USINOR SACILOR History

Company History:

Usinor Sacilor was the result of the merger in 1986 of Usinor and Sacilor, the two major French iron and steel groups. Usinor had existed for over 150 years in the north of France. Sacilor had been incorporated in 1973, but could trace its history back to 1704, when Jean Martin de Wendel bought the ironworks of Hayange in French Lorraine. Usinor Sacilor was in poor shape at the time it was created as a result of a government decision, but has seen a dramatic recovery since. The group whose components had been loss-making for years became profitable again in 1988. It strengthened its presence in international markets by acquiring German and U.S. iron and steel producers. The world's second-largest steelmaker, Usinor Sacilor is above all an iron and steel group, but it appears to be less of a French group at the beginning of the 1990s, a quarter of its total work force being German.

The Sacilor group has deep roots in France's industrial history. It has been associated with the Lorraine region and the de Wendel family since the early 18th century, when Jean Martin de Wendel acquired the ironworks of Hayange in Lorraine. Under de Wendel, the ironworks became one of the largest in France. In 1794, during the French Revolution, the ironworks were able to produce as many as 848 cannonballs, 84 bomb-shells, and 4,000 bullets per day. In 1822, the de Wendel iron-works gained France's first coke blast furnace. The de Wendel factories increased production at a considerable rate during the industrial boom of France's Second Empire: whereas the plants produced about 20,000 tons of cast iron and a little less iron in 1850, by 1869 more than 130,000 tons of cast iron and 110,000 tons of iron were obtained from the 15 blast furnaces. De Wendel, now the foremost ironmaster in France, employed a work force of 4,000 to fabricate rails, iron bars, iron sheets, tin, and wire. In 1870, however, the Lorraine region was annexed by Germany as a result of its victory over France and the company was split in two until 1918. The factories that were given back after World War I had been run efficiently by the Germans and the company was able to return to 1914's production level by 1924. De Wendel achieved record production levels in 1929, with 1.66 million tons of cast iron and 1.63 million tons of steel. The shock of the 1929 Depression, which reached France in 1930-1931, followed by World War II, prevented the company from investing capital in modernization during the 1930s and 1940s. In 1948, Sollac (Société Lorraine de Laminage Continu) was formed as a cooperative company by nine different steelmakers, including de Wendel. Sollac was intended to fill the technological gap that had developed during the last 20 years between the French and U.S. steel industries. Sollac began by setting up to produce steel sheets, then added a Kaldo steel plant using pure oxygen in 1960--the Thomas and Martin processes were still predominant in the profession--and finally introduced cold rolling mills and tin-making units.

The year 1948 saw also the creation of Usinor, through the merger of the two largest steel-producing groups of northern France, Denain-Anzin and Nord-Est. The two groups had complementary product lines, with Denain-Anzin oriented toward steel sheets and Nord-Est favoring shaped products. Both companies originated from small plants dating from the 19th century. The Société des Hauts Fourneaux et Forges de Denain-Anzin had been formed in 1849 from the ironworks of Denain, founded in 1835 by Francois Dumont with the permission of King Louis Philippe, and a similar plant created the same year by Benoit-Auguste Vasseur and located in Anzin. The Société des Forges et Aciéries du Nord-Est had been founded in 1882. It combined the Mines et Usines du Nord et de l'Est and Steinbach and Company, another iron and steel company. The former, created in 1873, was the result of the merger of the blast furnaces of Jarville; the iron factory of Trith Saint Léger, an old factory founded in 1828; and interests in the Houdemont mines. Nord-Est increased its size considerably after World War I through acquisitions and mergers in the mining and iron and steel industries. In 1919 it took over the Usines de l'Espérance, established in Louvroil in 1858 by Victor Dumont. In 1933 it absorbed the Société des Hauts Fourneaux et Laminoirs de la Sambre, a blast furnaces and rolling mills company that originated from the merger of the Hautmont factory, founded in 1871 by Michel Helson, and the Société des Forges et Fonderies de Montataire, established in 1840.

Concentration continued to take place in Lorraine's iron and steel's industry during the 1950s and 1960s. In 1950, the Grand-sons of François de Wendel company merged with the de Wendel company. The year 1950 also saw the creation of Siélor, a transformation company in which two Sollac partners, the Rombas and the Homécourt groups, took part. In 1963, another merger brought together the UCPMI, another Sollac partner, and the Knutange company to form the company SMS (Société Mosellane de Sidérurgie). Meanwhile, de Wendel and Sidélor decided to form a joint venture, Sacilor, which built a large modern oxygen steel factory at Gandrange. Finally, in 1967, the de Wendel, Sidélor, and SMS groups decided upon a merger. The new group, de Wendel-Sidélor, thus acquired 65% of Sollac's shares and all of Sacilor's shares. In 1968, the group companies produced more than 20 million tons of iron mineral, that is 40% of total French production, and 7.8 million tons of rough steel, that is two-thirds of Lorraine's production and one-third of French production. The work force amounted to more than 60,000.

