Project compass new star the race to win thyssenkrupp s 3 7 billion steel production facility
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Project Compass + New Star The Race to Win ThyssenKrupp’s $3.7 Billion Steel Production Facility PowerPoint PPT Presentation


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Project Compass + New Star The Race to Win ThyssenKrupp’s $3.7 Billion Steel Production Facility. Bob Hess Cushman & Wakefield Global Business Consulting. Topics. Introduction to Cushman & Wakefield Global Consulting Project Compass + New Star strategy and specifications

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Project Compass + New Star The Race to Win ThyssenKrupp’s $3.7 Billion Steel Production Facility

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Project compass new star the race to win thyssenkrupp s 3 7 billion steel production facility

Project Compass + New StarThe Race to Win ThyssenKrupp’s $3.7 Billion Steel Production Facility

Bob Hess

Cushman & Wakefield Global Business Consulting


Topics

Topics

  • Introduction to Cushman & Wakefield Global Consulting

  • Project Compass + New Star strategy and specifications

  • Project evolution, site selection methodologies and results

  • Continue with ThyssenKrupp further Insights from:

    • Mr. Ernst Bernsdorf, Senior Vice President, ThyssenKrupp Stainless

    • Kai Mahnke, Vice President, ThyssenKrupp Steel USA


Cushman wakefield overview

Cushman & Wakefield Overview

  • $1.5 billion revenues in 2006

  • 12,000+ employees worldwide

  • World’s largest privately-held real estate services firm.

Clients


Project compass new star the race to win thyssenkrupp s 3 7 billion steel production facility

Cushman & Wakefield Global Supply Chain Services

Site Selection

  • Workforce

  • Business Climate

  • Op. Costs & Risk

Site

Constructability

& Due Diligence

Building

Developer

or

Contractor

Market

Access and

FDI

Transportation

Planning

Manufacturing

Facility Design

Business

Strategy

& Goals

Global

Regional

Local

Implementation

Supply

Chain

Strategy

Contractor

Vendor

Selection

Network

Modeling &

Simulation

Environmental

& Permitting

Expert

Building

Construction

Port Strategies

& Feasibility

Trading &

Supplier

Dynamics

Material

Handling

Technology

Real Estate

Strategy &

Transaction

Financial

Analysis

Business Case

Support

Strategy

Real Estate Infrastructure

Execution

Consulting

Engineering

Operations


Project compass new star the race to win thyssenkrupp s 3 7 billion steel production facility

Project Compass Strategy and Specifications


Strategic importance of compass

Project CompassMobile, Alabama

Project HerkulesGermany

Carbon steel processing and stainless steel production

Increased carbon steel production / processing for German market

Project CSABrazil

New carbon slab production for NAFTA and EU Markets

Strategic Importance of Compass

Project Compass is integral to ThyssenKrupp’s global strategy to grow NAFTA market share and improve cost positions.


Project compass specifications redefining huge

Project Compass Specifications: Redefining ‘HUGE’

  • Facility: $3.7 billion; 3,600 acres; 7 million SF under roof

  • Annual steel production for two segments:

    • Carbon: Processing / coating 4.1 million metric tons flat carbon steel

    • Stainless: 1 metric ton melt shop; then coiled and rolled

  • Employment : 2,700+ employees; 75% semi- or highly skilled

  • Utilities:

    • Electric: 10+ GVA Short Circuit Capacity; two 230-kV trans. lines; 300 MW service; 107,000 MWH/month

    • Natural gas: 1.2 million MCF per month

    • Water supply: 10 million gallons per day

  • Transportation / Access

    • Rail -- unit trains; Barge -- accessible (and reliable) inland waterway;

    • Port -- accessible for slab unloading; Highways – heavy duty!

We began the project wondering: “Will ANY site meet these specs?”


Top priority supply chain efficiency

Top Priority: Supply Chain Efficiency

Logistics costs comprise 50% of Project Compass’ annual costs.

