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The restructuring of the Spanish integrated steel industry in the European panorama (1971-86): A lost opportunity
Pablo Daz-Morln a; Antonio Escudero a; Miguel A. Sez a a Department of Applied Economic Analysis, University of Alicante, San Vicente, Spain Online Publication Date: 01 July 2009
To cite this Article Daz-Morln, Pablo, Escudero, Antonio and Sez, Miguel A.(2009)'The restructuring of the Spanish integrated steel
industry in the European panorama (1971-86): A lost opportunity',Business History,51:4,547 568

To link to this Article: DOI: 10.1080/00076790902998496 URL: http://dx.doi.org/10.1080/00076790902998496
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Business History Vol. 51, No. 4, July 2009, 547568
The restructuring of the Spanish integrated steel industry in the European panorama (197186): A lost opportunity
Pablo D az-Morlan*, Antonio Escudero and Miguel A. Saez
Department of Applied Economic Analysis, University of Alicante, Ctra. San Vicente, s/n, San Vicente, 03690 Spain
Downloaded By: [Daz-Morln, Pablo] At: 09:03 23 July 2009
Spanish steelmaking policy in the 1970s and early 1980s was not especially dierent from that of the main European countries. The political transition was a tense experience that heightened the problems and made economic policy decisions harder to reach, but it did not cause a fundamental divergence from the rest of Europe. What made the steel restructuring policy fail and forced a new and costly restructuring in the 1990s, was the decision of the Socialist government, newly elected in 1982, to opt for maintaining the inland steelworks instead of the coastal steelworks. Its motives were related to the locations of these steelworks in socially and politically sensitive areas. The closure of Sagunto marked the end of the only real possibility of Spain having a competitive integrated steelworks in terms of its integration into Europe. Keywords: coastal steelworks; political transition; restructuring policy; European Coal and Steel Community
The year 2001 saw the merger of three European companies, Arbed from Luxembourg, Usinor from France and the Spanish company Aceralia, to form Arcelor, the largest steel company in the world. The merger could have been seen as the successful result of a long restructuring process of the integrated steel industries of the three countries concerned.1 Although the lions share of the operation was taken by France and Luxembourg, Spains participation was a respectable 10% of the capital of the new company. This contribution was viewed with satisfaction by Spanish steel executives as it represented the happy ending to a long story which had not always guaranteed success. According to the accepted version of the story, the expansion plans of the nal years of Francos reign, between 1971 and 1974, which lacked rigour and were based on unrealistic projections, sharpened the problems in the Spanish steel industry. These problems were also worsened by the tardiness of the authorities in recognising the depth of the crisis of 1975 and in taking appropriate measures to alleviate its eects. This was due to problems derived from the political transition after the death of Franco in 1975. Spain had to wait until 1983 with the coming into power of the
*Corresponding author. Email: pdiaz@ua.es

ISSN 0007-6791 print/ISSN 1743-7938 online 2009 Taylor & Francis DOI: 10.1080/00076790902998496 http://www.informaworld.com
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Socialist Party and the successful conclusion of the political transition, before the necessary measures were taken to move towards a suitable restructuring of its integrated steel industry. These measures, although disputable in some aspects, secured the survival of the sector after Spain integrated into Europe in 1986 and, although certain later adjustments were necessary, cleared the path for its rationalisation and subsequent privatisation (see, among others, Albentosa, 1985; Maravall, 1991; Dehesa, 1993; Bermeo, 1994; Garc a Delgado & Jimenez, 2001, p. 171; Navarro, 2004, 2005; Saro & Navarro, 2001; Gonzalez, 2004; Catalan, 2003; Mendez & Sanchez, 2003; Binda, 2005). The participation in the founding of Arcelor only conrmed the wisdom of the measures taken and the success of the Spanish restructuring policy.2 The objective of this article is to put this perception of the facts to the test by analysing the restructuring of the Spanish integrated steel industry in the context of concurrent events in the rest of western Europe. We compare steelmaking policy decisions taken in Spain and in the main steel producing countries of the European Coal and Steel Community (ECSC), in order to reach conclusions around various points that we consider questionable in the above explanation. First, was Spain dierent in terms of future projections, expansion plans, the perception of the crisis or the assumption of quick and ecient measures to soften its eects? Second, did the political transition in Spain after the death of Franco in 1975 play a decisive role in this supposed delay? Third, did the Spanish authorities take appropriate measures in 1983 to guarantee the future of the integrated steel industry? And, to conclude, can the restructuring of the Spanish integrated steel industry be seen as a success when compared to other European countries? Jumping ahead, we can say that as a result of our research the answers to all four of these questions are negative. The comparative method used begins with the study of the dierent national cases and rstly considers the policy of the ECSC. The study is divided into four sections. The rst discusses the expansion plans for the integrated steel industries of European countries and of Spain in the rst half of the 1970s. The second explains the arrival of the crisis in 1975, the early measures taken to alleviate its eects and rst Davignon Plan. The third analyses the manifest crisis of 1980, the second Davignon Plan and the alternative route taken by Spain from 1983 onwards. The nal section covers our conclusions in the context of the position of Spain in the 1990s and the present day. I Historically, steelmaking has been considered by all governments to be a strategic sector that required special attention. It was only from the nal years of the twentieth century, after the end of the restructuring and privatisation processes, that it became a normal industrial activity, more or less like any other. Its specic character was justied with three arguments, which we will number from the most to the least important. First, steel is the basic raw material of a good number of industries, which means that steelmaking can be seen as one of the main pillars of any industrialised nation. Second, it is vital for the weapon-making industry, so its strategic character for national defence is beyond doubt, especially in moments of international tension. Third, more than any other industry it invokes the prestige of the nation. Due to the conuence of these three reasons to a greater or lesser degree depending on each case countries all over the world established expansion plans for
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their respective steel industries; plans which went further than would be suggested by the economic logic of comparative advantage (on the strategic character of steelmaking, see Mueller, 1979, pp. 12; Marklew, 1995, p. 59). In Europe, the special importance bestowed upon steelmaking was evidenced in 1951 with the signing of the Treaty of Paris, which created the ECSC, the beginning of the process of European unication and, not by chance, the end of the century-old disagreements between Germany and France over steel (Houseman, 1991, pp. 9 11; Dudley & Richardson, 2001, pp. 3537; Ahijado & Ahijado, 2001). This strategic character should be considered alongside the technical characteristics of the steelmaking process to understand the structure and localisation of all the national steel industries. In the last 50 years, steel production has followed two technological routes with very dierent characteristics. The rst process is Basic Oxygen Steelmaking (BOS), which requires pig iron, produced in blast furnaces from a mixture of coke and iron ore. Pig iron is charged in BOS vessels to obtain molten steel which is poured in a continuous casting machine, the second great innovation in integrated steelmaking in the second half of the twentieth century, and transformed into steel products in hot rolling mills. This integrated steel process gives the largest scale economies, which has led to a sustained increase in the minimum ecient size (MES) to around 68 million tonnes of annual production. Integrated steelmaking is ecient in the production of at products plates for shipbuilding, coils for tubes and sheets for vehicles and electrical goods (or domestic appliances) with high added value, but it needs very high capital investment.3 The second method is nonintegrated and is associated with medium size rms known as mini-mills: its raw material is not pig iron but scrap, which is made into steel with electric arc furnaces. It cannot produce the full range of dierent qualities of integrated steelmaking, and this is why it is limited to long products of lesser added value, mainly for the construction sector. But it does have some important advantages, such as a closer relationship with the customer and lower capital investment. Hence, the steel industries of all countries are made up of two sub-sectors, integrated steelworks and mini-mills, the rst directed towards at products and the second towards long products. Product dierentiation within each sub-sector does not play an important role, so low prices and, consequently, low production costs are essential for the survival of each company.4 The optimum geographical location of integrated steelmaking has also changed over the past half century with regard to previous times. After World War II, the construction of a powerful steelmaking industry in Japan, which was completely lacking in raw materials, was based on dierent concepts to those previously known. Japanese companies, led by the Kawasaki Steel Corporation, built new large scale steel plants beside the coast with large ports capable of receiving the inputs and exporting the nished products all over the world at lower costs than existing steel works in Europe and the USA (OBrien, 1992, p. 128; Yonekura, 1991).5 The model was soon copied by other nations that did not have iron and coal deposits and in this way countries with no steelmaking traditions, such as the Netherlands and Italy, became important steel producers (Kipping, Ranieri, & Dankers, 2001). France, Belgium and the UK followed the same path and built new steel works on the coast. Around 1970, all the steel experts agreed that the optimum location for integrated steel plants was the coast, following the Japanese model, and that the optimum size should range between 6 and 10 million tonnes of annual production (Manuelli, 1974, p. 112; Tsoukalis & Strauss, 1986, p. 194; Wolter, 1977).
