Labor upset at the change of name for huge steel mill
Mittal Steel, the world’s largest steel company, announced Jan. 12 that it has changed the name of its recent Ukrainian acquisition, Kryvorizhstal.
The new name of Kryvorizhstal, Ukraine’s largest metallurgical plant, is Mittal Steel Kryviy Rih.
The steel giant also appointed foreigners to run the company, amidst labor union complaints that wages for employees have not been raised in accordance with privatization tender conditions signed last year when Mittal acquired the plant for $4.8 billion.
Mittal also appointed Indian native Narendra Chaudhary as the plant’s general director and created a non-Ukrainian supervisory board.
In a statement, Mittal officials said Chaudhary has over 40 years of experience in a variety of technical and managerial functions in the metallurgy sector. Chaudhary joined the renamed plant as corporate director of operations and maintenance after heading Mittal Steel’s Romanian and Kazakhstan metallurgical plants.
Chaudhary originally signed on with the group in 1993 as the director of Mittal Steel Lazaro Cardenas in Mexico, where he became executive director in 1996.
Changing brands
Volodymyr Kozachenko, the head of the Central Committee for Union of Metallurgy and Mining Industry Workers said that Mittal may have acted too hastily in changing Kryvorizhstal’s name. He said world markets associated the Kryvorizhstal brand name with high-quality competitive products, adding that the old name bears historical significance for many Soviet-born workers who still work at the plant.
“The investor has one brand, and so it was logical to rename Kryvorizhstal to Mittal Steel Kryviy Rih, but I think it was too early,” Kozachenko said, adding that most Ukrainians will find it difficult to refer to the Soviet-built Kryvorizhstal mill by its new name.
“For the Ukrainian population, this will be seen as an indication that new investors [from the West] simply do as they please rather than asking questions when arriving,” Kozachenko added.
Kozachenko said that it would have been better for the plant to continue to be known as Kryvorizhstal for at least six months to give its new owner time to understand how the name is perceived on the local and world markets.
Kryvorizhstal has a long history, adding that many current employees have worked at the plant during Soviet times, as have their predecessors.
“Generations of local Kryviy Rih residents have worked there,” Kozachenko said. “The new name carries a negative connotation for Ukrainians and particularly for local residents,” he added.
Wage dispute
Meanwhile, Kozachenko’s trade union has complained to Ukraine’s State Property Fund, which sold the mill to Mittal Steel, saying that the new investors have failed to fulfill promises to raise wages for plant employees.
When Mittal bought 93.02 percent of Kryvorizhstal shares in a resale last October, the conglomerate signed a contract requiring it to “establish wage rates for workers with seniority [that are] not lower than the minimum living standard for able-bodied employees.”
On Jan. 17, the SPF issued a statement requesting that Mittal Steel stick to its part of the purchase agreement.
Kozachenko told the Post by phone on Jan. 18 that the wage issue had been resolved.
He said that the plant had become the first enterprise in the steel industry that has satisfied such demands by raising wages at the plant for workers with seniority.
“We are trying to fulfill our goal, and we plan to raise the salary for leading industrial workers up to $1,000 [a month] by 2009,” Kozachenko said.
However, he said that a lot of work still remains before wages will be raised for all of the plant’s employees, adding that such increases were also stipulated in Mittal’s purchase agreement.
“Kryvorizhstal’s labor union is now calculating pay raises to make them part of the existing agreement,” Kozachenko said, adding that salaries should be raised by 12 percent, as demanded by the union.
Based on his committee’s data, as of November 2005, the average salary in the industry was Hr 896 ($175) a month in 2005. According to the same data, Azovstal, another major Ukrainian metallurgical plant, pays the highest average worker salaries in the country – Hr 2,085 ($408) a month – while Kryvorizhstal is fifth, paying its workers Hr 1,523 ($298).
Mittal Steel has operations in 16 countries on four continents.
In 2004, the company shipped 42.1 million tons of steel and generated revenues of $22.2 billion. Kryvorizhstal controls 20 percent of Ukraine’s metallurgy market.
Ukraine is ranked as the world’s seventh-largest steel-producing country. Ukraine also boasts large reserves of ore and coal, key raw materials used in steel production. Ukraine’s steel industry is largely dominated by Ukrainian and Russian business groups.
Through court proceedings last year, the government of then-Prime Minister Yulia Tymoshenko managed to renationalize the 93-percent share in Kryvorizhstal that was sold in 2004 to companies controlled by tycoons Rinat Akhmetov and Viktor Pinchuk. The latter is former President Leonid Kuchma’s son-in-law.
The Pinchuk- and Akhmetov-controlled companies acquired the mill for $800 million after bids nearly double in size were disqualified due to controversial sale conditions. Mittal offered $1.5 billion to buy the plant in the previous tender.
