1
Foreign Direct Investment:Financing Sustainability
Conference
June 19, 2002
Anton LukacVice President Strategic Implementations
U. S. Steel Kosice, s.r.o.
2
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
3
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
4
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
5
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
6
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
7
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
8
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
9
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
10
Global Economic ConditionsGross Domestic Product Growth in Central Europe Will Decline, but Not as Severely as EU, US, and JapanSlovakia GDP will increase
6
4.1
1.5
3.3
1.11.7
1.50.7
3.12.2
2.732.9 2.7
4
1.5 1.8
3.83.5
5.254
2000320012200210
-1 -0.7 -1-2
USA Japan EU Hungary Poland SlovakiaCzechRep
Source – OECD 2001
11
Global Impacts
Over Capacity
Trade Cases
Protective Tariffs
Bankruptcies
Consolidation
Privatization
12
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
13
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
14
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
15
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
16
Central European Growth Corridor
Central European Growth Corridor
17
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
18
Commitment ToEconomic Development
Attract FDI to PromoteEconomic Growthand Job Creation
PublicizeBenefits
Help EstablishNew Businesses
19
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
20
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
21
Commitment To Community
Since December 2000, USSK has Donated Over 1.4 Million US Dollars:• Health Care
• Environment
• Education
• Science
• Sports
• Culture
• Charities
22
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
23
U. S. Steel Kosice
FDI Critical to Business Success in Transition EconomiesCommitment to SucceedCommitment to Economic DevelopmentCommitment to CommunityCommitment to Employees
24
FDI Benefits All
Attracts More Foreign InvestmentSustainable GrowthMore Jobs / Reduced UnemploymentIncreased Social ProgramsImproved Standard of LivingMore Spendable IncomeLower Interest RatesDomestic Investment
Domino Effect
25
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