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KOŠICE STEEL MILL TO INVEST $160 MILLION IN AUTO-QUALITY STEEL LINE

USSK bids to supply car factories

SLOVAKIA's surging auto industry is not only drawing would-be parts suppliers from abroad - it is also driving a $160-million (€132 million) investment by one of the country's oldest concerns, US Steel Košice, which is bidding to become the "preferred supplier" of high-quality steel to the huge car factories due to come on line by 2007.

SLOVAKIA's surging auto industry is not only drawing would-be parts suppliers from abroad - it is also driving a $160-million (€132 million) investment by one of the country's oldest concerns, US Steel Košice, which is bidding to become the "preferred supplier" of high-quality steel to the huge car factories due to come on line by 2007.

Owned by storied American ironworks US Steel, US Steel Košice (USSK) on June 24 broke ground on a new galvanizing steel line at its facility in eastern Slovakia, in the presence of local and stateside US Steel brass, regional Slovak politicians and Prime Minister Mikuláš Dzurinda.

John Surma, president and CEO of US Steel, said the new line would "allow us to participate in the growth of the automotive assembly plants in Central Europe, especially in Slovakia, where auto production is projected to grow from nearly 300,000 vehicles this year to one million vehicles by 2010.

"Our goal is to have our steel in every one of those vehicles," Surma said.

The anchor of Slovakia's auto industry is VW Slovakia, a daughter of Volkswagen AG, which set up a Bratislava-vicinity plant in 1991 and last year turned out 220,000 vehicles, down from a record 283,000 in 2003.

VW Slovakia was the largest non-financial company in the country in 2004 with a turnover of Sk174 billion (€4.5 billion).

Among the newcomers, French manufacturer PSA Peugeot Citroen is erecting a €700 million plant near Trnava in Western Slovakia that will be capable of producing 300,000 cars annually after opening in 2006.

The Korean KIA Motors is also building a €700-million plant near northern Slovakia's Žilina with a capacity of 200,000 vehicles a year.

"We're beginning work on the new facility immediately so that the operation coincides with the start-up of the KIA Slovakia manufacturing facility in 2007," Surma said.

"Initially the line will produce a combination of construction and automotive products, eventually moving to a preponderance of automotive as capabilities are developed."

An analysis by PricewaterhouseCoopers shows that in two years time, the countries of the Visegrad 4 pact - Slovakia, Hungary, Poland and the Czech Republic - will be turning out two million vehicles a year.

US Steel is currently a leading supplier of sheet steel products on the North American auto market.

The new galvanizing line in Košice will employ about 100 people when it starts up in early 2007, and will have an annual capability of 350,000 metric tons. Some 400 construction workers will be employed during the peak building phase.

The line will use the "hot dip" galvanizing process, which immerses steel in zinc to protect it against corrosion.

Surma said USSK faced a challenge in "going from making cold-rolled sheet to producing the modern, high-strength, lightweight steels prized by auto makers."

At the USSK ceremony, US Steel's VP-Commercial, Joe Scherrbaum, welcomed representatives from Peugeot France and Peugeot Slovakia, Škoda, VW, Renault, Suzuki and Ford, as well as, "parts suppliers, processors and logistics centres that are all a significant part of the supply chain."

Scherrbaum noted that in addition to the automotive plants "there has also been significant expansion to the region's appliance manufacturing", and said that USSK would be aiming to supply these manufacturers as well.

The Košice steel maker does not yet have any contracts inked with potential customers, said David Lohr, the new president of USSK, "but we expect that with the facility we are building, the technology we have and the relationships we have with customers both here now and coming to Slovakia and the surrounding region, that we will be able to earn that business."

The $160 million investment will bring USSK closer to meeting a promise, made when US Steel took over the former VSŽ mill in 2000, to re-invest $700 million (€577.9 million) in the facility by 2009. It has so far spent about $450 million (Ř 371.5 million).

The firm's executives also said they hoped the new line would lure other investors to the region to take advantage of USSK's upgraded output.

"The key to this line is that it will be able to make exposed auto parts rather than floor panels, so it's going to require a different sort of manufacturer to work with the steel that we've really not been targeting in the past," said John Goodish, USSK's first chairman, now head of operations at US Steel.

"We want to target specific companies who will use the exposed automotive applications to come in and build facilities in Košice to take advantage of this steel and ship to the body assembly plants."

USSK's plans were reviewed in flattering terms by Slovak officials at the ceremony, who spoke of the firm's importance to the region and the national economy, as well as the confidence such investments inspired in other investors.

"That's how things pull each other along in related fashion in Slovakia," observed PM Mikuláš Dzurinda.

"One sector pulling another sector with it, one investor bringing along suppliers and other factories."

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