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India’s Eau de Cologne and Europe’s Stench

What roadblocks does the world’s largest steel company face in Europe?

February 10, 2006

What roadblocks does the world's largest steel company face in Europe?

Recently Arcelor's Chief Executive Guy Dollé summed up the crux of the challenge: the European company, he said, made “perfume,” while Mittal churned out “eau de cologne.”

Dear Shareholders:

“My name is Lakshmi Mittal. Many of you may only recently have heard of me. But what is going on right now, in fact, will become a familiar challenge of the 21st century — where far-away forces and people will increasingly impact, unexpectedly, upon our everyday lives.

“I am from India, where we have sought to cope with such forces for centuries. In our own industry, steel, I would like to note a statement by Sir Thomas Holland, the (British) Chairman of the Industrial Commission (in India), who in 1908 admired the ‘high quality’ of Indian iron. He even gave Indians credit for ‘the early anticipation of the process now employed in Europe for the manufacture of high-class steels.’

“India, however, has many more such stories to tell. For those of you who are interested, I recommend British historian William Dalrymple’s book ‘White Mughals.’ A reviewer in the Los Angeles Times (July 13, 2003) said this book explains that ‘rather than being an insulated civilization overripe for colonial picking and conquest,’ India was a commercially, culturally and militarily-advanced one, ‘in many respects, more advanced and refined’ than Europe’s, which had therefore to be won over ‘from the inside.’

“Indeed, we in India believe that we have been lucky to absorb the best from everywhere — and are now ready to return the favor. For it is not only in steel that India is rising to become a global force. Information technology, pharmaceuticals and biotech, electronics and telecoms, chemicals, cars and trucks, energy, diamonds, textiles, films — these are all areas where the world is seeing more of us.

“Today, other than a fringe who riot and burn in the name of ‘alien values and cultures,’ most of us welcome the immense new opportunities in a world where neither capability nor success is measured by caste and religion, or hopefully by color and origin. This is what, to me at least, is the meaning of globalization.

“In several ways, I am simply a citizen of the world. I was born in India. I live in London. Mittal Steel’s headquarters are in the Netherlands. We have research labs in the United States and Europe, staff and operations in four continents.

“Here in Europe, we have been called Indian, British, Dutch, American — and various combinations of these. No one has said what we really are — a ‘global’ company. We wish to imagine that we are the shape of the future, an end to the territorial, tribal absolutes of “us versus them” — and hopefully, a small example for the larger world.

“So I wish to pose one question. Instead of Lakshmi Mittal, had I been Laurent Michel, born in Orleans, France, and had Michel Steel been exactly what Mittal is today, a high-performance success story across the globe, would you be hearing protests about our ‘values’ and ‘industrial concepts?’ And would you be resisting everything else which is credited to us?

“All of us are impressed by the logic of European unification. Your own company Arcelor is an example of how steel businesses in three different countries joined forces to open up new roads to the future. Indeed, this is the essence of both the values and vision of Mittal Steel.

“But, like us, you too must begin to look beyond the frontiers of Europe, especially to Asia, where, astonishingly, you have hardly any presence at all. For it is in Asia where history’s great wheel is turning, as China and India return to their 19th century status, when they accounted for half the world’s economic output.

“China now consumes 30% of global steel consumption. India is voraciously building new manufacturing plants — and is on track to attain the steel production capacity of our two companies put together.

“It is, therefore, clearly in Asia, where we have to succeed, in order to maintain jobs and remain relevant, everywhere. But it is not going to be an easy ride. For Asia too has ambitious players, old and new, seeking to go beyond their roots, just like I did.

“Nor is a foot in that Asian door going to be easy. Last year, as you know, China’s steel industry over-produced as much as 43 million tons (or one-seventh of its entire consumption).

“In the face of such complex and dynamic challenges, you may still hope that you can go it on your own. I believe we would best achieve this together. To take a new lesson from Dalrymple’s book, we must fight and win ‘from the inside,’ everywhere, as indeed we will, if we ride the tide of globalization together.

“Your only alternative is to turn your backs on the future. This will be painful and futile. Today, even the great Talleyrand may have rephrased his words ‘Non, il n’est pas urgent d’attendre.’ (No, it’s not urgent to wait.) For the world is moving ahead.”