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Despite these shared opinions around the requirements for ecient steelmaking, the reality of the European steel industry painted a very dierent picture. In the UK, Germany, France, Belgium and Luxembourg there were regions in which almost all economic activity depended on steelmaking, developed according to the old logic of proximity to iron and coal deposits.6 One of the main objectives of the expansion plans designed and put into practice in the rst half of the 1970s was to correct this historical legacy, which had lost its competitiveness against the new optimum location model. The expectations of rising demand held by every country in the latter years of the 1970s allowed them to leave behind the obsolescence of their steelmaking through the construction of new plants on the coast destined to progressively replace the old plants, while diminishing the social costs of their closures. The various research projects of international organisations the United Nations Industrial Development Organization (UNIDO), the EEC and the International Iron and Steel Institute (IISI) agreed that within a decade the world would be suering from steel hunger. The IISI predicted demand of 940 million tonnes for 1980 and 1150 million for 1985 (Manuelli, 1974, pp. 110111; for a criticism of the models used to estimate future demand, see UNIDO, 1978, pp. 2240). In 1974, the same organisation warned that the expansion plans in place would only increase world steel production capacity by 160 million tonnes, half the amount required to cover the increased demand expected for 1985 (D az-Morlan, Escudero, & Saez, 2008, p. 156). Of these planned 160 million tonnes, 89 million were from the main producers of the capitalist world and were almost ready to be put into service, as can be seen in Table 1. In every country, with the partial exception of Germany, the generalised plan was to site large steel producing centres on the coast, and it included notable capacity increases to some of the main established plants (Hudson & Sadler, 1989, pp. 2021). In Europe, the British and Italian expansion plans were the most ambitious. The British government published its plan at the end of 1972. It consisted of investing 3000 million to increase the production of the state-owned British Steel Corporation (BSC) to 3638 million tonnes of liquid steel at the start of the 1980s, through the development of its ve coastal plants: Port Talbot (production capacity: 3 million tonnes), Llanwern (3.5m), Scunthorpe (7m), Lackenby (4.7m) and Ravenscraig (3.2m) (Department of Trade and Industry, 1973, p. 9; Ovenden, 1978, p. 179; Messerlin, 1980, pp. 89). The government had ended up putting aside the
Table 1. tonnes).
Crude steelmaking capacity in 1971 and planned capacity in 1975 (millions of Capacity in 1971 Planned capacity in 1975 33.0 66.1 18.4 34.7 30.4 6.4 7.4 150.0 144.0 490.4 Dierence 8.8 8.3 2.8 7.5 7.9 0.3 1.1 25.0 27.3 89.0 % of growth 36.3 14.3 17.9 27.5 35.1 4.9 17.4 20.0 23.3 22.1
United Kingdom West Germany Belgium France Italy Luxembourg Netherlands USA Japan Total
24.2 57.8 15.6 27.2 22.5 6.1 6.3 125.0 116.7 401.4
Source: Department of Trade and Industry, 1973, p. 6.
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most prudent conclusions of the report that it had commissioned from the consultant McKinsey, and nally supported the more expansive directives of the BSC. After returning from their visit to the coastal plants of Japan in 1970, the main players of the BSC, its chairman, Lord Melchett, and its chief executive, Monty Finniston, were convinced of the need to follow the Japanese example. This uncritical policy towards the pretensions of the BSC, which were based on overly optimistic estimations of future demand for steel, was the main reason for later criticism of the government by some British writers, although it was conditioned by the expansion policies of its neighbours (see, for example, Bryer, Brignall, & Maunders, 1982; Dudley & Richardson, 1990, pp. 1213, 37, 4042, 5255). In Italy, steel production grew at a faster rate than in any other western European country. From 8.4 million tonnes in 1960 to 17.2 in 1970, and plans to raise production at the large Taranto plant from 3.9 to 10.5 million tonnes were carried out in 1975. The state-owned Finsider dominated the integrated sub-sector with its four plants in Bagnoli, Cornigliano, Piombino and the abovementioned Taranto, and the Italian government planned the construction of an integrated V Plant in Gioia Tauro, close to Naples (Capanna, 1979; Sabatino, 1979). Originally, Finsider wanted to emulate the Japanese model, replacing the old plants of Bagnoli and Cornigliano with new coastal plants, and preferring to site the V Plant in the north, close to domestic and European markets. However, the government changed the plans and put economic sense aside in favour of political interests, deciding to place it in the south.7 The plate products made by Finsider were mainly destined for export to Mediterranean and European countries. The long products, also largely destined for export, were made by a strong non-integrated sub-sector made up of more than 100 small electric-steel plants, the mini-mills, called Bresciani because of their preferential location in the northern region of Brescia (Fumigalli, 1978). In 1970, the French government made a third of the investment needed to build a large coastal plant in Fos-sur-Mer, close to Marseille, through the holding company Solmer, while Usinor expanded the capacity of its coastal plant at Dunkirk from 3.6 to 8 million tonnes (Hudson & Sadler, 1989, p. 83; see also Green, 1979). Also in the 1970s, Belgium and Luxembourg, traditional steelmaking countries, opted for Sidmar, in the Zelzate area (on the GhentTerneuzen canal). This was joined by the recent arrival of a new player (in steelmaking terms), the Netherlands, with the modern coastal plant that the Hoogovens company built in Ijmuiden, close to Amsterdam (Capron, 1986; Kipping et al., 2001).8 Finally, Germany was the only exception in this European panorama. Unlike its competitors, the strategy followed by the most powerful German steelmakers, such as Thyssen, Krupp and Mannesmann, situated along the Rhine, was to modernise and rationalise their production processes (without moving to the coast), sharpening their capital intensive character and reducing employment at the same time as they began to diversify production outside steel and to vertically integrate, oering nished consumer products to the market (Messerlin, 1980, p. G. 11; Esser & Vath, 1986, pp. 631635).9 In Spain, the strong economic growth experienced in the 1960s had led to heavy demand for steel which greatly surpassed the predictions made by the National Steelmaking Programme in 1964 and upwardly adjusted in 1966. Consumption rose from 1 million tonnes in 1953 to 11.7 million in 1974, with an average annual growth rate of 12.5%. The estimations made for the following years used a demand growth rate of 77.5%, which was considered moderate bearing in mind the recent