In 1971 a conversion plan for the new group was issued. It proposed the closing of all the Martin and the Thomas steel-works and generally of all the most obsolete factories, the production of which was to be replaced by that of the leading plant at Gandrange. This policy was intended to enable the company to bridge the increasing competitive gap between Lorraine coal and iron mineral supply and that coming from abroad.

In 1973 the group structures were simplified. De Wendel-Sidélor merged with its own subsidiary Sacilor and its two parent companies, de Wendel and Sidélor Mosellane, to form the new company Sacilor. Close industrial cooperation was achieved between Sacilor and its transformation subsidiary Sollac. In 1975, the first year of the steelmaking crisis in France, the de Wendel and Marine-Firminy groups merged. A holding company, Marine-Wendel, united all the steelmaking interests of the two groups, including their shares in Sollac. Lastly, in 1977, the holding company Marine-Wendel gave to Sacilor those of its industrial interests directly linked to steel-making.

Usinor had been created in order to set up its own wideband train. The train was constructed in Denain, where the existing blast furnaces and steelworks could supply it with raw materials the train went into operation in 1952. Another decision was even more revolutionary: in 1956, Usinor announced its intention to create a new integrated factory oriented exclusively toward steel sheets. This decision was unusual, in that the plant would not be located in the mainlands, near the coal and iron mines, but by the sea, at Dunkirk. For economical reasons, the new factory was intended to receive raw material supplies from abroad. The preparation lasted for years and the factory, one of the most powerful and modern in the world, officially opened only in 1971.

In 1966 Usinor merged with the company Lorraine-Escaut. Lorraine-Escaut had been created in 1953 with the merger of three ancient steelmaking companies: Senelle-Maubeuge, Longwy, and Escaut et Meuse. It was the last of the great postwar mergers. The merger with Usinor led to the creation of a new holding company, Denain-Nord-Est-Longwy, which controlled about 60 companies through Usinor and Vallourec. Usinor combined the mining, steelmaking, and steel-selling activities while Vallourec controlled all the pipe-making activities which amounted to the three-thirds of the French pipe production.

During the early 1970s, the new group carried out several important projects, such as the construction in Mardyck, near Dunkirk, of a large steel sheet cold mill rolling factory. In 1973, benefiting from the financial difficulties encountered by the de Wendel-Sidélor group as a result of the difficult circumstances prevailing in the steel market and the weight of its restructuring plan in Lorraine, Usinor took a stake of 47.5% in Solmer, another 47.5% of which was retained by Sollac, the founder of the company. Solmer possessed in Fos-sur-mer, near Marseilles, a recent large steelmaking unit using foreign raw materials.

Both Usinor and Sacilor were hit severely by the economic crisis that began in 1975, two years after the first oil shock. While steel prices plummeted because of the diminished demand and the outbreak of the continuous casting, energy and salary costs increased. The two groups kept their work force intact for the first two years, while their financial results deteriorated considerably, aggravated by the fact that the steelmaking groups were already heavily indebted as a result of the modernization plans launched at the beginning of the 1970s.

At the beginning of 1977, the French steelmaking groups made public a steel project that planned reduced steel production, concentration on the leading factories, and the closing of the less-modern units. That same year, the steelmaking profession signed up a ten-year agreement on job cuts, the Steelmaking Profession Social Protection Covenant, with the government. The agreement allowed the firms to put workers into early retirement from the age of 58 years and 8 months and in some cases, 54. The cost was shared between the firms and, for the major part, the state.

In 1979, another merger occurred at the government's initiative, between Denain-Nord-Est-Longwy (DNEL-Usinor) and Chiers-Chatillon-Neuves Maisons. The latter was a somewhat smaller group, also the result of multiple mergers between long-established steelmaking firms--its oldest factory, Chatillon, dated from the 18th century and had belonged to the marshall-duke of Marmont, a Napoleon general. Also in 1979, Usinor took over the Rehon factory from the Cockerill group, while Sacilor became the major shareholder of another old steelmaker, Pompey. Finally, in 1981 the Socialist government decided to make the firms' situation clearer. Sacilor was nationalized by conversion of the state loans while Usinor was controlled up to 90% by the state and nationalized companies.

