Tito Martins sits back in his chair ready for the barrage of questions thrown at him from the media, extending his arms ahead and cupping his hands toward himself as if to say “Come on, I'm ready for you.”
This is the first time media has had an opportunity to speak with the president and CEO of Vale Inco since Vale took over Inco Ltd. more than four years ago. Roger Agnelli, the president of Vale SA, came to Sudbury shortly after acquiring the operation, but few had a chance to sit with him. Martins, the CEO of Vale Inco, among other companies, has not made himself available to the public until now. However he says that will change.
Both are heading up a $160-billion multinational company of which Canadian operations account for 10 per cent of their business and Sudbury a mere two to three per cent.
Inco's former operations have experienced many changes in the last few years and Sudbury has been no exception.
“My guess is if we had not acquired Inco Ltd., (previous) management would have been doing the same thing because everyone in the mining industry realizes that we have to put the company into a more aggressive position in order to (vie for capital) and give the proper return from the market as soon as possible,” Martins says, drilling his index finger firmly and repeatedly into the table in front of him.
The intention is to produce.
Tito Martins,
Vale Inco president and CEO
Sudbury is similar to his hometown of Itabira in Minas, a mining community in Brazil where Vale was born. When the industry experienced a shift starting in 2000, each company began competing for capital, he says. The only way to ensure a future was to acquire other companies.
“This is happening everywhere,” Martins says, as he shrugged when asked if he paid too much for Inco Ltd.
“If we manage to achieve some efficiencies and I am not talking about employees, we can cope with that. We can overcome this.”
Sudbury was prey to a number of foreign companies jockeying for a piece of the Sudbury action. Inco Ltd and Falconbridge were on the selling block. Teck Cominco, China Minmetals, Xstrata plc and Companhia Vale do Rio Dace (CVRD) were jumping into the feeding frenzy with takeover bids. It put an end to a trio set up between Inco, Falconbridge and American-owned Phelps Dodge to become one larger company. The pace of production increased and companies now have to learn to adapt to the new world while facing the Asians, Martins said.
Mergers are being driven by state-owned firms in countries such as China and India, which are looking to meet growing commodity demands. Cash-rich China, for example, accounted for almost two-thirds of Australia's US$10.6 billion of mining mergers and acquisitions deals in 2009 according to Ernst & Young reports. Just recently, in Itaminas, Brazil, an iron ore mine was acquired by East China Mineral Exploration and Development Bureau. Vale, the day before the deal was announced, sent a document to clients worldwide setting a new pricing system, where iron ore would more than double the reference price in 2010 from last year.
“Change – nobody likes change,” Martins said, but it is here and like it or not Vale Inco intends to move forward.
“We want to see changes in Sudbury not only for today, but for the future. If we cannot make these changes then forget it, there will be no more Sudbury.
"We know we are affecting people but there is no easy way to do this.”
Approximately 3,000 members of the United Steelworkers Local 6500 who work at Vale Inco are going into their ninth month on the picket line as the two sides remain conflicted on several issues.
To Martins, it is not about trying to break the union.
“The intention is to produce,” he says, adding that if he couldn't produce 120-million tons in Sudbury they can find other areas to put their monies into, such as Indonesia.
He knows these issues comes with casualties. Last year, Martins said he had a strategy meeting with approximately 30 of the top brass. He explained to them that “half of you may not be here next year” because of some fundamental changes Vale would be implementing.
The engaging former Inco president of North American and European operations Mark Cutifani understood the value of respecting cultures and the importance of management connecting with employees through dialogue. After Cutifani left, the programs he implemented were not followed up. Instead, CVRD took an aggressive top-down authoritarian approach to operations. Other key managers left after Cutifani, including Fred Stanford and Parviz Farsangi and more than 20 other senior Canadian managers and key engineers who walked out the door after a meeting in 2007. Only six men remain today, according to a Financial Times article (FT.com) on March 11.
“We have lost some good people because of this transition. Most of them today are heading up juniors in Toronto. There is life outside Inco,” he chuckles.
He attributes some of the hollowing out of Sudbury's mining expertise to previous over-management; too many management silos in each mine and in each province. Consolidating the business targets was “a mess,” he says.
Now, the company is not only consolidating Northern Ontario operations, but that of Indonesia and Brazil and having a person or persons in each city that can communicate mining status functions. This includes a structure mining director, smelter director, and an infrastructure director.
“I have one in each city : John Pollesel, Mike MacFarlane, Steve Wood are in Sudbury. I call them the Three Musketeers,” he smiles.
The three oversee the Sudbury, Voisey's Bay and Thompson operations from the Sudbury location.
“Those who want to be competitive have to accept changes. So far we have not been able to communicate that properly,” Martins says.
Vale Inco has earmarked $8 billion for environmental regulations compliance, sustaining capital, support equipment and infrastructure needs. Sudbury is to receive $4 billion of that for new mines and infrastructure projects.
Martins says they did not know about Sudbury's dated infrastructure because in hostile takeovers, the due diligence is waived.
“There was no due diligence. I am not saying we made a mistake, but we didn't know a lot of things,” Martins says, adding they still like what they bought.
“Some of the public information was not very precise. If you take Inco's sustaining capital in the previous 10 years before the acquisition and the investments after the purchase you will see a huge difference. They were about to shut down the Thompson.”
Would Vale sell Canada operations?
Martins pauses for a brief second before answering the question.
“I don't think...No. There is no reason to sell it.”
He smiles when he talks of the unmentioned companies and organizations putting in bids to purchase the company.
Leaning back in his chair once more Martins puts his hands behind his head. He is thinking of a response to a question about the company's legacy. How will they build the trust and respect again in Sudbury?
“It will take time to recover our reputation if we have one,” he says with a softer voice. He is thinking while the other company spokespeople are deferring the question to the union.
“What is it going to take, ask the union,” Cory McPhee, director corporate public affairs jumps in.
“Ask the union,” Martins adds. “It has become a strike related power dispute – not from our side.”
Northern Ontario Business will provide a detailed interview with Leo Gerard, international president of United Steelworkers, in the coming days. Stay tuned.
