After a decade of declining competitiveness and huge deficits, things are finally starting to look up for France's state-owned steel industry. Its worker productivity had fallen so low by the early 1980s that one European economist referred to nationalized French steel as ``the joke of Europe.'' The crisis came to a head in the spring of 1984 when French steelworkers marched on Paris after President Franois Mitterrand announced his plan to phase out both federal subsidies and 25,000 jobs before the end of 1986. ``By that time,'' said Mr. Mitterrand in a nationally televised speech, ``the European Community demands an end to all steel subsidies. The terms are fixed and we must obey them.''
With the 1986 deadline drawing near, the Mitterrand administration was able to pull off an unpopular feat that the two previous governments had been unable to do -- to cut jobs and subsidies from the steel industry in an effort to make it profitable once again.
``I have little doubt that the difficult decisions made by the French government will turn out to be the right ones in the long run,'' says Henry Duisenberg, an industrial analyst for the Paris-based Organization for Economic Cooperation and Development (OECD). One year after the new austerity program was announced, French steel's original annual deficit of $2 billion has already been halved. Recent OECD reports indicate that worker productivity is up while government spending is down.
Some of the more encouraging signs are coming from the sectors producing steel for special applications. Although even optimistic French analysts do not see their nation's industry reaching the break-even point before 1988, companies producing high-tech products like rails for high-speed trains and interlocking sheet piling used in waterproofing and harbor sea walls are already leading the recovery.
Sacilor, a division of the nationalized French steel industry which manufactures such products, leads the world in production and sales of high-speed train rails. A needle-nosed French train, dubbed the TGV -- for tres grande vitesse, or very great speed -- holds the world speed record for rail travel, at 170 miles an hour. Sacilor builds all the rails for France's rapidly expanding high-speed train network, and its exports are also growing as other industrialized nations upgrade their domestic rail services.
Sacilor will provide a portion of the rails to be used in a new Franco-German high-speed train line connecting Paris and Brussels with the industrial cities of the Ruhr Valley. Mitterrand and West German Chancellor Helmut Kohl have already agreed that construction on the line should begin in the next few years. Half a dozen other European nations are also drawing up plans for similar systems. Britain and Japan have already begun building them.
Rails for such high-speed trains must be far straighter than those used by conventional diesel or electric engines. Only a variance of 0.07 millimeters, or about the width of a human hair, is allowed along each 1.5-meter stretch of track to ensure that the train will not jump the rails.
This is far straighter than rails manufactured in the United States. Only the Japanese, in fact, can match Sacilor's extreme precision. The French company has also designed special elastic steel fasteners that bind the track to its wooden ties. These are much less likely to come loose than the spikes still used in the US.
French officials hope the US will turn to them if it even establishes its own high-speed train network. ``It is only a matter of time before something will be done about it,'' maintains Philippe Choppin de Janvry, Sacilor's director of industrial strategy and international relations. ``The US is a vital, growing country with a need for a better inter-city commuter service. When they are ready we will be on the scene with the best products in the world.''
But French trade has been frustrated by what many in the Mitterrand government see as American protectionism of its own domestic steel industry. Recent Reagan administration legislation imposed a 25 percent import duty on a wide range of specialty steel products, including train rails and sheet piling.
EC representatives have complained loudly, and they threaten countermeasures, but many of them expect the US import duty to remain in effect. Still, planners at Sacilor feel that when construction of an American high-speed train network finally begins, US companies will simply not be able to produce all the rails needed.
The French steel industry has done better at exporting a second specialty product: sheet piling used in watertight construction. Many countries around the world are building new harbors and upgrading their old ones, while relatively few have attained the stage of development where high-speed train services would be either necessary or profitable.
Sheet piling has become an important product in recent years, as it is far cheaper and easier to install than concrete. The piling comes in many shapes. Segments of it are driven into the ground in interlocking formations that keep out water and greatly reduce waterfront erosion. Potential applications include river and sea ports, dam construction, and building foundations in swampy areas.
Two-thirds of this special sheet piling produced in France is sold abroad, with one-third going for domestic use. Five years ago the situation was exactly the reverse. The quality of French designs and construction has won them contracts in recent years for a dam in Senegal, ports in Egypt and the Netherlands, and a new system of locks installed at Greenville, Miss., on the Mississippi River.
``We must produce a wide range of products for the future. Diversity is the key,'' says Sacilor's Mr. Choppin de Janvry. This is likely to be the only way out of French steel's decade-long dilemma, as industries in the developing world grow more adept at producing cheaper steel for conventional uses.