VALE: Growth pains of a fast growing Brazilian global player

1
VALE Growth pains of a fast growing Brazilian
global player

• Hélio Zylberstajn and Pedro Chadarevian
• 5th African Regional Congress
• International Industrial Relations Association
• Cape Town March 26-28, 2008

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VALE Growth pains of a fast growing Brazilian
global player

• Origins Discovering of a large iron reserve in
  XIX century
• 1929 Itabira Iron Ore Co (American capital).
  Great depression.
• 1930s Import substitution model state as
  producer.
• 1940s Brazilian state becomes owner of
  Companhia Vale do Rio Doce
• 1970s Largest iron exporter
• 1980s Aluminiun, Niquel, logistic expansion
• 1997 Privatization (Fernando Henrique Cardoso,
  great debate and protest)

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VALE Growth pains of a fast growing Brazilian
global player

• Table 1 Some figures of VALE
• Indicators Figures
• Employees (2007) 57 thousand
• Countries with VALE operations 27
• Investments (2003-2007) US 40,7 billion
• Iron production (2007) 296 million tons
• Refined Nyquil production (2007) 248 thousand
  tons
• Gross revenues (2007) US 33,1 billion
• Net profits (2007) US 11,8 billion

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VALE Growth pains of a fast growing Brazilian
global player

• Post privatization transformation
• Annual rate of revenues growth 40
• 16 of revenues created in Brazil, 84 comes from
  external operations
• China buys 18 of global production
• ¼ of employees in foreign countries (iron is
  labor intensive, but does not add much value)
• Was the price paid fair?

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VALE Growth pains of a fast growing Brazilian
global player

• Favorable environment
• China growth heated inelastic demand for
  minerals
• Increasing commodity prices
• Brazilian economy valuation of Real, foreign
  assets are attractive
• Availability of global financial resources
• VALE annual investments multiplied by 10 to US10
  billion

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VALE Growth pains of a fast growing Brazilian
global player

• HR management New new policies to adapt previous
  state-owned culture to private global player
• Results strongly linked to sales/revenue
• Very high pay for top executives competition and
  turnover
• Issues fair evaluation risk distribution
• Increasing number of steps in executive careers
  continuous tournament.
• Outstanding results, promotions. Good
  performance, variable pay/bonuses
• Large variance in executive pay
• Three-level performance evaluation individual,
  team, business unit
• Conflicting goals talent retention and
  pressure for results
• Conflicting concepts emphasis on team work and
  competition

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VALE Growth pains of a fast growing Brazilian
global player

• Important issues
• How will native executives react to the command
  of Brazilian bosses?
• What about operational workers? Which instruments
  are available? How good is IR tradition in Brazil?

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VALE Growth pains of a fast growing Brazilian
global player

• Brazilian IR System
• Primitive, state dependent, lack of
  representativeness of unions
• Union funding compulsory, state-managed
  collection of fees
• Labor Courts 1.8 million grievances every year
• Unions not allowed at working place
• VALE is exception, but general adversarial
  climate has its impact

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VALE Growth pains of a fast growing Brazilian
global player

• VALE IR System
• Political orientation of unions (state owned
  enterprise)
• Unions are inside the working place
• Privatization Employees representation at the
  Board. Investment Club
• Direct negotiation
• Union division deep conflict, 3 wings
• Labor outsourcing grievances create an unknown
  labor debt

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VALE Growth pains of a fast growing Brazilian
global player

• VALE looking ahead
• Internal consistency of executive/managers pay
  policies
• To built a progressive relationship with
  Brazilian unions
• VALE and developed countries unions new world to
  Brazilian managers
• Unions networking Brazil and global
• Union solidarity will some mechanism arise?
• Stakeholders pressure from many sides
  (environment, social movements)