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growth history, with an estimated steel consumption of 18 million tonnes for 1980. Faced with this demand, Spanish steelmakers would not produce more than 12 million tonnes after nishing their expansion plans, meaning that Spain was going to suer a decit of steel products of 6 million tonnes, which would have to be covered by imports from abroad. Taking all this into consideration, the solution was based on the construction of a new coastal integrated steel works with a capacity of 6 million tonnes, coinciding with the quantity that the experts considered to be the minimum optimal size. This new plant would allow them to save $1800 million by reducing steel imports, increase production per capita from 320 to 450500 kg (above average for neighbouring European countries), allow Spain to strengthen its position in terms of entry into the EEC, and would set the national steel industry on the road to modernisation, following the example of the more advanced steelmaking countries (D az-Morlan et al., 2008, pp. 140142). From the beginning of talks around the IV Integrated Steelmaking Plant (IV ISP), in 1966, its location was a disputed point among the authorities and the two companies that made up the integrated sub-sector. The state-owned Ensidesa, located in the Asturias region, and the privately-owned Altos Hornos de Vizcaya (AHV), in the Basque Country, fought for the commission of the IV Plant, as the winner would dominate the production of at products in Spain. For AHV, the IV Plant was a route to modernisation and to secure its future, as its obsolete installations in Bilbao were located close to iron ore deposits worked intensively since the last decades of the nineteenth century and at the time almost nished, and they were constrained by the surrounding population. Because of this, the government proposed building the new plant in the coastal location of Sagunto, close to Valencia, where it had a small integrated mill that could guarantee a series of advantages to the IV Plant. Apart from the presence of a qualied labour force, a port and useful supporting facilities, the most important of these advantages was that it was less than 400 km from Madrid, Valencia, Barcelona and Zaragoza, the urban centres that took 60% of national demand for at products. Moreover, AHV guaranteed its technical solvency thanks to the strategic alliance it had had with United States Steel (USS) since 1964. In 1971, the government nally settled the matter by giving the contract to AHV, as opposed to Ensidesa, to build the IV ISP in Sagunto. AHV, USS and the banks participating in the project founded a new company in the same year called Altos Hornos del Mediterraneo (AHM) to build the new plant (Instituto de Promocion Industrial de Valencia, 1973; Navarro, 1989). The project had three phases and actually started with the nal part of the steelmaking process. In order to oer nished products to the market as quickly as possible, it was decided that phase I would be cold rolling and that it would be nished by 1975. The later II and III phases would include all the installations of an integrated steelworks a port for ships of up to 150,000 tonnes capacity, large blast furnaces, oxygen converters, continuous casting and hot rolling mills and would take production to 3 million tonnes by 1980 and 6 million by the end of the 1980s. While it was being built, the cold rolling mill would be temporarily supplied with coils from the Spanish steelworks of Ensidesa and AHV and from abroad. The total projected investment rose to 126,000 million pesetas ($2 billion in 1972), which could be partly covered by low interest credit from the state, which would also act as a guarantor in the acquisition of machinery from abroad (D az-Morlan et al., 2008). To sum up, the situation in Spain was just another example of what was happening in Europe and the rest of the world in the 1970s. The development of
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a new coastal integrated steelworks with capacity for 6 million tonnes was similar to the plans we have seen in the UK, Italy, France, Belgium-Luxembourg and the Netherlands. The IV ISP of Sagunto was more modest than that of Taranto or the V Plant of Gioia Tauro, and similar to Fos-sur-Mer, Dunkirk, Sidmar, Ijmuiden or any of the ve British plants. It was a result of the general opinion not only in Europe but also in Japan, the USA and in developing countries included in all future planning, that the world would be suering from steel hunger by around 1980, and that the model to be followed was that which the Kawasaki Steel Corporation had begun on the Japanese coast in the 1950s. Nobody predicted what was going to happen to demand and steel prices from 1975 onwards. II Steel consumption in the EEC began to fall in the nal months of 1974, but in this year production still rose by 3.6% over the previous year, reaching a record level of 155.5 million tonnes. However, in 1975 the sudden drop in consumption led to massive price reductions to take them to 40% below 1974 prices. This response from individual producers was based on the logic of a capital intensive sector such as steel, with high xed costs to cover and the consequent need for full use of its production capacity at any price. In spite of that, production fell from 87% in 1974 to 66% in 1975.10 Meanwhile, there were rises in the costs of raw materials, energy and wages, which resulted in sudden heavy losses for most European steelmakers. The French, British and Italians asked the EEC to take extraordinary measures to support the sector based on dispensations granted by the Treaty of Paris, but German companies, which were better prepared than their competitors thanks to the rationalisation policy of the previous years, were against these measures, arguing that the slump was part of the normal cycle of the steel sector and that the free market should be allowed to operate. The European Commissioner for competition agreed with the Germans. After considering this dierence of opinion, the European Commission declared that the crisis was temporary and not structural, and that it was still necessary to increase production capacity to cover the expected demand for 1980 (Tsoukalis & Strauss, 1986, pp. 195198; Houseman, 1991, pp. 1113).11 Faced with a worsening situation, in December 1975 the Commission started a consultation procedure to establish mandatory minimum prices, but it later changed its mind and decided not to act after an improvement in the steel market in the early months of 1976. In July, again with a worsened situation, the new Industry Commissioner, Henri Simonet, prepared a series of measures to return the sector to normality. The Simonet plan, which was approved in December 1976, included regional aid, protection against third countries and non-obligatory price recommendations for steelmaking companies and was to be adopted in the rst months of the following year. In January 1977, Etienne Davignon took over from Simonet and for the rst time ocially recognised that the crisis was structural and not cyclical. The new Industry Commissioner dropped the Simonet plan for being insucient and put forward his idea of giving the steel industry a breathing space to restructure itself.12 Thus, May 1977 saw the introduction of what was known as the rst Davignon plan, which was met with the approval of the whole Commission, the member states and Eurofer, the large European steel body created some months earlier to represent the interests of the sector (Tsoukalis & Strauss, 1986, pp. 199 202; Daley, 1996, pp. 149150).
