Vale's CEO to Exit Amid Political Pressure -- WSJ
February 25 2017 - 03:02AM
Dow Jones News
By Paul Kiernan
RIO DE JANEIRO -- Brazilian mining giant Vale SA said Friday its
chief executive plans to step down when his term ends in May, amid
widespread reports of pressure to replace him with a political
appointee.
Vale CEO Murilo Ferreira won't renew his contract when it
expires on May 26, after six years on the job, the company said in
a press release. No reason was given for the decision.
Multiple Brazilian news outlets have reported in recent weeks
that conservative Sen. Aécio Neves has been maneuvering in
Brasília, the capital, to replace Mr. Ferreira with a candidate of
his choosing. Politicians in Brazil often use high-level
appointments as bargaining chips, and Mr. Neves' PSDB party is a
key ally in President Michel Temer's governing coalition.
While Vale is not outright controlled by the state and generally
operates like a private company, the Brazilian government holds a
substantial portion of its voting stock via state-run pension funds
and other entities, and it has managed to shake up the company's
management in the past. Mr. Ferreira was installed in 2011 at the
behest of former President Dilma Rousseff.
Since Ms. Rousseff was impeached last year, Brazil's ruling PMDB
party and its allies have been eager to replace Mr. Ferreira with a
loyalist of their own, two people familiar with the matter said.
Though the private members of Vale's controlling group have been
mostly happy with Mr. Ferreira's running of the company, they
didn't feel it was worth getting into a fight with the government
over, one person said.
A spokeswoman for Mr. Neves, who criticized the nomination of
political appointees to state-controlled firms when Ms. Rousseff
was president, denied that he had been involved in Mr. Ferreira's
exit. Investors have been generally pleased with appointments Mr.
Temer's government has previously made to state-controlled firms,
such as oil company Petróleo Brasileiro SA.
In a conference call with reporters, Mr. Ferreira avoided saying
whether he had been forced out, but said that his age was a factor
in the decision and that "the line has to keep moving." Vale has an
age limit of 65 for executives. Mr. Ferreira will turn 64 in June.
CEOs serve two-year terms at the company.
But he added that because the company operates a large number of
concessions in its mining and logistics businesses, it deals
constantly with the government and regulatory agencies.
"You receive pressure, you receive different demands. It's part
of being a company that has a lot of concessions," Mr. Ferreira
said.
Vale Chairman Gueitiro Genso thanked Mr. Ferreira for his
service and said the board would hire an international headhunting
firm to support its search for a replacement.
As CEO, Mr. Ferreira guided Vale through a number of crises,
from a nearly 80% drop in the price of iron ore to a catastrophic
dam failure at the company's Samarco joint venture that killed 19
people. He also reduced costs by slashing noncore projects from the
company's investment portfolio, and oversaw the final stages of a
landmark iron-ore mining project known as S11D.
"During his term, Vale became a leaner and more agile company,
significantly increasing its operational competitiveness and
maintaining a healthy level of debt," the company said in the press
release.
Mr. Ferreira's efforts to make Vale more globally competitive
and his handling of the Samarco disaster stirred discontent in his
home state of Minas Gerais, which Mr. Neves represents in Brazil's
Senate. Centuries of intensive mining there by Vale and others have
depleted the state's ore reserves and left some operations
vulnerable to commodity downturns.
S11D, located in the northern state of Pará, is seen by many as
a hedge against Minas Gerais's decline. Built at a cost of $14
billion, it will increase Vale's production capacity by 25%,
churning out the 90 million metric tons a year of the
highest-quality, lowest-cost iron ore in the world.
"Minas Gerais needs jobs, it has a deficit and needs revenue,
and Vale isn't taking into account its social responsibility," said
Newton Cardoso, Jr., a PMDB congressman from the state. "There
needs to be government intervention in the long-term policies at
Vale to guarantee that mining towns can transition from a mining
economy to a new economy."
Rogerio Jelmayer contributed to this article.
Corrections & Amplifications Vale CEO Murilo Ferreira won't
renew his contract when it expires on May 26, after six years on
the job. An earlier version of this article incorrectly stated the
number of years he worked there.
Write to Paul Kiernan at paul.kiernan@wsj.com
(END) Dow Jones Newswires
February 25, 2017 02:47 ET (07:47 GMT)
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