Mittal and Hollande in ‘Blackmail’ Talks

Lakshmi Mittal will fly into Paris on Tuesday for emergency talks with the president of France over an extraordinary industrial row in which the Indian steel magnate's company was accused of "lying" and "blackmail" by a French minister.

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The hastily convened meeting at the Elysée palace takes place a day after Arnaud Montebourg, the leftwing industry minister, launched a blistering attack on Mr Mittal's company, ArcelorMittal, saying that he wanted the world's biggest steel producer to quit France.

People close to Mr. Mittal – the steelmaker's chairman, chief executive and main shareholder – said he was "extremely shocked" by Mr. Montebourg's attack, prompted by the company's plans to shut two blast furnaces.

French officials said they were unhappy with Mr. Montebourg's inflammatory language, but insisted the minister was correct in claiming Mr. Mittal had failed to meet commitments over the furnaces made in 2006 and 2009. ArcelorMittal denies the claims.

The dispute will deepen fears among international companies about a powerful strain of anti-business sentiment running through François Hollande's Socialist government. Mr. Montebourg, a vocal critic of globalization, launched similar public broadsides against the Peugeot family over the carmaker's plans to close the Aulnay car plant near Paris.

The chief executive of one of France's biggest industrial employers, who asked not to be named, told the Financial Times: "Maybe he's being naive, but Montebourg is giving an image of France around the world which really isn't good."

In a French newspaper interview on Monday, Mr. Montebourg said: "We do not want ArcelorMittal in France, because they do not respect France."

He also accused Mittal Steel, which took over Luxembourg-based Arcelor in a €26.9 billion deal in 2006, of "lying" and "never holding to its engagements" with the French state.

ArcelorMittal, which employs 20,000 people in France, wants to close the two furnaces at its Florange site in the industrial Lorraine region and make 629 workers redundant.

Speaking to Les Echos newspaper, the minister said: "The violence and the brutality of Mittal; they are going to have to pay."

Mr. Montebourg later tried to soften his comments, saying: "When I said, 'We don't want Mittal in France any more', I wanted to say that we do not want its methods any more." But he added that those methods included "blackmail and threats".

The plight of the Florange workers played an important part in this year's presidential election, which Mr. Hollande won on a "pro-jobs" platform.

Mr. Mittal has given the government until December 1 to find a buyer for the Florange blast furnaces before he shuts them for good. He intends to keep the rest of the site, which employs 2,000 workers.

Mr. Montebourg wants the whole site put up for sale, arguing that he can find buyers only for the entire facility. Should Mr. Mittal refuse, the minister is threatening to nationalize the entire Florange site.

The government argues that the Florange closure breaks promises made by Mr. Mittal during his hostile takeover of Arcelor, which was strongly opposed by ministers. It also says Mr. Mittal offered explicit guarantees about Florange's future in 2009.

ArcelorMittal denies it made any binding commitments and says the closures are necessary because of plunging demand for European steel. Mr. Mittal argues a sale of the entire Florange site would endanger the jobs of all of his 20,000 French employees because it is integral to the company's operations in the country.

Mr. Mittal's lawyers believe a state seizure is unlikely under French law. Mr. Hollande raised the prospect of a "factory act" during his election campaign this year, which would force companies to seek buyers before closing profitable plants. But lawyers say it would be difficult to enact under the French constitution and EU laws.

Hermann Reith, a European steel analyst at BHF Bank in Germany, said Mr. Montebourg's comments were "not helpful" and added that Mr. Mittal had run his network of plants in a "reasonable" way while respecting broad undertakings to invest: "Politicians have to realize that headcount can only be sustained if the plants are competitive in the long run."

Additional reporting by Peter Marsh in London