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In essence, the Davignon plan was a series of protectionist and company aid measures designed to take them out of the crisis in the short term and to restructure the sector in the long term. It was based on the extensive intervention powers for steel that the Treaty of Paris had given rstly to the High Authority of the ECSC and then to its successor, the Commission of the EEC, and which had never previously been employed. Its aim was rstly to protect the European steel industry from increased imports through a system of voluntary restrictive licences and agreements with the main exporting countries, which guaranteed them access to the EEC market if they respected certain quotas and minimum prices.13 Secondly, it used Eurofer to impose on European companies obligatory minimum prices for a series of products and recommended prices for others in an attempt to achieve voluntary production cuts.14 After 1977, which was as catastrophic as 1975, with a worsening of the nancial situation of steel rms, 1978 saw the beginning of recovery in production and prices and in 1979 the recovery continued.15 The measures adopted seemed to have the desired eect, although there were critical voices that denied its benecial consequences and attributed the improved steel situation to the general economic recovery (Tsoukalis & Strauss, 1986, pp. 203204). The anti-crisis measures of the EEC were accompanied by national policies in all the aected countries. But the main preoccupation of almost all of them was to avoid the social costs derived from closing plants, through granting public money to act as a nancial sticking plaster to delay the real solution of the problems. In the UK, a new White Paper presented to parliament in March 1978 was to replace the ambitious expansion plan of ve years earlier. The Labour government recognised the gravity of the crisis and, although it continued with the swift completion of the coastal Ravenscraig plant, it interrupted plans to increase capacity from 3 to 6 million tonnes at Port Talbot and other plants that it had passed only one year earlier, in March 1977. It declared that the BSC had to restructure in order to be competitive in the world, but it did not reveal its closure plans for obsolete plants, conditioning them to its individual negotiations with the trades unions (Department of Trade and Industry, 1978, pp. 25). In reality, the British government was making generous redundancy payments to avoid social and political costs, which became the usual tendency for the restructuring measures of the BSC while Labour were in power, and was continued after the Conservative victory in the 1979 elections (Dudley & Richardson, 2001, pp. 89, 93, 96, 9899, 106). Other places also saw the slowing down or stopping of some of the main elements of the ambitious expansion plans of the rst half of the decade. In Italy, after nishing the increase to 10.5 million tonnes of Taranto in 1975, there was an interruption in 1977 of the project to build the V integrated steel plant in Gioia Tauro, in Naples, where they had already built a deep-draught port and obtained the land required. In response to criticism of this action, the chairman of Finsider, Alberto Capanna, argued that nobody could have foreseen the extent of the crisis in 1974, or its structural rather than cyclical nature (Capanna, 1979, pp. 4351). In France, the government of Raymond Barre did not dare follow its liberal inclinations and in September 1978 announced a rescue plan the fourth in 12 years that cancelled part of sums owed by the state aid granted in previous years and converted the rest into capital, meaning that the state became de facto the controller of the bulk of the national steel industry. Additionally, it nally recognised that France had to reduce its production capacity, stopping the investment plans of Sacilor in Lorraine and postponing the second phase of Solmer
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in Fos-sur-Mer until better times, although it opted to concentrate future steel production in this coastal plant and that of Dunkirk. The redundant workers of the obsolete plants were generously compensated from public funds (Daley, 1996, pp. 123128).16 For its part, in March 1977 the Belgian government commissioned the consultant McKinsey to carry out a study into steelmaking in Belgium and Luxembourg. A year later, his main conclusion was that only the coastal plant of Sidmar, in Zelzate, was clearly competitive according to international parameters. The two countries were world leaders in steel production per capita (1670 kg; the second was Japan with 960 kg), but they had concentrated a large part of their production in inland regions the Grand Duchy (or Luxembourg) and the Walloon districts in the south of Belgium of uncertain steelmaking future. The Belgian government decided to follow the McKinsey reports recommendations and reached an agreement with business leaders and unions in November 1978 to participate in the capital of the companies and undertake a costly process of investments and rationalisation, closing unviable plants, generously subsidising labour reductions, merging companies and looking for international partners (Messerlin, 1980, p. BL. 7).17 The Luxembourg company ARBED (Acieries Reunies de Burbach, Eich et Dudelange) intensied its commitment to Sidmar, diversifying its activities and acquiring an interest in Saar to nd technical and strategic co-operation between the companies, while gradually reducing the workforce in its home country where, in 1978, it employed 20,000 of its 150,000 workers, which gives a clear idea of the steelmaking specialisation of Luxembourg (Messerlin, 1980, pp. BL. 1214; Evans, 1980). Finally, Germany was able to enjoy relative calm in its Ruhr steel industry thanks to the rationalisation process carried out in the rst half of the 1970s, but the Saar area, with smaller and older companies, needed public intervention due to the worsening of their diculties, which began to improve in December 1977 with the appearance of ARBED (Messerlin, 1980, pp. G. 14; Capron, 1986, pp. 646651). The political situation in Spain at the outbreak of the crisis could not have been more unstable. The long regime of Francisco Franco came to an end with the death of the dictator in November 1975. In June 1977, Spain held its rst democratic elections for four decades. Regional, social and public order problems lled the agendas of the government of the Union de Centro Democratico (UCD), the party founded by Adolfo Suarez to lead the political transition. Pitted against the resistance of those who were nostalgic for the old regime were the impatient demands of the new parties, unions and lobby groups, which were trying to nd a place in the new situation, all of this in an atmosphere that at times turned poisonous due to the various terrorist groups with dierent ideologies that sprang up or grew around that time.18 The seriousness of the economic crisis in Spain surpassed the worst expectations and its outbreak coincided with the most delicate moments of the transition. Ination rose to 24.5% in 1977 and settled at around 1416% in 1979. Unemployment went from 3.8% in 1975 to 16.8% in 1982, and whole industrial sectors saw their survival threatened (Maravall, 1991, p. 14). These traditional sectors were concentrated, moreover, in regions that were particularly sensitive to political and social problems such as Asturias and especially the Basque Country, where steelmaking and shipbuilding accounted for 15% of industrial employment. Because of this, the economic teams of the UCD government were entrusted by Suarez with the mission of avoiding conicts while democracy found its feet and they
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were obliged to nd short term solutions. In integrated steelmaking, which was especially aected by the crisis, the IV ISP of Sagunto (AHM) became the task for which an immediate solution had to be found, while Ensidesa, in Asturias, and AHV, in the Basque Country, began to demand nancial aid from the state. As soon as the June 1977 elections were over, the Spanish government formed a commission to make a plan of urgent action to support and restructure the integrated steel industry. The proposal of the commission was presented in December in a package of similar measures to those that had been adopted by EEC countries: apart from price increases and export aid, it was considered necessary to nancially restructure the companies, close obsolete mills, reduce workforce to increase productivity, and block investment programmes. In the case of AHM, the commissions report highlighted the discrepancy between the obsolete integrated steelworks (the old AHV plant) and its modern cold rolling mill (phase I of the IV ISP), as well as the lack of a hot strip mill (HSM) to act as an intermediary production link between the two. Because of this, the commission thought it necessary to install a 2 million tonne HSM as part of the installations of the second phase of the IV PSI. This did not entail, however, abandoning the rest of the integrated steelmaking project, but a deferment of the