Inbound Supply Chain: Louisiana

Slabs: 4.1 MMT via Panamax Ship

Unload Barge at Mill

Unload Slabs to Port (Mill)

Load Slabs to River Barge

Origins:

Brazil/Other

Barge

Inbound Supply Chain: Alabama

OR

OR

Stocking Point or Customer

Truck

Coil

Barge

Rail

Outbound Supply Chain


Leading and managing the experience

Leading and Managing the Experience

  • Unique aspects and key challenges of Project Compass/New Star:

    • Accelerate…accelerate….accelerate (to accept slabs from Brazil)…deadlines;

    • Diverse subject matter and large teams (market access, logistics, labor, financials, site development, permit applications);

      • Over 100 team members on project – numerous sub-teams around value chain of project with different leadership/management styles and needs.

    • High profile, with political and PR issues from day 1 – internal and external communication plans were key to success;

    • Time difference / travel / 7 x 24 expectations (no sleep, no vacations, no mercy!);

    • Magnitude – normal measures, methods, inquiries, models, etc. don’t necessarily apply

      • This was the “mother load” project that no one could respond to with off-the-shelf information;

    • Coaching states, utilities, chambers, railroads, ports, politicians, and other stakeholders to “think unconventionally” and to make the investments to compete; and

    • Team motivation, skillsets, and project expansion.

…all worth it for a once in a lifetime project!


Project compass new star the race to win thyssenkrupp s 3 7 billion steel production facility

Project Evolution and Site Selection Approach


Search area

Search Area

Four factors determined the search area: coastal port(s) for inbound slabs, barge-navigable water ways; anticipated customer concentrations; and business climate.

Customer concentrations

PA

IL

IN

OH

MD

WV

MO

KY

VA

NC

TN

OK

AR

SC

MS

GA

AL

LA

TX

Inbound Slabs

Inbound Slabs


Identifying and eliminating sites

Identifying and Eliminating Sites

1.

2.

Request for Information (RFI) and sites issued to search-area states.

RFI responses received and catalogued.

3.

4.

Site inspections and community/utilities meetings used to select Preferred Sites.

Sites evaluated against Critical Success Factors, and classified as Retain, Marginal or Eliminate.


Early phases eliminating sites and ports

Early Phases: Eliminating Sites and Ports

The project initially progressed through phases of parallel analysis of candidate sites and ports on both the East and Gulf coasts.

Sites

67 considered

Ports

25 considered

  • Site Criteria

    • Electric infrastructure

    • Size / shape

    • Water and rail access

    • Natural gas service

    • Topography, wetlands, floodplains

    • Water supply

    • Layout challenges

Port Criteria

  • Channel depth

  • Distance from open sea

  • Rail service

  • Berth length

  • Storage space

  • Inland river access

  • Qualified labor

  • Steel experience

Desktop Flaws Analysis

Sites

35 eliminated

Ports

19 eliminated

Site Visits

Sites

20 eliminated

Ports

Terminals studied

12 sites / 6 ports


Port screening methodology

PA

OH

IN

IL

MD

WV

Philadelphia

Baltimore

MO

KY

VA

NC

TN

OK

AR

Norfolk

SC

GA

Morehead City

AL

MS

LA

TX

PORTS

FL

Feasible (6)

Mobile

New Orleans

Eliminated (19)

SCALE

equals 250 km

Port Screening Methodology

  • Of the 25 ports analyzed for their ability to meet key Compass/New Star requirements, six appeared to present feasible options based on evaluations to date, eventually narrowed to Mobile and New Orleans.

Ports Analyzed

  • Mobile, AL

  • Tampa, FL

  • Brunswick, GA

  • Savannah, GA

  • Burns Harbor, IN

  • Lake Charles, LA

  • Baton Rouge, LA

  • South Louisiana, LA

  • New Orleans, LA

  • Plaquemines, LA

  • Baltimore, MD

  • Gulfport, MS

  • Pascagoula, MS

  • New York, NY

  • Morehead City, NC

  • Cleveland, OH

  • Philadelphia, PA

  • Charleston, SC

  • Corpus Christi, TX

  • Port Lavaca, TX

  • Freeport, TX

  • Houston, TX

  • Beaumont, TX

  • Port Arthur, TX

  • Norfolk, VA


Critical location factors

Critical Location Factors

Throughout the project, candidate locations/sites were evaluated based on their performance against seven Critical Success Factors and their cost profile (20-year net present value).