During the 1980s, FFr100 billion (US$16 billion) were poured by the state into the abyss of the steel industry crisis. About 100,000 jobs were lost, even if the redundant workers benefited from the Steelmaking Profession Social Protection Covenant, which was reconducted from 1987 to 1991. Production capacities were reduced by 20% for flat products and 36% for long products, those most affected by the demand slump. Many of the ancient steelworks, such as Trith-Saint-Léger, Pompey, Vireux-Molhain, Decazeville, and Longwy, had to be closed down. Most of the others, such as Les Dunes, Denain, Hautmont, Gandrange, Hagondange, Homécourt, Neuves-Maisons, and Joeuf, saw their activity reduced. A series of state-monitored mergers, intended to accelerate the restructuring of the French steel industry, began in 1982 when Ugine Steels was integrated into the Sacilor group and Sacilor took a majority stake in the Société Metallurgique de Normandie. Another crash, prompted by a decline in demand, occurred on the steel market in 1983, which led to a much more decisive step: the creation in 1984, as part of the Socialist government's restructuring plan for the steel industry, of Unimetal and Ascometal. Both companies combined entire departments from the rival groups Usinor and Sacilor: Unimetal grouped all the current long products and Ascometal all the special long products. Meanwhile, job cuts became effective from 1984, meeting fierce union resistance initially.

In 1986, the year in which state subsidies for the steel industry were stopped by the European Commission, steel prices broke down again. The merger between the two French giant steelmakers was announced in September 1986 by the Chirac right wing government, with Francis Mer, former number-two at Saint-Gobain Pont-&agave;-Mousson, being appointed president of the two companies and then of Usinor Sacilor. In 1986, Usinor achieved sales of FFr33.7 billion with a work force of 41,000 and lost FFr5 billion. Sacilor achieved sales of FFr42.6 billion, with a work force of 61,000 persons, and made a loss of FFr7.5 billion. The new president set up a drastic plan aimed at boosting productivity in the group: two years later, in 1988, the group employed 80,000 and had sales of FFr78.9 billion. Benefiting from this tremendous effort and from the strengthened demand for steel, in particular flat steel, in the world, Usinor Sacilor made a recovery. From that moment on, Francis Mer felt free to conduct an ambitious international strategy that soon led the group to the second position in world steel-production volume, just behind Nippon Steel, with 23 billion tons compared with Nippon Steel's 28 billion.

This external growth strategy has been aimed simultaneously at steel producers, so as to gain weight in the steel world market, and steel merchants, in order to come nearer to the group's clients; Usinor Sacilor now controls the distribution of about 30% of its output. Usinor Sacilor bought 70% of Saarstahl from German Saar state. In the United States, the group took over J&dollar¯p;L Specialty Products Corporation, a top U.S. stainless steel maker; Techalloy Co., a stainless steel product maker; and Alloy &dollar¯p; Stainless, Inc., a specialized trade company; and it set up a joint venture with Bethlehem Steel Corporation, and finalized an alliance with major wiremaker, Georgetown Steel Corp. The group also invested in Italy, taking a 24% stake in Lutrix, a holding company controlling La Magona d'Italia, an important coated steel sheet maker, and then buying 51% of Alessio Tubi. It eventually bought a majority stake in ASD, Britain's second-largest steel distributor. Finally, the group invested in France in CMB Acier, formerly Carnaud Basse-Indre, a packaging steel producer, thus becoming the co-world leader, with Nippon Steel in this sector. Today, the group, one of the most productive in the steel industry, relies on its own strength to face the next downturn in steel world demand, whereas most of its competitors, USX, Thyssen, Hoesch, and even Nippon Steel have been heavily diversifying their activities.

Principal Subsidiaries: Sollac (99.9%); Forges et Aciéries de Dilling (Germany, 95.1%); GTS Industries; Europipe (Germany,50%); Unimétal; Ascométal; Saarstahl AG (Germany); Ugine SA (96%); Ugine-Savoie; Imphy; CLI(Creusot-Loire Industrie); Forcast International(66%); Fortech (66.1%), GPRI (55.4%); Tubeurop Tréfilunion; Techno Saarstahl; Nozal (65.7%); IMS (58.7%); Saarlux Beteiligung (Germany); Valor; Daval Edgcomb.

Source: International Directory of Company Histories, Vol. 4. St. James Press, 1991.

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