The Interview: Philippe Varin, Chief Executive Of Corus

French charmer with a touch of cold steel
Click to follow
The Independent Online

A grimy steelworks in South Wales is not the kind of place you would naturally expect to find an urbane and educated Frenchman like Philippe Varin, graduate of the Ecole Polytechnique and clarinet player in his spare time.

But then, M. Varin's scholarly features and sharp continental dress sense belie his industrial background. "I have spent all my working life in the metals industry and frankly for me whether I am making aluminium or steel makes no difference," he says. "I enjoy it and what I am very proud of is that we are getting away from the image of being a dirty industry. We must have very clean plants with perfect housekeeping and high levels of safety. If you look at what we have done in safety I am very proud of it and you see pride too in the eyes of the employees."

The employees he is referring to are the 49,000 who work for Corus, the Anglo-Dutch steel maker formed through the merger of British Steel and Hoogovens of the Netherlands five years ago. Corus broke the mould when it hired M Varin from the French aluminium producer Pechiney 13 months ago.

Previous chief executives had worked their way up through the business, man and boy, and gloried in names like "Black" Bob Scholey and Tony "Dr Death" Pedder, so called because of his penchant for wielding the axe.

There is a touch of the cold steel in M Varin too - he is overseeing a £250m restructuring of the company's UK steelmaking operations, involving another 1,000 job cuts and the closure of the Stocksbridge plant in Sheffield.

It is beginning to bear fruit. This week M. Varin announced Corus's first profit since its creation and the first profit in its UK operations for six years. "Part of that is down to improving fundamentals for the steel industry and rising prices," he admits. "But part of it is also down to our 'Restoring Success' initiative and better focus on the customer. Each of our plants knows who their customers are and it is their job to keep the customer happy."

M. Varin, the son of a champagne salesman, seems happy with his lot too. As a graduate of the Ecole Polytechnique, the French finishing school for the country's ruling elite, he could have ended up anywhere but he chose aluminium for a career, joining Pechiney at 26. "I had some choices and basically, I chose industry," he says. "I didn't see myself in politics. I do not have the qualities to do it. I am too impatient. And I didn't see myself in finance or trading. I like doing things that you can build on time."

He also seems to like being in Britain where he is one of a growing number of Continental managers running big UK companies. He lives in South Kensington, the area of London known colloquially as the French ghetto and sends two of his four children to the French school there (the other two are grown up).

But there are some things we do differently here compared with France. Two in particular. "One is clearly corporate governance," he says. "It is much more sophisticated and more robust here. I often say that if the Americans are the kings of disclosure, then the British are the kings of governance.

"This is positive up to a point but I think there is a danger of spending too much time on governance issues and too little time running the business.

"A second thing which is important is the connection you have here with the City which is very positive. If you have a good plan and a good team you can raise the money easily in a short period of time. The flip side is that you are permanently under short-term pressure from shareholders to deliver when in a business like steel you need to take decisions for the long term."

One of those shareholders is the Russian steel magnate Alisher Usmanov who has built up a 13.4 per cent stake and has been agitating for a seat on the board. M Varin saw him off at the company's annual meeting earlier this year and the return to profitability may have bought him some more time.

"The best thing we can do for all our shareholders is to improve our results. If I were in his shoes I would be pleased to see the performance improvements that have been achieved," he says diplomatically.

When M. Varin arrived, Corus was slipping into the sea and he had to act quickly. His set three initial goals. First, to stabilise its finances, which he did by securing a new €1.3bn working capital facility, Second to raise finances for the UK restructuring, which again he has achieved with asset sales and a £291m share issue. The third is to repair the fractured relationship between the Dutch and UK halves of the business.

But there is still a mountain to climb if Corus is to close what M. Varin calls the "competitive gap" with its rivals, which means increasing its profits by some £400m.

Despite his nationality, M. Varin is as Anglo-Saxon as they come on the subject of industrial policy, decrying the French fad for government to back strategic industries. "I don't like national champions," he declares bluntly. "What is important is to be a champion on the global scene. That is all about competitiveness. What I do think governments have to do is provide the appropriate environment."

As an example, he cites the issue of greenhouse gases and the introduction in Europe of an emissions trading scheme. "Today 90 per cent of new steelmaking capacity is being built in countries which are not constrained by the Kyoto protocol. The UK government and those in Europe need to be very careful about what they do because we need a level playing field. That is the role of government."

Another, he adds, is to provide a stable currency stability. Because steel is priced in Europe in euros, every cent that the currency moves against the pound affects Corus to the tune of £70m. Not surprisingly, then, M. Varin is a fan of the UK joining the single currency.

"The decision is one for politicians, not industrialists," he says. "All I would say is that we can live with an exchange rate of €1.4 to €1.5 to the pound but above €1.6 it is clearly harmful to us."

What then, does he make, of the more alarming prospect of Britain not only remaining outside the single currency but leaving the European Union altogether? "Generally speaking I am not supportive of any form of extremism."

The metal guru

Personal: Married with four children

Age: 51

Pay: £1.2m

Nationality: French

Career: Joined Pechiney in 1978 as a researcher. Worked his way up to become senior executive vice-president. Appointed chief executive of Corus in May 2003

Hobbies: Tennis, sailing, clarinet. School rugby player