Arcelor mittal looks at brazilian expansion

Arcelor Mittal, the world’s biggest steelmaker, is considering a $4.5bn plan for a big boost in production from its Brazilian operations in order to cash in on the low cost available there.

A key element is a proposal for a new steel manufacturing site, which could be built on the coast of Brazil within 100km of Arcelor Mittal’s largest Brazil production operations in Vitoria.

If the plan went ahead, Arcellor Mittal whose main shareholder is Lakshmi Mittal, the Indian steel magnate, could be making 20m tones of steel a year in Brazil by about 2013 – double last year’s output.

The new site would have easy access to Brazil’s low-cost supplies of iron ore and would cost $2.5bn-$3bn to build.

Mr Mittal and other Arcellor Mittal managers will have to weigh up the plan in the light of expansion plans elsewhere in the group and by other large steelmakers.

South Korea’s Posco and JSW of India have announced ambitious expansion schemes, stocking fears that the world steel industry may be lurching into the phase of overcapacity.

The Financial Times, October 2^nd, 2006

UNIT V

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Gm growing in india, reshaping in europe

GM and other big automakers hoping to offset slumping North American operations, are increasingly looking to India. Car sales in India are growing at about 15% a year, a rate projected to continue for the next five years, with low-cost cars making up the bulk of the sales.

Traditionally, the country took a back seat to China, but a growing middle class and new manufacturing strength have made India a popular destination for new joint ventures and investments. GM expects India to be the second-fastest growing car market in the world, after China, over the next 10 years.

The Chief Executive of GM, Rick Wagoner, said Tuesday that the company planned to take advantage of India’s high-quality, low-cost supply base. GM is “looking to source more parts out of India for our global operations,” he said. Sourcing increase could be as much as fivefold over the next two years.

That may translate into GM purchasing as much as $1 billion of car parts in India annually, the largest spending of any foreign automaker in India, analysts say.

GM’s new local base will provide a new opportunity for Indian suppliers, said Wagoner, given the growth of the company’s manufacturing in Asia.

The Indian government has been pushing to turn the country into a new low-cost Asian car manufacturing center through tax breaks and other incentives.

The international Herald Tribune, April 18^th, 2007

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Ge takes a new line in the business of outsourcing

Where General Electric leads, corporate America follows. So GE’s decision to outsource “back-office” services ranging from financial analysis to software development will be felt far beyond the conglomerate. GE is set to sell a majority stake in Gesics, which provides support services for the group’s 17 business units.

Economic theory says that companies should turn to outside suppliers whenever it is cheaper to buy in a product or service than provide it in-house. Many high-technology manufacturers today outsource not only component supply, but also assembling and testing, logistics and after-sales service.

With this week’s announcement, GE is taking this approach one step further. Why should it employ financial analysts or administrators if it can save money by buying in what they do?

GE executives explained their decision to outsource: the back-office services were considered non-core. The risk is that today’s non-core processes could become tomorrow’s source of competitive advantage. It is against this background that corporate strategists warn against a headlong rush into outsourcing. They argue that contractual relationships between companies and outsourcers will never be as effective as relationships between company departments.

The Financial Times, November 10^th, 2005

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