investment. Although the rst restructuring plan was put aside after the ministerial crisis of February 1978, the new economic team quickly returned to the matter as the nancial situation of AHM threatened to result in a suspension of payments that would have aected not only AHV but also some of the most important banks of the country, which were backing both companies with credit and share purchases. In August 1978, the government passed the draft bill of the Law of Urgent Measures to Support the Steelmaking Sector, which was approved by parliament in December (two weeks after ratication of the new democratic constitution). The aim of the law was twofold: to solve the problem of the continuity of the IV ISP and perform the essential nancial reorganisation of the sector to alleviate the serious funding problems that the three companies had been suering since 1977. The government recognised the transitory character of the adopted measures, as they were only intended to solve the funding problems, but it expressly alluded to the need to adopt a restructuring programme similar to that of other European countries in the following months (Ministry of Industry and Energy (Miner), 1979, p. 65). To be precise, it entailed nancially backing the large companies to avoid the destruction of the business structure and the serious social consequences that would arise if it disappeared. It was a purely defensive strategy whose main aim was to stop the industrial crisis from interfering in the complicated political transition process. Some researchers defend the thesis that in Spain the measures planned to solve the economic problems could not be taken until the political transition ended with the victory of the socialist party in 1982. First the political problems had to be solved and only then could the economic problems derived from the crisis be looked at (Lopez-Claros, 1988; Maravall, 1991; Dehesa, 1993; Bermeo, 1994). However, we should clarify this thesis because what the UCD government really did was to distribute tasks in such as way that, although the success of the political transition was the priority, they were able to prepare aid and restructuring plans for the most threatened sectors. Perhaps there was still a certain delay compared to the rest of Europe, but we should remember that when the EEC passed the rst Davignon plan in May 1977, Spain was holding its rst democratic elections (in June), and the rst plan for integrated steelmaking was made just after that, although it was not put into
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action until the end of 1978. The dierences are not substantial if we compare these dates with those of other European countries: the Armani report, which advised the Italian government against the V Integrated Steelmaking Plant in Gioia Tauro, was not published until 1977; in March of the same year, the British government still supported the expansion plans of the BSC; in April, the French government thought that steel prices and production would recover over the following months, and the nancial plan that saved its main steel companies from bankruptcy was implemented in September 1978; nally, the restructuring plan of the Belgian government, which was based on the McKinsey report, began in November 1978. Consequently, the fact that the economic renovation measures in Spain were insucient should not be linked with the supposed paralysis of the UCD government, but rather with what was happening at that time in almost all European countries: the initial inability to foresee the structural as opposed to cyclical nature of the crisis, and the second shock of 1979, which had an especially serious eect on the steelmaking sector from 1980 onwards.
III Articles 58 and 61 of the Treaty of Paris granted far-reaching powers to the High Authority and its successor, the Commission, to declare a state of emergency in the steel sector in order to x mandatory quotas and minimum prices for all steel companies (Messerlin, 1980, p. E. 1). Between 1975 and 1977, disagreements within the Commission and the member countries of the EEC prevented them from using these powers, but the worsening steel situation in 1980, which this time also aected the German companies (historically in private hands), led to an agreement. Demand for steel in the EEC began to fall in May and Eurofer was unable to control prices. The system imposed in 1977 collapsed, as did Eurofer. In October 1980, the Commission declared a state of emergency and published mandatory production quotas for various types of products and extended it in July 1981 to cover 65% of total steel production. In August 1981, a new system came into eect which allowed for public aid in each country, subject to rigorous restructuring plans for each company. The individual governments had to provide their programmes before September 1982 and the Commission had to pass them in July 1983.19 However, whereas the EEC asked for cuts in production capacity of 3035 million tonnes, the member countries initially only oered 14 million. This started an arduous three-sided negotiation process between the reconstituted Eurofer, the industry ministers of each member state and the Commission, which held the powers granted to it by the Treaties of Paris and Rome, i.e. the quota system and approval of public aid.20 In July 1983, the proposal of the Commission, which was passed by the member states and became the second Davignon Plan, was to make cuts of 26.7 million tonnes, equivalent to 15.8% of the 1980 production capacity, and to end the quota system in December 1985. However, subsequent and more pessimistic estimations of future demand led to the need to make new cuts and to extend the time periods of the quota system and the public subsidies, which were to continue until their ocial demise on the rst of July 1988.21 The national governments carried out their restructuring programmes under the conditions set by the Commission in its leading role. They all accepted the demand for capacity reduction in the second Davignon Plan in exchange for continuance of the quota system and the approval of generous subsidies with which they could give nancial relief to steel companies and limit the social and political costs of closing
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plants. The changes made in Britain were perhaps the most dramatic. In 1975, the BSC still had 228,000 workers on its books who were producing around 2021 million tonnes of steel per year. But the alarming accumulation of losses year after year since 1976, with peak losses of 1800 million in 1979/80, forced them into a package of strong measures which brought about the famous three-month strike with which the unions greeted the new prime minister, Margaret Thatcher, in 1980. The social cost of closing obsolete or badly situated steelworks was alleviated by a sizable injection of public resources by the government. At the end of the restructuring process in 1988, the company had 52,000 workers producing 14.7 million tonnes of steel and was making prots of 410 million, which meant that it was considered ready for immediate privatisation, which happened in December of that same year (Hudson & Sadler, 1989, p. 65; Hannah, 2004, pp. 9899). There was still the matter of the closure of the Ravenscraig plant, whose political cost, with it being in Scotland, was something the Thatcher government wished to avoid. It was carried out by the new British Steel in 1992 (Marklew, 1995, pp. 6061; Dudley & Richardson, 1990, pp. 181182, 201 and 217220). In France, Francois Mitterrand became President of the Republic in 1981 with the promise that there would be no more job losses in steelmaking areas, after the massive cuts of the steel plans of 1977 and 1979. After de jure nationalising the two main companies, Usinor and Sacilor (de facto these were already public as the state had taken majority control in 1978 by converting its debts into capital), in June 1982 the Socialist government presented a new plan, which proposed slight labour cuts without closing plants in exchange for an investment package for the inland regions most aected by the crisis. But the failure of the forecasts, which were too optimistic, led to a fall in sales and an increase in operating losses, which forced a new plan in 1984 (the fourth in seven years) to make up for the previous plan. This had an approach closer to the free market and followed the guidelines of the second Davignon plan; it proposed new closures of obsolete installations and concentrated on strengthening the coastal plants of Dunkirk and Fos-sur-Mer. Usinor Sacilor, which became the biggest steelmaker in Europe and the second biggest worldwide after its 1987 merger, started to make prots in 1988 after 12 consecutive years of losses and after losing two-thirds of its workforce (Marklew, 1995, pp. 8794; Daley, 1996, pp. 129131; Smith, 1996). The restructuring also required plant closures and workforce changes in the traditional Belgian steel industry, and these were accompanied by massive nancial aid for the Walloon regions of the south that worsened the stando with its Flemish neighbours in the north. In particular, the governments decision in December 1982 to avoid the bankruptcy of Cockerill-Sambre required signicant public funding. Finally, the Gandois plan of May 1983 was designed to comply with the requirements of the second Davignon plan and gave Belgium a production capacity of 4.5 million tonnes. The main pillar of the Luxembourg based Arbed was, once again, the Sidmar plant, along with a policy of alliances with German, French and Belgian companies with a view towards rationalising and complementing production (Capron, 1986, pp. 715733; Howell et al., 1988, pp. 119121). Italy, for its part, had refused to reduce its production capacity in the 1970s and because of this had become the fourth largest producer in the world by 1982. The rst restructuring plan, in 1979, which was inuenced by union and political pressure, included an optimistic consumption forecast of 30 million tonnes for 1985 and rejected any closures or job losses. But, in 1980, the shock of the crisis and the
