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What we don’t talk about when we talk about steel

Keywords: Tags  Parting Shots, Thomas C. Graham


Are you tired of the endless election campaigning? Do you enjoy the dinnertime robocalls asking for contributions? Aside from pollsters, television pundits and newspapers, it is hard to see who benefits from two-year-long election campaigns. Of course, there is a lot of money spent--but it is certainly not spent productively. We would be well advised to legislate the permissible duration of campaigning, rather than focus on the money spent campaigning. The endless repetition of hackneyed political cliches does not change minds, despite what the experts apparently advise. OK, we all hate the rich and we are all in favor of the “middle class.” Now where do we go?

We are afflicted with a similar syndrome in the United Steelworkers union-represented steel industry. U.S. Steel Corp. and ArcelorMittal USA Inc. just settled three-year labor contracts with the union. Should this be cause for jubilation, or is something more pernicious going on? With RG Steel LLC and its assets now offline due to bankruptcy, about 8 million tons per year of USW capacity just disappeared. This occurred after many years of continuous decline; unionized mills once accounted for essentially all of the 100 million tons of annual capacity. This has now slipped to about 40 million tons.

Almost simultaneously, about 5 million annual tons of union-free finishing capacity appeared on the market. The ultimate fate of ThyssenKrupp AG’s facility in Calvert, Ala., is not yet determined, but it is unlikely it will ever become classified as USW capacity. The march of union-free steel continues unabated, to the obvious detriment of U.S. Steel, ArcelorMittal, AK Steel Corp., Cliffs Natural Resources and, particularly, the union.

Three-year contract incrementalism will assure the ultimate triumph of union-free steel production and, thus, the ultimate withering of both unionized companies and the USW unless something changes radically on both sides. Of course, radical change is sometimes best accomplished incrementally. But absent radical change, there is an inevitability to the march of events. Short-term labor contracts that are more of the same are an exercise in kicking the can down the road.

What is needed to change the inexorable procession we are watching? We need imaginative longer-term thinkers on both sides. U.S. Steel and the USW both have leaders who qualify. ArcelorMittal is an enigma; their bargaining tactics were inexplicable, maybe European. At any rate, they have now learned that major progress cannot occur under the searing lights and publicity of end-of-contract bargaining. It is amazing that such a sophisticated company can be so tone-deaf when it comes to their U.S. investments.

What should these imaginative leaders do? They should form a joint long-range committee comprising younger managers charged with producing recommendations to tackle the alarming loss of “share” occurring to their businesses.

The initial meetings of this group will yield predictable posturing. The failures of all failed companies were “management” failures. Of course they were--now what? The management of companies were grievously handicapped by restrictive union practices; of course they were.

But what kind of symbolic “triumph” is it that at RG Steel’s facility in Sparrows Point, Md., union workers were still cutting the grass outside the office when the lights went out?

Thomas C. Graham is a founding member of T.C. Graham Associates. He is a former chairman and chief executive officer of AK Steel Corp., president and chief executive officer of Armco Steel Co. LP, chairman and chief executive officer of Washington Steel Co., president of the U.S. Steel Group of USX Corp. and president and chief executive officer of Jones & Laughlin Steel Co. His column appears monthly. He invites readers’ comments and can be contacted at tom.graham@tcgrahamassociates.com.


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