FLORANGE, France The French government urged ArcelorMittal (ISPA.AS) on Thursday to restart idled blast furnaces at a plant in northeastern France or put them up for sale, declaring itself in a "tug-of-war" with the steel giant over their fate.
President Francois Hollande held talks with ArcelorMittal's chief executive after a media report that the firm will shut the furnaces at a plant which became symbolic of France's industrial decline during campaigning for May's presidential election.
Speaking to angry workers at the plant in the town of Florange, Industry Minister Arnaud Montebourg said Hollande had called on Lakshmi Mittal to invest 150 million euros in the site or sell the furnaces.
"We are now in a conflict with ArcelorMittal," Montebourg said in a speech frequently interrupted by jeers. "It's a difficult tug-of-war."
"The French government has at the highest level insisted ... that we want the restart of these two furnaces at Florange that have been idled for 14 months," he added.
The furnaces - where iron is extracted from ore for use in steel production - employ about 550 of the 2,800 workers at the Florange plant, the rest of which is operational.
Earlier, Liberation daily said the government was offering to buy the two furnaces - idled since last year due to weak international demand - for a single euro so that it could then seek a company willing to operate them.
Montebourg did not make reference to any such offer in his speech. Earlier his spokeswoman confirmed talks were taking place with the company but declined to comment on their content.
An ArcelorMittal spokesman said it would not comment on Florange until after a meeting with unions on Monday to discuss the its sites in northern and eastern France.
In a blow to Hollande, unemployment passed the psychological 3 million mark in August, its highest level since June 1999, figures showed on Wednesday.
The Florange plant is the last survivor in the once bustling northeastern steel region after the neighboring ArcelorMittal mill of Gandrange was wound down, despite former President Nicolas Sarkozy's promise to protect it.
Lorraine's days as an industrial heartland based on its rich coal and iron ore deposits are long over, but lightweight steelmaking has continued at Florange to supply car factories in France and nearby Germany. This demand has fallen as struggling French carmakers such as Peugeot (PEUP.PA) cut production and jobs.
Hollande, who has vowed to revive an industrial sector which lost 750,000 jobs in the past decade, visited Florange during his successful campaign and promised to keep it open.
The president, whose popularity has dived since the May election, has staked his reputation on reversing the upward trend in unemployment by the end of 2013 using state-sponsored job plans, industrial investment and labor market reforms.
Several major companies have announced big layoffs in recent weeks including Peugeot, retailer Carrefour (CARR.PA) and pharmaceutical firm Sanofi SAYS.PA. Business leaders complain that high taxes and social charges are eroding France's competitiveness.
A government report in July concluded that Florange remained economically viable as a steel-producing site, provided it received appropriate modernization and investment.
(Additional reporting by Allan Andrew; editing by David Stamp)
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