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new European regime of obligatory quotas and prices nally convinced the authorities and companies of the need to adapt. Debt and decapitalisation in Finsider were alarming and their need for nancial aid from the Italian government rose to 8500 billion lire ($10 billion) between 1976 and 1983. After two new failed plans, in 1981 and 1983, it was nally in May 1984 that the Italian government passed a restructuring plan for the steel industry to deal with the problems of its modernisation, with the loss of 26,500 jobs and a new capital injection of 5000 billion lire (Eisenhammer & Rhodes, 1986, pp. 436473; Masi, 1986; Howell et al., 1988, pp. 147154). Finally, in 1980 some of the powerful German Ruhr companies found themselves in the red for the rst time, which helped soften German opposition to the Davignon measures. In 1982, Hoesch and Krupp had to use public subsidies to carry out their restructuring plan, which included modernising their installations, reducing capacity and breaking the link between Hoesch and the Dutch company Hoogovens, which had not met the collaboration objectives set in 1972. All the companies, including Thyssen, closed obsolete plants to concentrate on products with higher added value and on the nal stages of production, while they strengthened ties with the automobile industry and other customers. In the second half of the 1980s they began to make prots again (Esser & Vath, 1986, pp. 669677; Howell et al., 1988, pp. 180 88; Vitols, 1993). In comparison with the EEC countries we have just discussed, the rst surprise when we look at Spain is that, despite the delicate political and economic situation in the early 1980s, there was no great delay in adopting restructuring measures. After the Constitution was passed in December 1978, new elections were held in 1979 with a narrow victory for the UCD, now very much weakened by internal disputes. Towards the end of 1980 Suarez resigned and in February 1981, during the investiture ceremony of the new president, Leopoldo Calvo Sotelo, there was a failed attempt at a coup detat. The internal problems of the party in oce brought about a comfortable victory for the Spanish Socialist Workers Party (PSOE), led by Felipe Gonzalez, in October 1982. Meanwhile, the industrial and nancial fabric of the country entered into an unstoppable process of necrosis, as expressed later by Gonzalez himself (Maravall, 1991, p. 21). In these circumstances, the nal governments of the UCD tried to carry out a real industrial restructuring process, but they did not have enough time. In May 1981, after almost a year of arduous negotiations between the executive, the companies, the creditors and the unions, the government published a Royal Decree detailing the agreements. The rst objective was to improve the balance sheets of the three integrated steel companies with public money, reducing their nancial costs from 16% to 8% over sales and labour costs from 30% to 20%. The second objective was to modernise the installations and provide nance for the most needed investments: two new BOS plants in Ensidesa and AHV and a new hot strip mill, essential to make the coils needed by the cold rolling mill of Sagunto. But the convenience and location of this HSM became the main point of dispute between the three steel companies. It was an essential element for AHMs survival as without it there would be no link between their old installations at the main plant and their ultra-modern cold rolling mill (the rst phase of the IV ISP, the only one built in the 1970s). For Ensidesa and AHV, abandoning their old HSMs turned them into producers of semi-products of lower added value and, in time it could very possibly make them subordinate to the integrated Sagunto plant.
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The disagreements around the location of the new HSM led the government to use the services of a consultant, as had been the case in other countries.22 In December 1981, and after rejecting Nippon Steel due to its relationship with the Taranto plant, the Kawasaki Steel Corporation was commissioned to make a report of the future of the sector and it was delivered in May 1982. There were two central ideas of the Kawasaki report. First, the need for a modern integrated steelworks on the coast like those of Dunkirk, Fos-sur-Mer or Taranto if the Spanish integrated steel sector wanted to compete in the future in the international market; second, the new hot strip mill should be installed next to the Sagunto cold rolling mill, which was the most advanced type in the world, as a way of eciently using its potential (Kawasaki Steel Corporation, 1982, p. 2/12). However, it recommended delaying the investments until the industrial and nancial situation of the companies improved (Kawasaki Steel Corporation, 1982, pp. 1 and 1/2). Ensidesa and AHV were not slow in responding. Ensidesa claimed the new HSM for itself while AHV argued that it was cheaper to renovate the existing HSM in Asturias and the Basque Country than to build a new one in Sagunto. The government gave the three companies several months to submit their reports, which they did in September 1982. But the general elections of October brought about a radical political turnabout. While the UCD was nished forever, the PSOE of Gonzalez, as mentioned earlier, achieved an absolute majority in parliament. In February of 1983, the new industry minister, Carlos Solchaga, made the conclusions sent by AHV his own. The construction of the new HSM in Sagunto was abandoned and they proceeded to renovate the two existing mills in Asturias and the Basque Country. The old AHM installations were closed and the bulk of investment went towards improvements at Ensidesa and AHV. Concretely, the conclusions of the Kawasaki report were turned around with support given instead to the two traditional steelworks and the IV ISP in the Mediterranean was abandoned (Miner, 1983, pp. 3160). The Royal Decree-Law of 30 November 1983 of Restructuring and Reindustrialisation replaced the measures passed by the previous UCD government, although the investment had been authorised in July. If we compare these dates with those of other European countries it can be seen that there was no signicant delay in the Spanish measures with regard to Europe. The second Davignon plan was in July 1983, the Belgian plan in May of that year and the Italian and French plans were in May 1984. Also, the European quota system, which was supposed to nish in December 1986, was extended to July 1988. Spain had been given an extended threeyear period for public aid starting from its joining the EEC on 1 January 1986, which nished in December 1988. Therefore, in contrast to what was said at the time and to what has been repeated since, it was not the delay in having and taking measures that caused failure, but the content of the measures. In October 1984 the Sagunto integrated mill was closed, and with it the possibility of some day building the IV ISP. Meanwhile, between 1983 and 1987, 166,000 million pesetas were put towards the renovation of the HSM of Ensidesa and AHV and the construction of two new steelworks. Despite the pedagogical eorts of the government, the decision in favour of the two traditional steelworks as opposed to the new coastal Sagunto plant lacked valid technical or economic explanations. The motives can be found in the social and political costs that were avoided. At that time there were 4000 workers at the Sagunto plant, in a region, Valencia, that was not among the most conictive of the
