Structuring a New Global Business Model in the Steel Industry

11 April 2002
Nippon Steel Corporation
ARCELOR

Approximately a year has passed since NSC and Usinor concluded the Global Strategic Alliance Agreement aimed at enhancing their worldwide cooperation relationship.

In the mean time， the two companies， which both enjoy a worldwide reputation for their advanced technological and supply expertise in the field of automotive steels， have completed the framework for joint and consistent response to the global development of automobile manufacturers by launching specific cooperation activities. As such， both companies have already achieved progress beyond their initial expectations.

Today， Mr. Chihaya， President of Nippon Steel Corporation， Mr. Mer， co-Chairman of arcelor and Mr. Dolle， CEO of arcelor， met in Paris to mutually assess the results achieved during the first year of the Alliance. They reaffirmed their common commitment to continue their efforts to maximize the results of the Alliance through enhanced cooperation for the benefit of their customers and all of their stakeholders.

In February of this year， Aceralia， Arbed and Usinor merged to form arcelor， the world’s largest steel company. NSC and arcelor have jointly confirmed that as of this date arcelor will assume Usinor’s commitments in the Alliance with NSC. As a result both partners’ customer responses will expand to include other products in addition to the flat carbon and stainless products initially targeted by the Alliance.

Following the signature of their Agreement in January 2001， Usinor and NSC had set up a Steering Committee co-chaired by the two Executive Vice Presidents of the two companies， as well as five ad hoc committees in the fields of automotive steel， procurement， stainless steel， tinplate， and the environment. Their tasks are to study and define specific areas of the cooperation in each of these fields.

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In the field of automotive steel， both companies signed the Automotive Steel Alliance Implementation Agreement (”ASAIA”) in October 2001 in order to establish the framework for specific technical cooperative activities with car manufacturers in their development and production of ”World Cars” and other global activities.
- In a first stage， both companies have begun to expand the lineup of their product offer to the market through the exchanges of licenses.
- In a second stage， different subjects for joint R&D， corresponding to the needs for future products and future steel solutions have been selected and those R&D initiatives are being implemented.
Both companies have already paid visits to automobile manufacturers explaining the purpose of the Alliance and finding solutions to individual technical problems based upon customer’s requests. This initiative has generated positive responses from a number of automobile manufacturers.

Yesterday， Nippon Steel and arcelor also signed the Automotive Steel Technology Cooperation Agreement with Tata Steel (TISCO) of India. This agreement provides for joint technical assistance to TISCO in its relations with automotive steel users in India.

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In the fields of procurement， stainless steel， tinplate and the environment， significant achievements leading to promising goals have also been made. Specifically:
- In the field of stainless steel， in order to respond to requests for the supply of high formable grades from automobile parts manufacturers in the United States， both companies are now investigating the possibility of undertaking such stainless steel production at J&L， an American subsidiary of arcelor.
- In the field of the environment， both companies have agreed on the need to make more extensive efforts concerning CO2 emissions， essential in the prevention of global warming. In the future， they intend to intensify their cooperation in this domain with other leading steel companies， the IISI and other steel-related associations.

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Both companies have also agreed to pursue future specific cooperative efforts in the automotive steel and other fields covered under the Alliance and to try and extend their joint efforts into other domains.
In this regard their aim is to:
- launch studies on cooperation in the fields of construction steel， including long products， in order to demonstrate the advantages of steel in construction and to increase steels’ worldwide use.
- accelerate studies on joint ventures or other cooperative efforts in the United States and other regions.
- achieve a wider diversity of material supply sources， with the aim of procuring iron ores， zinc， other metals and supplies on a consistent basis.

NSC and arcelor will endeavor to realize further development through the prompt implementation of this jointly created ”new global business model” in the steel business. Through the structuring of this business model， both companies， from their widely distant geographical locations and with their independent management activities， will work together on worldwide activities of common interest as described above. In this regard， NSC and arcelor are confident that this will enable them to become more responsive to customer demand， to achieve cost reductions and to reinforce their R&D potential， which should enhance each company’s competitiveness in their respective steel activities.