The Hindu Business Line : Building strong ties, the Essar Steel way

Recently in Sault Ste. Marie, Ontario, Canada Till recently, not many Indians would have been able to locate Sault Ste. Marie (pronounced Soo St. Marie) on a map. But, after the Mumbai-headquartered Essar Steel acquired a steel plant in the city a large number would be in a position to say that it is in Canada’s Ontario province.

Algoma Steel, one of Canada’s oldest steel plants, was Essar Steel’s stepping stone into North America. A few months after this acquisition, Essar Steel acquired a greenfield mining site in Minnesota in the US, where it will develop an iron mine to make pellets that will feed the steel plant in Canada in two-three years, initially, after which Essar Steel plans to have an integrated steel plant in Minnesota itself.

In a little over a year since it acquired Algoma Steel, Essar has made efforts to become a part of the local community. The Canadian company’s name has been changed to Essar Steel Algoma Inc, to mark one year of the acquisition, while simultaneously efforts were on to build the Essar brand.

Essar obtained the naming rights for Sault Ste. Marie’s ice-hockey sports stadium. Essar bid Canadian $1.3 million (about Rs 6 crore) and bagged the rights for a 10-year period, against competition from a couple of other companies, officials at the Essar Centre, as the stadium is now called, told a group of visiting Indian journalists, on a trip sponsored by Essar Steel. The stadium is home to the Soo Greyhounds, a minor league ice-hockey team. The company is donating money for a local hospital and recently organised a family day at the plant.

On a boat cruise on the St. Mary’s river, the guide gives a running commentary of the landmarks and points to the steel plant and refers to it as Essar Steel Algoma, rather than Algoma Steel, the name by which the 106-year-old company was known till June this year.

The steel plant means a lot for the local community. With 3,500 employees on its rolls, it is, after all, the largest employer in the city with a population of 75,000. The others, such as the St. Mary’s paper plant or the local casino, each have 200-300 employees. At its peak, the steel plant employed about 12,000.

Positive impact on community

How important was Essar’s acquisition of Algoma Steel? “Very,” says Mr Frank Fox, matter of fact. “Otherwise this city would have become dead,” he says, and adds that after a long gap, there is some real-estate development taking place. He worked for nearly 30 years in the company, before quitting in 1999. He now drives for a car hire company. He was a technician in the quality control department when he quit because he did not like the then management’s attitude.

Mr John Febbraro, Director of Industrial Marketing, Economic Development Corporation, Sault Ste. Marie, says Essar has had a positive impact on the community. “They took over a company that went through two bankruptcies,” he says. A number of ancillary and downstream units will come up now.

In the beginning, says Mr Febbraro, the community was sceptical and apprehensive, because an overseas company was taking over their steel plant. “Once the community absorbed what Essar was doing, all that apprehension disappeared.” An offshoot of the takeover is that the corporation is planning a trade mission to India next April.

A big company in a big world

Mr Danny Burella, General Manager – Technical Services, Essar Steel Algoma, puts the Essar acquisition in perspective. A third generation employee of Algoma Steel (his father and grandfather worked for the company), Mr Burella, 46, says: “We are a small steel company in a big world and we had to belong to a big company in a big world.” The Algoma facility needed to have raw material integration in a changing steel industry landscape, which would now come through Essar acquiring and developing an iron ore mine in Minnesota, US.

There were cultural differences and these were being overcome with cultural training, he says.

Mr Jerry Freiman, Manager – Environmental Control, Essar Steel Algoma, a 37-year veteran with the company, recalls that he has gone through quite an exciting ride with the company. “I don’t like the idea that I am coming to the end of my career. I may stay here till they kick me out,” he jokes.