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country. In Ensidesa, on the other hand, there were 21,000, in an environment socially degraded by the global crisis in related sectors, especially coal mining. The case of AHV, with more than 10,000 workers, was very complex because there was also crisis in, among others, the sectors of special steels, ship building, metallic constructions and electric machinery, and because of this unemployment rates in the Basque Country were higher than the national average, reaching more than 30% in areas close to the plants. To this we have to add the nationalist terrorism of ETA (Euskadi ta Askatasuna), which at that time killed an average of 100 people per year, and the existence of a regional government with a nationalist absolute majority, whose demands the Spanish government wished to soften. Finally, the governments proposal was accepted by the unions because it guaranteed the continuance of the two major companies of the sector, Ensidesa and AHV, and because it oered important compensations for workers aected by restructuring process in exchange for accepting the closure of the old integrated mill of Sagunto. The Spanish restructuring programme was, in the words of an analyst, the most generous in Europe (Bermeo, 1994, p. 617). A second reason to explain the behaviour of the Spanish government is related to negotiations around their integration into Europe, which were at the point of culmination. This integration was made on 1 January 1986 and became the leitmotiv of the rst Socialist government: Europe was seen as the solution for Spain, the only possible way to guarantee economic modernisation and permanent democracy (Maravall, 1991, pp. 1920 and 3536). The main voice of dissent, both in industrial and agricultural respects, came from France, and the IV ISP of Sagunto could have been competition for Fos-sur-Mer. The Italians already knew in 1979 that the French plant saw the Lombardy and Veneto industries as part of their natural market (Capanna, 1979, p. 24; Sabatino, 1979, pp. 109, 114). Moreover, Spain was an important consumer of hot coils and sheet made in the EEC. In 1980, for example, it accounted for 70% of Spanish steel imports and 17.3% of EEC exports of both products, which made Spain the second biggest customer (the biggest was the USA with 23.7%). The decision not to build the HSM on the Spanish coast had a clear beneciary, the French steel industry, which was able to develop its Marseille plant without fear of close competitors in the Mediterranean market. In fact, the nal decision in favour of the Fos-sur-Mer plant came from the 1984 plan, which was passed a year after Spain dropped the IV ISP. Did the Spanish governments decision inuence that of the French? What is certain is that in the 1990s, Usinor became the majority owner of the cold rolling mill of Sagunto, and Sagunto became the main destination of the coils made at Fos-sur-Mer (see http:// www.arcelormittal.com). IV We should conclude with a brief analysis of the fundamental facts relating to Spanish integrated steelmaking in the 1990s and 2000s, which demonstrate the failure of the measures decided on in 1983. The rst was the need for new restructuring in the 1990s and the second was the denitive move of the steelmaking balance sheets into the red. The consequences of integration into Europe were not long in arriving. In 1986, prices fell and the national steel market was lled with imports from other EEC countries. In the same year, the Spanish government was forced to adopt the safeguard clause included in the entry treaty to
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protect the threatened industry by limiting imports. In April 1987, following the recommendations of a report by the consultant McKinsey, new aid was approved for the Spanish integrated steel industry that the European Commission passed in exchange for an additional production capacity cut of 750,000 tonnes (Miner, 1987, pp. 2728). In 1989, integrated steelmaking made prots after 13 years in the red, but in 1990 the arrival of a new crisis sent the gures falling again. The government was forced to align itself with Italy in the group of countries that asked for the Commissions authorisation for new restructuring, as opposed to those countries such as the UK and France, that had been successful in their modernisation processes and protested because the aid to obsolete Spanish and Italian plants aggravated the overcapacity problems of the European steel industry (Marklew, 1995, pp. 4748 and 9394; Dudley & Richardson, 1999, pp. 239241). The new restructuring plan, passed by the Commission in December 1993 after prolonged discussions and in exchange for a further capacity reduction, entailed the closure of all the installations at the main AHV plant between 1995 and 1998, including the BOS plant and the hot strip mill that had been renovated in the 1980s, and its replacement by an electric mini-mill, the Acer a Compacta de Bizkaia (ACB) (for the second restructuring of integrated steel, see Aguera, 1996; Saro, 2000; Saro & Navarro, 2001; Fernandez de Pinedo, 2001, pp. 118120; Fernandez de Pinedo, 2003; Navarro, 2004). In Asturias, where for historical reasons the steelworks were situated in two areas, Aviles and Gijon, 14 kilometres apart, the blast furnaces of Aviles were shut down in 1998, leaving the renovated HSM of Ensidesa disconnected from the other installations of the main plant in Gijon. The total workforce was reduced to 10,000 as opposed to 43,000 in 1980 and 22,000 in 1990. Finally, in 1997 Aceralia was born as result of the merger into one company of what was left of the Spanish integrated steel industry: the Asturian installations of Ensidesa and shares in various companies, including the new ACB and the cold rolling mill of Sagunto now Siderurgica del Mediterraneo (Sidmed), also partly owned by Usinor.23 The government nished the restructuring process by selling 35% of the new company to the Luxembourg company Arbed and oating the rest on the stock market, so that Aceralia was a private company by the end of 1997. Neither Ensidesa nor AHV had the possibility of converting into real coastal plants because, although they were situated in maritime areas, either they were far from the coast (as with the dispersed installations of Ensidesa), or they were restricted by the surrounding population (as with AHV).24 Spain was left with no real coastal integrated steelworks and limited its production capacity of oxygen steel to under 5 million tonnes per annum, a lower quantity than the Netherlands, which had its only plant at Ijmuiden. From this moment on, the Spanish steel industry specialised in long products of lower added value made through electric steelmaking and left the supply of the main part of its growing demand for at products in the hands of other European producers. The result could not have been any other than the progressive worsening of its trade balance with the EEC. The current foreign trade gures for Spanish steel products conrm that the decisions of 1983 were wrong. Due to a large extent to the increased automobile industry in Spain, demand for at products shot up in 1986, which led to increased imports, especially of this type, from other European countries. In 1995, the trade balance of steel products shifted denitively from positive to negative (see Table 2). Spain went from being a net exporter in the 1970s and 1980s to being a net importer in the 1990s and 2000s. Sagunto became the main Spanish steel port due to the
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Table 2. Spanish steelmaking: basic data of production and foreign trade, 19852005 (millions of tonnes). Production Oxygen 1985 1990 1995 2000 2005 5.5 5.6 5.2 4.2 4.3 Electric 8.7 7.3 8.6 11.7 13.6 Total 14.2 12.9 13.8 15.9 17.9 Import 1.4 3.4 5.3 9.3 11.3 World trade Export 7.8 4.2 4.9 6.1 6.5 Balance 6.4 0.8 70.4 73.2 74.7 Import n.a. 2.7 3.9 7.0 8.3 EC trade Export n.a. 2.5 3.3 4.3 4.6 Balance n.a. 70.2 70.6 72.7 73.7
Sources: Miner, various years; http://www.unesid.org (statistical appendix; Spanish steel industry, various years).
import of coils from Fos-sur-Mer, and France became its main foreign supplier of steel products, with 3.1 million tonnes in 2006. In this year, imports surpassed exports by some 7 million tonnes, which represented a decit of e1800 million.25 To be precise, the restructuring of 1983 resulted in Spain suering a permanent decit of steel products, precisely what Spain wanted to avoid through the IV ISP project of Sagunto in 1971. Spanish steelmaking policy in the 1970s and early 1980s was not especially dierent from that of the main European countries. The expansion plans of 197174, the erroneous perception of the crisis until 1977, the short term subsidies to avoid closures, the fear of worker unemployment, the nationalisation policy of the industry, internal struggles in the state and even the use of foreign consultants were characteristics shared with EEC countries. The political transition was in Spain a tense experience that heightened the problems and made economic policy decisions harder to make, but it did not cause a fundamental divergence from the rest of Europe. Perhaps it was responsible for a slight delay in response. What made the steel restructuring policy fail and forced a new and costly restructuring in the 1990s, was the decision of the Socialist government, newly elected in 1982, to opt for maintaining the inland steelworks instead of the coastal steelworks. Its motives were related to the locations of these steelworks in socially and politically sensitive areas and, perhaps, with French pressure intended to avoid competition with Fos-sur-Mer. The closure of Sagunto marked the end of the only real possibility of Spain having a competitive integrated steelworks in terms of its integration into Europe.
