Re: Rouge Steel sold to Russians

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October 25, 2003
BY JEFFREY MCCRACKEN
FREE PRESS BUSINESS WRITER
With one fell swoop, an iron and steel plant envisioned by Josef Stalin and
run for decades by the Communist Party has bought access to Detroit's auto
industry via a remnant of Henry Ford's vision.
Spokespeople from Detroit's three automakers said none of them buys steel
directly from Severstal, either in the United States or Europe.
They all, however, buy steel from Rouge, which last year produced about 2.8
million tons of steel, according to the International Iron & Steel Institute,
making Rouge the 79th-largest steel producer in the world. Rouge -- owned for
decades by Ford Motor Co. -- is Ford's largest steel producer and one of the 10
largest for the Chrysler Group.
"The reason the Russians want this mill is because it is a good supplier to
the Big Three," said Peter Morici, the former chief economist of the U.S.
International Trade Commission.
Like nearly all large Russian businesses today, Severstal was once government
run, with government planners in Moscow deciding what to buy, what to sell
and what to charge.
Any profits went back to Moscow, which balanced the plant's books and planned
its future.
Severstal was first conceived by Soviet dictator Stalin in the late 1940s. By
August 1955, the steel mill was in business and feeding the Soviet Union's
industrial ambitions, churning out steel that was used to make everything from
bridges to tanks.
At its peak, the plant employed more than 52,000 people, according to the
Russian newspaper Pravda. And so it went until Communist Russia collapsed in 
1991
and the company was privatized a few years later.
Most of the workers sold their shares to a management group, led by its top
executive and steel tycoon, Alexei Mordashov. The 37-year-old Russian owns 16.6
percent of the company, according to various reports, and is Russia's
10th-richest man with an estimated net worth of $1.2 billion, according to 
Forbes.
Mordashov and a group of young, capitalist-friendly locals were able to buy
up most of the shares of Severstal, to the point that management now owns 80
percent of the company.
"All of those state-owned industries -- oil, gas and steel -- transferred to
private hands, and there have always been lots of suspicions, questions about
how that happened," said Meyendorff. "Remember, there was no Russian stock
market and no regulation of this, so there was a lot of corruption and a lot of
allegations about mob-like activity. Russia is cleaning up that now."

full: http://www.freep.com/money/business/sev25_20031025.htm


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