By buying up loss-laden steelworks around the world and quickly turning them around, Lakshmi Mittal, CEO of Ispat International, has defied industry traditions-and become a global force.
By Richard Evans

MAN OF STEEL
By Richard Evans

Inside the sprawling steel mill, a computerized conveyor belt feeds specially treated iron ore and carbon into a huge, electric-arc melting furnace. More computers guide the furnace as it tips its molten, 1,300-degree C. contents into a second vat, where a robot completes a 30-second content analysis. Outside, a 65,000-ton cargo ship is tied up at the company dicks, discharging iron pellets down a four-mile conveyor belt to a deoxygenating plant. The huge automated complex buzzes with activity, but there are few workers to be seen.

This high-tech scene is mot in Kobe, Japan, or on the Great Lakes. It's in the Mexican port town of Lazaro Cardenas. 200 miles southwest of Mexico City. And the operation is run not by expatriate American executives, but by a46-year-old entrepreneur from Calcutta, Lakshmi Mittal, whose privately owned steel company, Ispat International, has mushroomed from $2.7 billion last year. Net profits have jumped more than tenfold over the same period, to $375 million. Today Ispat, which was barely on the industry's radar screen before the 1990s, ranks as the world's 14th largest steel maker measured by sales. And if the measure is capacity, only Nippon, Pasco, British Steel, Usinor Sacilor, and Riva-blue chips all-are now capable of churning out more steel.

Mittal's formula for success is one part daring, one part daring, one part sleight of hand: Buy up loss-laden state-owned steelworks in every corner of the globe and make them profitable. Since 1992 he has acquired struggling mills in Mexico, Quebec, Trinidad, Germany, Ireland, and Kazakhstan. Mittal mow governs a worldwide steel empire of 72,000 employees producing 9.5 million tons of steel a year. His golden rule: Never buy a mill you cannot turn around in two years or less. " Our production has grown 45 times sins 1998, " reflects Mittal from his corporate headquarters on London's Berkeley Square. "It's like you want to catch your breath. "

Received wisdom in the rest of the steel industry is to keep your costs down, focus on discrete market niches, and try to capture a large slice of one national or regional market . Mittal, by contrast, is a heretic. He pays top dollar for the most modern technology in all his mills. He refuses to use scrap metal, preferring an unusual-and higher quality-form of treated ore called directly reconstituted iron. He rejects focusing solely on his core business: instead buying iron and coal mines to control raw-material costs, as well as four 65,000-ton cargo ships to decrease delivery charges. And the proof of his nonconformist beliefs is in the payoff.

Ispat does so well because Mittal is a master of change," says Alan Coats, London- based international steel analyst with Merrill Lynch. "he is very good at making deals and getting performance out of the companies he's acquired. And being sole owner makes him more fleet of foot than the old, entrenched companies."

When Mittal decides to move, he can move very quickly indeed. He put together due-diligence teams and snapped up his Mexican, Irish, German, and Kazakh companies within a number of weeks. He's also an extremely hands-on manager, spending two weeks a month visiting every outpost of his far-flung empire. "When we first bought Ispat Mexicana, I spent the best part of six months there, " Mittal recalls.
Ispat's lone shareholder estimates his personal wealth to be in the region of $1.5 billion. "I'm sort of the Bill Gates of India, " he jokes. But beneath his informal exterior beast the heart of a manic bean counter. In May 1996 , Mittal snatched up the newly privatized Irish Steel for a token Irish punt ($1.55) and convinced the Irish government to write off $55 million in loans and debts, even though he committed to keeping only 300 full-time workers on staff. Three years earlier, the United Steelworkers of America had nixed an attempted Mittal takeover of Bethlehem Steel's Johnstown, Pennsylvania, division out of fear that wages would fall as the company slashed costs and increased productivity- exactly what Mittal has achieved at Ispat's other operations.

Mittal, who's the son of a steel plant owner, runs Ispat with the frugality and dedication he learned early in life. The village where he was born, in India's western Rajasthan desert, didn't have electric power until the 1960s. Later, studying accounting and business at Calcutta's Saint Xavier's College, the teenage Lakshmi attended class from 6:30 till 9:30 in the morning and then went to help his father, Mohan Lal, with his business. But office work didn't interfere with his scholarly progress: Lakshmi graduated at the top of his college class at the age of 19, the first Mittal ever to finish university.

Two years later he set up his first steel mill, and by the age of 26 he started Ispat (the Hindi word for steel) with his father. He quickly established a new mill in Indonesia, the family's first business outside India, since then, Ispat has grown many hundred-old; his father remained on the company's board until a few years ago.

A wiry bundle of energy, Mittal stats each day with an early morning swim at his mansion on London's Bishop's Avenue , known locally as "millionaires mile." His favorite way of doing business is through mixing with people; perhaps the result of growing up in crowded Calcutta. "Being Indian is a real advantage if you are doing business in a lot of different cultures," he says. "You learn a lot about bridging differences and reaching compromises when you grow up in a country with over 300 languages and ethnic groups."

Traditional Indian business practices still guide Mittal's growing global empire. The most important is the century-old Partha accounting practice, by which all costs are calculated at the end of each working day. "They say I am insane, but I tell them that's what you have to do if you want to work for Ispat."

The payoff is clear. Since buying up half of Mexico's struggling Sicarsta steelworks for $220 million in 1992- the Mexican government spent $2 billion building it less than ten years earlier- Mittal has poured in $80 million and plans to spend $260 million more over the next three years. Already production at the plant has climbed from 25% of its original capacity to 110% in just four years.

Ispat's drive for greater efficiency and quality, however, has created some labor relations problems. In Trinidad, clerical workers and supervisors want on a 50-day strike in 1993 over wages and working conditions. Local labor officials have also grumbled that safety standards have suffered in the rush to maximize production.. Part of the problem, from the local point of view, was the presence of an Indian-read foreign-management team. But the general trend, insists Mittal, is toward better relations between management and workers. " We realized we had some problems, and we're sincerely trying to fix them," he says.

The company faces a huge challenge in turning around its biggest acquisition so far-the gigantic Karmet steel and coal works purchased from the government of Kazakhstan a year ago for $450 million. The formerly Soviet works, virtually the area's sole employer, was in a dreadful state when Mittal took over: All its steel was bartered against goods from former Soviet republics, and management paid its 75,000 workers in worthless company scrip. Mittal also bought the local tram and railway service, which was threatened with closure. "There was something quite compelling about buying an entire city," he says.

Many industry watchers believe that the kaxakh gamble is the riskiest so far. "It's a very difficult project," concedes Zubaid Ahmad, a managing director at CS First Boston and one of Mittal's chief advisers for the past five years. "But if there's one person who can pull it off, it's Lakshmi Mittal."

ISPAT

Ironically, Ispat International does no business in India. " It is one of my biggest disappointments," he admits. "As an Indian, I feel I really ought to do something for my country." Mittal has looked at a number of possible acquisitions, but nothing has compelled him yet. He is considered becoming a rail and road builder there, helping to develop the country's creaking infrastructure, not least because that would enable him to set up a business in India without having to compete with his dad, who still oversees a small steel and manufacturing operation there.

Yet as attractive as returning to India might be, Mittal has more urgent goals. True to form, today the Indian entrepreneur has his eye on a fresh target, Venezuela's Sidol steelworks. And he opened an office in Charlotte, North Carolina, last year, with the unabashed as soon as possible. Given Mittal's track record, it won't be a long wait.