Severstal North America is in transition.
The U.S. unit of Russian steelmaker OAO Severstal, which owns the steel plant at Ford Motor Co.'s famed Rouge manufacturing complex in Dearborn, Mich., has replaced nearly all of its senior management this year in an attempt to create "profitable, sustainable growth," CEO Saikat Dey said Thursday.
Dey replaced former CEO Sergei Kuznetsov on Sept. 3. Severstal said Kuznetsov resigned, but a flurry of management changes followed. Within weeks, nearly all of it top management had been replaced, including its CFO and three vice presidents.
Dey said the changes reflect the company's shift in priorities.
The old team "was focused on building new assets, investing in Dearborn and maintaining an automotive business; doing the M&A and the divestment," Dey said. "That was probably the right team. Now we face a different challenge … a change in focus."
Severstal acquired the former Ford steel mill, later Rouge Steel, for $285 million in 2004.
The company made several acquisitions of U.S. steel plants totaling $2.7 billion in transactions over the next few years, increasing production capacity from 2.5 million tons in Dearborn to 11.4 million tons of capacity across the U.S.
But by 2010, the industry collapse caught up and Severstal shifted to divesting, shedding the now-bankrupt Sparrows Point plant in Maryland, along with plants in West Virginia, Ohio and New York. The $1.2 billion divestiture reduced the steelmaker's overhead -- dropping 8,000 employees, down to 2,000 -- and allowed it to shed 7.3 million tons of capacity.
The downturn came at a cost, dropping Severstal NA's revenue to $3.4 billion in 2011 from $8.2 billion in 2008.
But the divestitures allowed Severstal to modernize its decaying Dearborn plant and build a new $1.5 billion mill in Columbus, Miss.
Severstal poured in $1.4 billion to upgrade the Dearborn plant -- where some equipment was several decades old.
Severstal has invested $6 billion to $10 billion in the North American market over the past decade, Dey said. In 2012, it sourced $400 million in iron ore from Michigan's Upper Peninsula, he said.
Dey said the new direction of Severstal is focused on higher-margin, or value-added, products thanks to the investments in North America.
"We believe, we have the potential to make these assets more profitable," Dey said. "All it takes is good driving."
Severstal North America will also focus on "cash discipline" and quality, Dey said.
Last year, the parent company said it planned to increase the North American share of its global sales by as much as 42 percent by 2016.
The North American subsidiary generated $3.9 billion in revenue, or 27.7 percent, of the parent company's total revenue of $14.1 billion in 2012.
Dey said pressure on profits from its parent remains unchanged under the new leadership, but acknowledged it is time for Severstal North America to carry its own weight.
"We've stopped seeing this as a child-parent relationship," he said. "They have held us up for 10 years and now it's time to pay them back for that favor. It's time to grow up and make sure their trust in us isn't misplaced …"