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Foreign Direct Investment:Financing Sustainability

Conference

June 19, 2002

Anton LukacVice President Strategic Implementations

U. S. Steel Kosice, s.r.o.

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U. S. Steel

United States Steel• Founded in 1901

• World’s first billion dollar corporation

• Known on Wall Street as “The Corporation”

• A giant of 20th century American industry

• Growth fueled by American industrial expansion

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U. S. Steel

Manufactured many types of steel productsOwned a variety of steel and non-steel businessesPioneered technologies and management techniquesEmployed over 200,000 people; owned facilities across the U.S.Integrated steel company

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U. S. Steel

1990’S – Modernized facilities to meet world class standardsEntered in joint ventures with companies from:• Mexico• Japan • Korea• US

Focus on core business and customers

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U. S. Steel

Globalization of USS Customers• U. S. Steel customers operating overseas

Globalization Criteria• Support customer overseas operations

• Serve emerging markets

• Develop new markets for USS products

USS search led to Kosice, Slovakia

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U. S. Steel

USS-POSCO JVTinplate, Galv., CR

USS-FairfieldFlat ProductsFor Constr.

USS-Tubular

USS-MinntacIron Ore Mining &Pelletizing

USS-GaryAutomotiveProducts.

USS-FairlessGalv. & Tin

Pro-Tec JVGalv.

- USS Auto Research Ctr.- Double Eagle JV, EGL- Worthington JV, processing- Olympic Laser Processing JV

- USS HQ- Irvin Works- ET Works- Straightline- Research Ctr.Acero Prime JV

Processing forAuto & Applicance

Met-Chem

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U. S. Steel Kosice

U. S. Steel aware of VSZ’s assets:• Modern equipment

• Well-maintained facility

• Highly-educated workforce

1998 – U. S. Steel signed agreement with VSZ to produce tin plate

USS assumed control of VSZ steel plant in November, 2000

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U. S. Steel Kosice Market

Ger.Poland

Ukraine

Belarus

Russia

Romania

Bulgaria

Yugoslavia

Italy

Switzerland

Czech Republic

Hungary

Slovakia

Croatia

Austria

Slovenia

Bosnia-Herzegovina

GM

GM

GM

Ford

Tower Automotive

TowerAutomotive

A.O. SmithButler Mfg.EmersonFrigadaireVan Leer

Whirlpool

Trinity Ind.

Trinity Ind.

DaimlerChrysler

BMW

Van LeerVan LeerVW Group

VW Group Magna

Magna

MagnaMagna VW Group

VW Group

VW Group

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U. S. Steel Kosice

Central Europe – A Good Investment Decision• Potential for economic change• Healthy and dynamic market economy• Emerging markets• Excellent educational system• Skilled workforce• Cooperative governments

$121 million profit, $61 million CAPEX in 2001

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Global Economic ConditionsGross Domestic Product Growth in Central Europe Will Decline, but Not as Severely as EU, US, and JapanSlovakia GDP will increase

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4.1

1.5

3.3

1.11.7

1.50.7

3.12.2

2.732.9 2.7

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1.5 1.8

3.83.5

5.254

2000320012200210

-1 -0.7 -1-2

USA Japan EU Hungary Poland SlovakiaCzechRep

Source – OECD 2001

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Global Impacts

Over Capacity

Trade Cases

Protective Tariffs

Bankruptcies

Consolidation

Privatization

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Price Trends in GermanyCRU Statistics

Hot rolled

Cold rolled

Galvanized

540

480

180

240

300

360

USD

per

ton 420

IX.0

0

I.99

I.01

I.98

I.00

I.97

V.00

V.97

IX.9

7

V.99

IX.9

9

V.01

IX.0

1

V.98

IX.9

8

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Growth MarketsReal GDP Growth

Central Europe exceeds Western EuropeReal GDP Growth % change YOY%

3.3%

1.7% 1.5%

2.9%

4.3%

2.6% 2.7%

4.1%Western EuropeCentral Europe

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.02000 2001 2002 2003

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Sheet Steel Consumption GrowthConsumption Exceeds Production

ProductionConsumption

15

14

13

10

11

12

mil.

tons

9

8

2000 2001 2002 2003 2004 2005 2006Source: CRU October 2001 Sheet Steel Quarterly

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Central European Vehicle Production000 units of production

1,396 1,4491,665

1,972 2,111

1,500

2,000

Greater than 10% annual growth expected

2,500

1,000

0,500

0,0002001 2002 2004 2006 2011

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Central European Growth Corridor

Central European Growth Corridor

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Serbia Is Part Of Central European Growth Corridor

Serbia is making great political and

economic progress

Serbian Government is:

• Stabilizing economy

• Strengthening democracy

• Improving investment climate

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Commitment ToEconomic Development

Attract FDI to PromoteEconomic Growthand Job Creation

PublicizeBenefits

Help EstablishNew Businesses

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Commitment ToEconomic Development

Over 280 Companies Contacted10 Companies Considering Relocation 5 Companies Have Established Operations• Approximately 1000 New Jobs at Full Staff and

$26 Million in Foreign Direct Investment

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Why Would USS Do This?

To generate more business for U.S. Steel

If we recruit businesses that use steel products, we can sell steel products

To be a part of the all aspects of the community: economic, social, cultural, and civic

To integrate into the society at large

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Commitment To Community

Since December 2000, USSK has Donated Over 1.4 Million US Dollars:• Health Care

• Environment

• Education

• Science

• Sports

• Culture

• Charities

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Commitment To Employees

USSK has Maintained Employee Level at Approximately 16,000 Employees Are the Strength and Character of the CompanyIncreased Cooperation Between Labor and ManagementLabor Agreements Signed EarlyEmployee Cooperation, Trade Unions, Improved Productivity and Profitability Resulted in Increased Wages

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U. S. Steel Kosice

FDI Critical to Business Success in Transition EconomiesCommitment to SucceedCommitment to Economic DevelopmentCommitment to CommunityCommitment to Employees

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FDI Benefits All

Attracts More Foreign InvestmentSustainable GrowthMore Jobs / Reduced UnemploymentIncreased Social ProgramsImproved Standard of LivingMore Spendable IncomeLower Interest RatesDomestic Investment

Domino Effect

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U. S. Steel Kosice

Foreign Direct Investment:Financing Sustainability ConferenceJune 19, 2002U. S. SteelU. S. SteelU. S. SteelU. S. SteelU. S. SteelU. S. Steel KosiceU. S. Steel Kosice MarketU. S. Steel KosiceGlobal Economic ConditionsGlobal ImpactsPrice Trends in GermanyGrowth MarketsReal GDP GrowthCentral Europe exceeds Western EuropeSheet Steel Consumption GrowthConsumption Exceeds ProductionCentral European Vehicle ProductionCommitment ToEconomic DevelopmentCommitment ToEconomic DevelopmentWhy Would USS Do This?Commitment To CommunityCommitment To EmployeesU. S. Steel KosiceFDI Benefits AllU. S. Steel Kosice