Acknowledgements
The authors are very grateful to the participants of two conferences that took place in Alicante (April 2008) and Barcelona (February 2009) for their useful comments. The research programme ECO200800398/ECON from the Government of Spain gave nancial support to this work.
Notes
1. In 2006, the Indian company Mittal Steel took control of Arcelor and founded ArcelorMittal. Concurrently, another Indian company, the Tata group, acquired the UK/Dutch integrated steelworks which had merged a few years earlier under the joint name of Corus. There is not enough space in this paper to analyse these business actions, which are excellent representations of real business globalisation today.
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2.
A very representative criticism of all the actions of the previous governments is found in the discussion of the 1983 measures published by the Industry Ministry: Ministry of Industry and Energy (from now on, Miner), Annual report on industry (1983), pp. 3132; see also Howell, Noellert, Kreier, & Wol, 1988, pp. 372393. For a discussion on scale economies and the minimum ecient size of steelmaking plants, see Cockerill, 1974, pp. 6792; Howell et al., 1988, pp. 2026. For the poor match between integrated steelmaking and long products, see Balconi, 1993, p. 476. For the characteristics and limits of the mini-mills, see Cockerill, 1974, p. 26; UNIDO, 1978, pp. 100101; Balconi, 1993, pp. 474476. Between 1960 and 1978, the Japanese plants obtained coal and iron ore at an average price not very dierent from that paid by European and American plants. However, they had lower wage costs than the Americans for the whole period and lower than the Europeans as from the early 1970s (see Mueller, 1979, p. 14). The six worst hit regions by the crisis in the 1970s were Saar, Wallonia, Eastern France, Luxembourg, Scotland and Wales. The rst four were adjacent. Messerlin, 1980, p. 26. In 1977, coastal plants still only had 17% of the total EEC steel production, as opposed to 88% in Japan, and Europe had six plants with production capacity equal or higher than 6 million tonnes while Japan had 12 (see Mueller, 1979, p. 21). For an international comparison of productive installations and cost structures, see Carlsson, 1981. The V Plant was projected to have a production of 4.5 million tonnes of plate products and a workforce of 7500 (Eisenhammer & Rhodes, 1986, pp. 430431). At around 1978, the Luxembourg company Arbed controlled 62% of Sidmar. Hoogovens also worked on entering the aluminium sector (see Schenk, 2001). The strategy of co-operation between companies and between unions and management also played an important role in the German success story (Tooze, 2001). For the logic of the price war between steel companies, see Esser & Vath, 1986, pp. 626 627. The British authorities also insisted on the transitory nature of the problems and that the BSC would have to produce 37 million tonnes in the near future (Dudley & Richardson, 1990, p. 79). The Simonet plan failed because the companies did not stick to the price discipline asked for by the Commission (see Mueller & Kawahito, 1979, p. 11). Annual steel imports of the EEC were over 67 million tonnes on average between 1969 and 1975, at 11 million in 1976 and 1977, to then fall below 10 million in 1978 thanks to the measures of the Commission (see Mueller & Kawahito, 1979, p. 7). The Commission came up against the opposition of the Bresciani, who refused to follow the minimum price recommendations for reinforced bars until the rise in scrap prices in 1979 brought them into nancial diculties (Tsoukalis & Strauss, 1986, pp. 202203). For a detailed analysis of the rst Davignon plan, see Messerlin, 1980, pp. E. 37. Optimism was not long in returning to the steelmaking policy makers, to the point that some new estimations repeated the old, much criticised, errors of the past. For example, the OCDE (Organization for Economic Co-operation and Development) made a future projection according to which the world would need 864 million tonnes of steel in 1980, 1058 in 1985 and 1900 in the year 2000 (Walter, 1979, p. 156). As late as April 1977, the French government, along with the directors of Usinor, published an estimation that demand and prices for steel would start to recover in the second half of the year. The reality was even worse than in 1975 (see Hayward, 1986, p. 334). The numerous aid packages for the declining Walloon industry sharpened Belgian regional conicts, as the Flemish region had already given a lot of nancial aid to its southern neighbours (see Capron, 1986). There is a huge amount of literature on the Spanish transition and, in general, on political transition processes. In terms of our subject, which is the relationship between the economy and these transition processes, of special interest are: Rustow, 1970; Linz, 1988; Sole Tura, 1989; Maravall, 1991. World steel production fell over three consecutive years, between 1980 and 1982, something that had only happened twice before: in 193032 and 194446. In 1984 production reached, 710 million tonnes, which was similar to 1974, 704 million (Hudson
3. 4. 5.
6.
7. 8. 9. 10. 11. 12. 13. 14.
15.
16.
17. 18.
19.
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20. 21.
22.
23. 24.
25.
& Sadler, 1989, p. 18). The quota system was based on the production of each company between July 1977 and June 1980 (Tsoukalis & Strauss, 1986, pp. 209212). The Treaty of Paris prohibited public subsidies to companies, but the Treaty of Rome opened the door to exceptions (Houseman, 1991, p. 147). All the countries made sacrices, although not all to the same extent as they did not have the same problems of obsolescence and badly located plants. Thus, the UK, Belgium and Luxembourg reduced their capacity between 1980 and 1985 by around 20%, with Germany and the Netherlands below 12%, and Italy and France at around 16% (Hudson & Sadler, 1989, pp. 3439; Howell et al., 1988, pp. 8093; for the extension of the subsidies, see Dudley & Richardson, 1990, pp. 217220). For the subject of external consultants, see Meny & Wright, 1986, pp. 3637. The British and Belgian governments contracted McKinsey at dierent moments, and the Italians consulted Nippon Steel to organise their Taranto plant, calling on them again in the 1981 crisis (see Masi, 1986, p. 492). Previously, they had founded the Corporacion Siderurgica Integral (Integrated Steel Corporation), which brought Ensidesa and AHV together in 1991 (Miner, 1983, 1991 and 2000). This was the main reason why AHV wanted to expand in the 1970s through the IV ISP of Sagunto (see D az-Morlan et al., 2008, pp. 145146). All the production and foreign trade gures come from http://www.eurofer.org and http://www.unesid.org (statistical appendix; Spanish steelmaking industry, 2006).
Notes on contributors
Pablo D az-Morlan and Miguel A. Saez are lecturers in Economic History at the University of Alicante. Antonio Escudero is senior lecturer in Economic History at the University of Alicante.
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industry in the European panorama (1971-86): A lost opportunity',Business History,51:4,547 568

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*Corresponding author. Email: pdiaz@ua.es

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Source: Department of Trade and Industry, 1973, p. 6.

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7. 8. 9. 10. 11. 12. 13. 14.

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