Executive Word -- Steel's Future: Smarter, Stronger

Dec. 21, 2004
U.S. Steel's Thomas J. Usher addresses the hot topic of the steel industry and the controversies that surround it.
Thomas J. Usher Chairman, President and CEO U.S. Steel Corp. Pittsburgh Born: Sept. 11, 1942 Education: Bachelor's of science degree in industrial engineering, a master's degree in operations research and a doctorate in systems engineering from the University of Pittsburgh. Career Highlights: 1966: Joined U.S. Steel as an industrial engineer. 1979: After serving in other U.S. Steel positions in Chicago and Gary, Ind., was named director of corporate strategic planning and returned to Pittsburgh. 1994: Named COO of USX Corp., the new name of U.S. Steel following diversification into the energy business. 1995: Named CEO of USX and retained that title when, in 2001, today's U.S. Steel was created in a spin-off of the steel units. Family: Wife, Sandy, three children, three grandchildren. Interests: Serves on the boards of the Boy Scouts of America and is a trustee of the University of Pittsburgh.
The North American steel industry has seen more than 30 bankruptcies since 1998. At the annual American Iron and Steel Institute (AISI) conference in May, several speakers called for a continued and more dramatic restructuring of the industry. Thomas Usher, president and CEO of U.S. Steel Corp., Pittsburgh, and chairman of the AISI, sat down with IndustryWeek to answer some questions about the current state and future of the steel industry.IW: What's the North American steel industry going to look like five years from now? Usher: It will still be a healthy industry, still a significant industry, but I think there are a number of players who are household names who will probably not be there. Probably in terms of capacity, it will be about where it is today-but fewer players and more concentration. IW: What will this mean for your end users? Usher: It will be on balance a plus. You could argue that as you get a concentration, pricing power may shift more to the producer instead of the consumer, but I think there will be enough competitiveness that that won't be a concern. Many of our customers place a premium on technology and innovation and research and new products. Some of these weaker [steel companies] really haven't been able to participate in those areas. So, from a customer perspective, having a healthier industry with fewer companies will be a plus. IW: One major issue facing the North American steel industry is the cost of retiree benefits. Your company had asked the federal government to pick up this cost for some bankrupt steel companies in exchange for U.S. Steel's acquisition of those companies. So far, the government hasn't done that. Should the government pick up these costs? Usher: Most of the people I've talked to have said that if you do this with one particular industry, it opens Pandora's Box. An argument can be made that if these people are cut loose, eventually the government is going to end up picking up a substantial part of these costs anyway. Certainly with LTV (LTV Steel Corp. filed for bankruptcy in December 2000) we've seen a number of people going to Medicare or other programs. It just seems that instead of forcing a company into Chapter 11 or Chapter 7 to get the government to step forward, there ought to be a better way to do it. [A way] in which, certainly, the employee wouldn't get the full benefits that he had gotten under the previous company ownership, but that this transition could be made more smoothly. IW: The U.S. steel industry is being lambasted both here and abroad for government's involvement in the industry, most recently for the Section 201 tariffs announced in March. Is this justified? Usher: We as an industry have gotten a reputation for running to the government for help and that we've not done anything on our own and not been innovative and creative in how we run our businesses. But the transformation that has taken place in this industry domestically in the last 25 years without any major help is outstanding, and it's a story that hasn't been told. At U.S. Steel in 1980 we had 25 million tons of capacity; today we're at 12 million. We've shut [the plants] down, we've cleaned them up environmentally, we've taken on the obligation for retirees, and we've done all that without any government help. In the European steel industry, the governments forgave massive loans in billions of dollars and picked up the legacy costs of hundreds of thousands of people who were displaced by restructuring. In Brazil and the Far East, the government has put massive amounts of money into building the steel industries up to a certain level. All of this has taken place in the United States without any government involvement. And yet we are criticized, and all we are saying to our government is, 'Look, just enforce the [trade] laws that are on the books.' E-mail nominations for Executive Word to Editor-in-Chief Patricia Panchak at [email protected].

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