned by Indian-born steel tycoon Lakshmi Mittal.

"It is positive that we reached an agreement on the future of our activities at Florange," said ArcelorMittal executive Henri Blaffart.

"In the context of the current economic environment, it's a good agreement."

French Prime Minister Jean-Marc Ayrault announced a deal late on Friday. In it, he said ArcelorMittal had committed to invest at least 180 million euros ($234 million) over the next five years at the Florange site in northeastern France.

The government and the steelmaker had waged high-stake brinkmanship for weeks over the fate of two blast furnaces.

ArcelorMittal wanted to shut them for good because of a slump in demand for low-end steel products.

It had given the government until December 1 to find a buyer for the blast furnaces after which it would begin laying off around 630 employees.

The government responded by threatening to nationalise the entire site, which contains facilities to produce higher-end products that ArcelorMittal wanted to keep. Paris said it could not find a buyer for just the furnaces.

But ArcelorMittal made it clear that any nationalisation of the plant would cast doubt on the future of all its operations in France, where it employs 20,000 people.

Ayrault said under the deal the two blast furnaces ArcelorMittal had closed would be left intact until EU financing was confirmed for an existing carbon-capture project. ArcelorMittal had agreed not to proceed with forced job cuts, he added.

ArcelorMittal made no mention of the carbon-capture project in Saturday's statement.

The 180 million euros in investment would be made in higher-end steel production, not the blast furnaces, it said.

But unions wanted to know what had happened to a prospective buyer government had mentioned.

"We have the feeling we have once again been betrayed," said Edouard Martin, a spokesman for the CFDT union at the Florange plant. "We don't trust Mittal at all," he added.

The deal raised concerns about the position of Industrial Renewal Minister Arnaud Montebourg, who earlier in the week had accused the company of blackmailing the country.

He had also said it was "no longer welcome in France", he added, sparking outrage in business circles.

Montebourg had also announced there was an investor ready to invest 400 million euros in Florange, and just hours before the deal told workers that the government was ready to nationalise the site.

However a source at the prime minister's office said Friday there were no "credible, firm" takers for the site.

In comments to TF1 television on Saturday evening however, Montebourg insisted nationalisation was still possible.

He had met French President Francois Hollande Saturday morning who had told him that "... the question of temporary nationalisation remained on the table because it is a dissuasive weapon.

"If Mittal does not keep his commitments, the state will assume its responsibilities," said Montebourg.

At Florange, many of the workers were sceptical of the deal.

"Lakshmi Mittal has fooled them all," said one worker, Serge Gremese.

But Ayrault also made it clear Saturday that he would ensure that the company kept its promises.

An antiglobalist, Montebourg is widely regarded as a loose cannon inside the government. His statements chilled the business climate and caused outrage in Mittal's native India.

The dispute over the plant had put Hollande's government in a bind, caught between a pledge to protect jobs and to improve the competitiveness of French industry as the country faces rising unemployment and stagnant growth.

There had been concerns that a nationalisation would have set a precedent and unleashed a wave of similar demands from unions at other ailing companies.

Despite being under severe budget constraints to meet its EU commitments to cut public deficit, the French government has recently helped prop up automaker Peugeot's financing arm. It will have to pump billions into Dexia bank.

The dispute also came at a difficult time for Arcelor Mittal, which plunged into a quarterly net loss of $709 million in the period from July to September on sliding demand from China.

The company is saddled with debt that is expected to rise to $22 billion by the end of the year, with Moody's recently downgrading ArcelorMittal's credit rating to junk status.

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