Utility

Infrastructure

5.0%

Quality of Life

3.0%

20-Year Total Costs

(one-time and recurring)

50.0%

Skilled Labor

Availability & Quality

12.0%

Business Climate

Perceptions

7.0%

Site Suitability & Quality

3.0%

Ease of Implementation and Timing

7.5%

% denotes decision weight

Supply Chain Effectiveness

12.5%


Complete business case evaluation

Complete Business Case Evaluation

Cushman & Wakefield and ThyssenKrupp developed working teams and methodologies to deploy a holistic business-case approach to identify the optimal location solution for Project Compass.

Methodologies / Teams

Optimal Location Solution

Network/Logistics Modeling

Port and Location Strategies

Site Selection/Due Diligence

Business Case Development

Optimal Solution

Workforce Profiling and Financial Modeling

Incentive & Real Estate Negotiations

Program Management Oversight


Selecting 3 finalists from 12 preferred sites

Selecting 3 Finalists from 12 Preferred Sites

In three months of analysis and site visits, the 12 Preferred Sites were narrowed to three Finalists (Arkansas, Louisiana, and Alabama).

12 Sites in 7 States

Qualitativeconditions ratings

…ThyssenKrupp Stainless joins project - a ~$1 billion expansion!!…

Multiple executive site and port tours

Logistics network modeling

Finalists: Further Due Diligence & Incentives

Iterative business case and IRR modeling

Illustrative examples


Project compass new star the race to win thyssenkrupp s 3 7 billion steel production facility

Extensive Due Diligence on Three Finalists

Extensive financial and logistics modeling, coupled with engineering and site constructability analysis, revealed Alabama and Louisiana sites as superior candidates.

Key Learnings

  • Highest logistics costs at Osceola, AR site

  • Louisiana site has the most manufacturing skills, but with premium costs

  • Construction and permitting challenges exist at all sites, but are manageable

  • Incentives dialog focused on needs to achieve ‘ready to build’ site

Refined Logistics Modeling

Greater site-specificity on modes, carriers, rates, and distribution models

Labor Market Analysis

Manufacturing industry presence, market-based wages, and education and training resources

Site Constructability / Permitting Analyses

Site-specific facility design, site prep cost estimation, and site conditions assessments

Incentives Negotiations

Incentives potential assessments, in-person meetings and Requests for Proposal


Tailoring financial incentives to the sites

Tailoring Financial Incentives to the Sites

  • The final months of activity focused on development-cost estimation, environmental permitting, and problem solving through collaboration between ThyssenKrupp’s and the states’ teams…

  • … and tailoring incentive programs that could most impact the Project Compass/New Star business case.

Financial Incentives

  • Prioritized based on business case impacts

  • Means to address extraordinary development needs (piling, grading, utility and transportation infrastructure)

Facility Design and Site Development Costing

  • Site specific facility designs were refined based on results of on-going site assessments

  • Parallel wetlands, river construction and air permitting


Final site selection decision

Final Site Selection Decision

The good news: Two great sites... The bad news: How do we decide?…

  • Based on the Critical Success Factors, the sites were objectively rated on 30+ weighted qualitative factors.

  • The results suggested a near tie based on qualitative factors.

Unique pros and cons of the sites were nearly balanced.

30+ individually weighted factors re: operating conditions, risks, timing, etc.

Illustrative examples


Final site selection decision continued

Final Site Selection Decision (continued)

  • Ultimately, ThyssenKrupp’s internal deliberations on the sites’ merits and their long-term financial business cases yielded the selection of the Mount Vernon, Alabama site.

    • Louisiana Highlights: Superior inbound logistics coupled with larger labor force and deeper manufacturing presence; yet more extensive infrastructure development and higher anticipated operating costs.

    • Alabama Highlights: Lower long-term operating costs (e.g., electricity and labor) and less complex site development and infrastructure-improvement scenario.

  • The final choice between the two sites was a very challenging one for ThyssenKrupp’s leadership and project teams – due in large part to the outstanding efforts of Team Louisiana and Team Alabama.

  • Intangibles and the performance of economic development teams played a key role in ThyssenKrupp’s decision-making throughout the project.


Project compass new star the race to win thyssenkrupp s 3 7 billion steel production facility

…in the end, leadership and commitment


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