By IAN ROSS
When Denis Turcotte’s mentor and Algoma Steel board member Patrick Lavelle labelled the 45-year-old president and CEO of the Sault Ste. Marie steelmaker as a ‘Boy Scout’ in a national magazine cover story, Turcotte couldn’t really argue about the good-natured dig.
The naivety fits the profile of the tenacious former Tembec executive who’s not afraid to question anything that’s considered conventional industry wisdom.
Turcotte says he’s not afraid to ask “Why can’t this be done?’ in probing for ways to shave the tax bill, lighting costs or tap into the full intellectual potential of his workforce to find a solution
“If you do that, you gain respect and that leads to trust,” says the Thunder Bay-raised Turcotte who arrived in September 2002 as Algoma emerged from bankruptcy protection, its second major restructuring in a decade.
“If there’s enough common ground and you can align people’s effort from the board room to the shop floor, you can blow all your competitors away. That’s hard to do, but most companies never try.”
Like many North American steelmakers, Algoma has had its share of tough times with disastrous capital spending projects and an adversarial relationship with its unionized workforce.
“Believe me, we’re not holding hands singing the company song every morning, we have fundamental disagreements still,” says Turcotte. “But this company could not have achieved what it has if everybody wasn’t working together, better than it had in the past.”
The leading-edge Direct Strip Production Complex (DSPC), a $440 million rolling mill that almost sank the 3000-employee company, is now producing at full capacity.
Turcotte admits paying down the DSPC’s massive debt was a “big dragon to slay” after the previous management borrowed more than $400 million (US) at high interest rates for what he calls “bleeding edge “ technology.”
Algoma is now receiving the mill’s full benefit after an “atrocious” two-year, start-up curve. It’s now breaking records in producing more than 1.8 million tonnes of steel on annual basis, with the potential of pushing that to two million tonnes.
Ironing out bugs requires full employee involvement, he says. “To move mountains, you gotta engage the hearts and minds and full commitment of all the people involved.”
Algoma’s rags-to-riches story from a debt-ridden, insolvent company to one of world’s most efficient steel producers is well documented.
Turcotte is given much credit for Algoma’s results-oriented attitudinal shift that’s improved production performance, focused on debt and cost reductions, and resulted in more outside-the-box thinking in their strategic planning.
Their $35 million German SIAG joint venture to build wind towers in the Sault turned some heads earlier this year.
And although their European partner is undergoing corporate restructuring, Algoma is making contingency plans to still pursue this fast-growing energy market with other international partners. The concept made sense to Turcotte as a way of adding value to their lower cost “as-rolled” plate, which will be laser-profiled for wind tower assembly.
He’s also been lauded for staring down the aggressive advances last spring from New York hedge fund Paulson & Co., which held a 19 per cent stake in Algoma, and wanted a $420 million payout to shareholders.
Both parties avoided a special shareholders’ vote and compromised on a $200-million share buyback, which was completed in September. “You always try to find solutions even with your adversaries.”
Unlike his CEO predecessors, who tended to concentrate on the core business when markets soured or spend lavishly on massive mill projects that floundered, Turcotte isn’t willing to “bet the farm” on first out-of-the-box technologies, but focus instead on projects that “strategically make sense.”
“He’s the real deal,” says Peter Warrian, a leading steel industry analyst and a senior research fellow at the University of Toronto’s Munk Centre for International Studies.
He calls Turcotte a “terrific asset,” mentioning him in the same breathe as IPSCO president Roger Phillips, also a steel industry outsider who transformed the Saskatchewan plate and pipe maker into a North American leader.
“Never mistake brains for sheer luck,” says Warrian. “Denis is a humble guy and he’ll tell you that, too, but he’s got a success story in spite of (improved) steel prices, because there’s plenty of lousy stories out there, too.”
Warrian says Algoma is intelligently re-investing while also exploring long-term strategic interests.
“Within conventional wisdom, Algoma tried everything in the book. You needed someone who had a different kind of play book.”
Even today, with relatively healthy markets, Algoma announced a $59.5 million third quarter profit, the company is planning for the inevitable rainy day when steel prices dip.
“You gotta grab control of what you do have control of,” says Turcotte. “Always assume the market’s going to fall apart tomorrow. You’ve got to always be a little bit nervous and apprehensive.”
But for Algoma to survive as an independent producer, especially with global sharks like Mittal Steel in full acquisition mode, striking some sort of strategic alliance or partnership is essential, says Warrian.
The company is out exploring alliances with non-competitive players in South America, Europe and Asia to develop new products, new technology and source materials.
“We will look at anything that fits within our strategic framework,” says Turcotte. “We see positive things developing over the next 12 to 18 months.”
Says Warrian: “The steel industry is not the place for orphans. Each consolidation story is different, but the physics are clear, they’ve got to bulk up to be able to deal with commodity prices upstream as well as the auto industry downstream. They’re not big enough to do that.
“Either you’re the meat in the sandwich or you need bigger elbows, and they’re opting for bigger elbows.”
