[TRAVEL LOG] STEEL = STAHL AUF DEUTSCH

Yesterday was all about steel.  What is the biggest reason that Linz is such a prosperous city today? Steel.  To begin, let’s explore some background information…

Before our tour of Rosenbauer on Monday, our bus driver actually took us through a small village just outside of Linz.  He announced to us that we were passing the childhood home of Adolf Hitler.  He then directed our attention to the cemetery that held the graves of his parents.  Hitler was not a native German; he was Austrian (until 1925).  He grew up near Linz, and when he came to power later in life, he still had Linz on his map of cities that would serve a great cause in his Reich.  He established a steel company in Linz going into the Second World War to fuel his armies with steel.  Tanks, airplanes, ships, and artillery all required the precious commodity.  Linz became a major resource for Germany during the war.   

At the end of the war, the plant was destroyed.  The allies had destroyed much of it as a means of cutting off resources to the German army.  After the war, the city was split between the allies just as Berlin was.  One major difference, however, was that the city center was not designated towards any particular country.  Each occupying country took turns occupying this portion of the city.  Eventually, much would be turned over to the Americans.  In the 50s, the Americans helped to restart the Linz economy by reviving the steel plant.  Two blast furnaces were reconstructed and the plant began production again.  For years it would operate as a state owned company.  In 1995, Voestalpine (the name the steel company had been given), made its IPO and went public.  At this time, many investors were able to buy stock to take part ownership of the steel giant.  It is now 54% state owned and 13% employee owned.  As with many company histories in central Europe, it has a long and interesting story.  Sometimes this history contains some darker periods.  Voestalpine does not take pride in the fact that it once fueled the German war machine, but it does do well to acknowledge this very important part of the company’s history and use all past experiences to build on and move the company into the future.

Our group of MBAs traveled to the plant and met with a couple of their representatives at 10am yesterday.  The initial presentation gave an overview of the company’s past, present, and future.  Anita Friedl from Corporate Development gave the initial talk on the global steel market.  Today, the industry is booming because of significant growth in China.  The current top two market leaders in steel manufacturing are actually in China (the market leader) and the USA.  Actual company market leaders are 1) ArcelorMittal, 2) Baosteel, and 3)POSCO.  The US top manufacturer, US Steel, falls in at number 8, while Voestalpine, Austria’s top manufacturer, falls in at number 29 globally.  Voestalpine employs 12,000 employees locally and supports more than 200,000 area jobs.  Over 1300 apprentices work at the plant and 500 employees are dedicated solely to research and development, including research in environment protection initiatives.  Voestalpine prides itself in being the cleanest steel mill in Europe, and possibly even the cleanest in the world.  Due to recent initiatives (and regulations by the E.U.), the mill has managed to reduce its polluting emissions by nearly 95%.  For this reason, Linz has some of the cleanest air of any city in Austria.

Voestalpine has five separate divisions and employees nearly 41,000 employees globally.  Divisions include steel, special steel, profile form, rail systems, and automotive.  In 2010, they brought in nearly 11 billion Euro in revenue. They are spread between five continents and 60 different countries.  Major partners include companies like BMW, Audi, Ford, GM, Daimler, Fiat, Peugeot, and other auto manufacturers.  They hold a number one position in rail technologies specifically.  They are even able to produce steel rails as long as 120 meters!  …and ship them successfully!! 

The next corporate development representative, Rene Killinger, gave an overview of the company’s look into the future.  The motto “One Step Ahead” was very prevalent throughout the company grounds and in all of their branding.  Four focus areas were explained in which the corporate, business, and functional company strategies all converged.  These were 1) a focus on niche and high quality/technology market divisions, 2) continuing to offer a large product variety, 3) avoiding “spot market” exposure, and 4) creating a longer value chain. 

For all you “non-business” types, I apologize for all of the jargon.  One part of this trip is that I give some focus to the “business” side of things out here.  In general, the concept of an “MBA” is more of a new one in Europe than in the US.  We sort of pioneered this idea of a business focus.  It is neat, however, to see how the “talk” is the same in Europe.  Business concepts have become more standard worldwide, and I can see how this is leading towards a more global economy.  Cooperation efforts, plans, and joint strategies become more productive when language and concepts align at a basic level.  It is the nuances of the business structures that make observation of foreign business interesting.  For Austrians, competing at an international level is almost necessary because of their country’s small size.  In American, many companies do not need to extend past our borders because the US alone “supplies” enough “demand” to businesses.  With that small interlude, allow me to continue with Voestalpine…

Just as with any other steel manufacturer, Voestalpine is taking a serious look at what the future of the industry looks like.  With new material development in the auto industry and ever changing means of transportation in the world, the future demand for steel is largely uncertain.  To prepare for such a future, workshops within the company have been assembled to discuss the outlook and make recommendation to the company board.

In terms of other growth, I mentioned its look value adding processes.  This is a downstream growth strategy that would include adding processes to make the steel worth more to a customer.  For example, I could sell you a steel plate OR a steel spoon.  If you are a chef, which is worth more to you?  The steel could weigh more, and therefore have a higher value to a steel maker, but you gain more use out of the spoon- not the amount of material.  Because of this, you would pay more for the spoon than the plate.  The process that made the steel bar into a spoon is a “value adding process”.  Voestalpine is looking at which of these they can add to their company to increase profitability.  One example is that they are now stamping and welding together various grade steels for car body panels for BMW.  This is a process BMW outsources.

One final subject of the morning involved the business-worker relations.  We discussed how the company did not lay anyone off in the recent economic crisis.  Costs were cut heavily and the Chamber of Labor was able to provide funding for special job training in slow periods.  The concern of an elderly working class once again came up, and it was described how these workers were then placed with jobs fit to their physical abilities. Getting younger workers in the door is something Voestalpine is focusing on, and they are doing this through joint work with educational institutions such as JKU.  In Austria, apprenticeships are very common and many students will work and study jointly.  This gives sufficient training and helps more effectively bring youthful employees into the company.  This is all very similar to the co-op program our university utilizes. 

After our morning discussion, we had lunch in the company cafeteria.  We then were lead on a guided tour of Stahlwelt (Steel World), their visitor center, and the plant itself.  Our guide was very informative and took us through each step of the steel manufacturing process.  On the plant tour, we took a bus to each of our stops.  The plant is literally a city of its own.  It has its own police, fire department, and health center.  We stopped first at the larges blast furnace (capable of 800 tons of iron ore production per day) and then we stopped at a portion of the plant where stamped steel panels were being welded together for BMW.

The trip to Voestalpine took up the entire day, but was very educational.  Between the history, engineering, and business information gained, I know my mind was exhausted.  It was, however, a good way to end the Linz experience.  Some of us guys later when to a frequently visited café behind the hotel for dinner.  We mentioned to the waiter that we were from UC, and he promptly handed us a guestbook to sign.  The place was called Johann’s.  We could actually see a few entries in the guestbook where other professors and university affiliates had signed in the past.  Jordan sketched in a giant c-paw in the book and we all signed.  For anyone visiting in the future, we left a tally of how many “beverages” we purchased there.  Our challenge to you is to support this local business by beating our tally.   

For as small as Linz was, there was much to discover.  I’m glad to have been there and experienced the scene.  I now am onboard a Westbus bus (operated by the same company as Westbahn) heading for Prague.  We left at 9:20 am this morning and should arrive in Prague around 2:30 pm.  We’ll be having another welcome dinner later this evening.  I look forward to reporting from there!