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Longhi seeks to improve U.S. Steel profits

Keywords: Tags  U.S. Steel, Gerdau, Alcoa, Mario Longhi, John P. Surma, Thomas C. Graham, Charles Bradford, flat-rolled Catherine Ngai


NEW YORK — U.S. Steel Corp.’s incoming chief executive officer Mario Longhi will be looking to improve profits at the Pittsburgh-based steelmaker, the company said Aug. 19.

“He seeks to return our company to sustainable profitability and to improve shareholder value creation through a renewed focus on operational excellence, product innovation to support our customer needs, and a high performing organization with the capability to deliver on our expectations,” a spokeswoman told AMM in an email Aug. 19.

Last week, U.S. Steel announced that Longhi will succeed John P. Surma effective Sept. 1. Surma will retain the position of executive chairman through Dec. 31, when he will retire from the company and its board of directors (amm.com, Aug. 16).

The move came just months after Longhi was named president of the integrated producer, and within a year of joining the company as its executive vice president and chief operating officer. Some called the move expected, although it was still a surprise to others, particularly as Longhi’s rise in the ranks was atypical for the company.

“That was surely part of the plan when he was recruited,” Thomas C. Graham, founding member of TC Graham Associates who served as president of U.S. Steel Group of USX Corp. from 1983 to 1991, told AMM. “There will be a lot of constituents from various segments watching this closely because it’s a radical move for U.S. Steel. This has always been a company that promoted within. There had to be a lot of foresight when he was hired. His progression probably occurred at recruitment.”

For Longhi, the road ahead looks like a particularly difficult one. The company, which netted losses in five of its past eight quarters, will have to regain market share and improve margins to instill confidence on Wall Street and in the marketplace.

“The question is what are they going to do to make money,” Bradford Research Inc. analyst Charles Bradford told AMM. “The first thing that Mario is going to have to do ... is to go plant by plant, facility by facility, with someone who knows the operations and do some benchmarking. They’re going to have to figure out how to compete.”

But, in addition to moving away from loss-making territory, Longhi will need to focus on maintaining team unity in a time of transition.
“One of the biggest problems with the company is internal politics,” Bradford said. “There has been a huge loss of senior management over the last four to five years right through the organization.”

Longhi, while a relative newcomer to U.S. Steel, is well known in the metals industry. He spent 23 years at aluminum producer Alcoa Inc., followed by a six-year tenure at Gerdau AmeriSteel Corp., later renamed Gerdau Long Steel North America.

Although some have claimed that Longhi’s background in the aluminum and steel long products sector may mean a mismatch at the flat-rolled and tubular producer, Graham said the move is a logical one.

“This is a guy who previously has been successful in two major companies. I doubt that it’s a serious obstacle for an executive of his caliber,” he said. “He will have an awful lot of support and people wishing him well.”

In addition, Longhi’s background could push the integrated producer closer to electric-arc furnace territory, which Surma previously said could have potential (amm.com, Sept. 16, 2011).

Earlier this year, Longhi was charged with heading up a cost-reducing initiative that would improve efficiency and help the bottom line.
In June, the company shuffled a number of executives, including the hiring of a procurement officer from Alcoa (amm.com, June 10).

“This company has the possibility to show major progress in the next couple of years,” Bradford said, citing the advantages U.S. Steel has, particularly on its raw materials side. “I think there’s a lot of potential there but I wouldn’t expect it to happen overnight.”



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