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Project%20Compass%20 %20New%20Star%20The%20Race%20to%20Win%20ThyssenKrupp

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Project Compass New Star The Race to Win ThyssenKrupps $3'7 Billion Steel Production Facility – PowerPoint PPT presentation

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Title: Project%20Compass%20 %20New%20Star%20The%20Race%20to%20Win%20ThyssenKrupp


1
Project Compass New Star The Race to Win
ThyssenKrupps 3.7 Billion Steel Production
Facility
Bob Hess Cushman Wakefield Global Business
Consulting
2
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

3
Cushman Wakefield Overview
  • 1.5 billion revenues in 2006
  • 12,000 employees worldwide
  • Worlds largest privately-held real estate
    services firm.

Clients
4
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
Real Estate Infrastructure
Strategy
Execution
Engineering
Consulting
Operations
5
Project Compass Strategy and Specifications
6
Strategic Importance of Compass
Project Compass is integral to ThyssenKrupps
global strategy to grow NAFTA market share and
improve cost positions.
7
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?
8
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 Slabs to Port (Mill)
Unload Barge at Mill
Load Slabs to River Barge
Origins Brazil/Other
Barge
Inbound Supply Chain Alabama
OR
OR
Stocking Point or Customer
Coil
Barge
Truck
Rail
Outbound Supply Chain
9
Leading and Managing the Experience
  • Unique aspects and key challenges of Project
    Compass/New Star
  • Accelerateaccelerate.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. dont 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!
10
Project Evolution and Site Selection Approach
11
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
OH
IL
IN
MD
WV
MO
KY
VA
TN
NC
OK
AR
SC
MS
GA
AL
LA
TX
Inbound Slabs
Inbound Slabs
12
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.
13
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
  • Port Criteria
  • Channel depth
  • Distance from open sea
  • Rail service
  • Berth length
  • Storage space
  • Inland river access
  • Qualified labor
  • Steel experience
  • Site Criteria
  • Electric infrastructure
  • Size / shape
  • Water and rail access
  • Natural gas service
  • Topography, wetlands, floodplains
  • Water supply
  • Layout challenges

Desktop Flaws Analysis
Sites 35 eliminated
Ports 19 eliminated
Site Visits
Sites 20 eliminated
Ports Terminals studied
12 sites / 6 ports
14
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

15
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
16
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
17
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
Qualitative conditions 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
18
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
19
Tailoring Financial Incentives to the Sites
  • The final months of activity focused on
    development-cost estimation, environmental
    permitting, and problem solving through
    collaboration between ThyssenKrupps 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

20
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
21
Final Site Selection Decision (continued)
  • Ultimately, ThyssenKrupps 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-improv
    ement scenario.
  • The final choice between the two sites was a very
    challenging one for ThyssenKrupps 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
    ThyssenKrupps decision-making throughout the
    project.

22
in the end, leadership and commitment
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