Severstal NA on TOP with restructuring efforts

Severstal NA on TOP with restructuring efforts

Severstal North America, Inc. (SNA) yesterday updated the public on the company’s progress in restructuring its Dearborn, Michigan steel making operations following Russia-based OAO Severstal’s acquisition of Rouge Industries in January 2004. Severstal Group CEO Alexey Mordashov called the ratification of the Asset Purchase Agreement on January 29, 2004, by Rouge Industry’s UAW-represented production and maintenance employees an “important milestone in the global consolidation of the steel industry.” During the first 14 months following the acquisition, SNA improved the efficiency of the former Rouge Industries by expanding the productive output of its steel making facilities while utilizing a smaller number of employees. “We are fortunate that we have developed a constructive labor–management relationship with the UAW and its Local 600,” explained SNA CEO Ron Nock. “We were able to implement the key elements of the UAW-SNA labor agreement with the desired results and without the painful effect of layoffs. In reality, we saved several thousand jobs in Southeastern Michigan, at a time when good paying manufacturing jobs in Michigan are a growing concern.” According to Mr. Vadim Makhov, Chairman of SNA’s Board of Directors, “The management team and employees of Severstal North America have spent the better part of the last year addressing key operating and maintenance issues and detailing specific action plans. All of this was being accomplished in the context of improving the Company’s overall financial and operating performance while supplying the North American automotive market with superior products and services and integrating SNA within the global network of the Severstal Group. We believe that, with proper planning and execution, SNA will continue to strengthen its competitive position as one of the leading suppliers of high quality steel products for the American automotive industry.” Many of SNA’s quality and process improvements and cost reduction efforts were made possible through the introduction of the Total Operating Performance (TOP) process. TOP, which previously had been implemented at OAO Severstal’s steel making operations in Cherepovets, Russia, focuses additional resources on employee training in problem solving, team building and financial analysis skills. SNA indicates that TOP has generated several thousand ideas and over $20 million in verified cost savings in 2004 alone. The company intends to expand the scope of TOP throughout 2005. SNA has also made considerable progress in securing a reliable supply of strategic raw materials. In the past year, the company purchased over 1.2 million net tons of metallurgical coke from domestic and foreign suppliers for in its blast furnaces. In addition, SNA is continuing efforts to secure domestic coke supplies through the development of strategic partnerships. On December 23, 2004, SNA inked a non-binding letter of intent with Wheeling-Pittsburgh Steel Corporation to create a joint venture involving Wheeling-Pitt’s coke plant in Follansbee, West Virginia. While the letter of intent originally called on both parties to enter into a definitive joint venture on or before March 31, 2005, deliberations are still underway.