U.S. Steel to Change Name, Create Separate Steel Unit

U.S. Steel, beset by seemingly endless woes in its basic steel operations, is planning to announce a major restructuring that will be accompanied by a name change for one of the oldest and most visible firms in American heavy industry, company officials said.

Under the proposed restructuring, the steel operation would likely be separated from the parent corporation, with its own separate corporate staff and balance sheet. U.S. Steel’s two oil companies, Marathon Oil and Texas Oil & Gas, are already structured along similar lines.

In turn, the parent company, which may be renamed USS, would be transformed into a holding company with separate subsidiaries in steel and oil.

U.S. Steel officials said the overhaul, which is likely to be announced later this month, is not intended to spin off the company’s troubled steel operations to shareholders or management.

Instead, the move will force the steel division to become a stand-alone business, living off its own cash flow and bearing its own administrative and interest expenses, company officials said.

The parent corporation will stop subsidizing the steel segment’s losses, which the company claims it has done for the past several years, officials said. And, since such a restructuring will mean that the money-losing steel business could be starved of investment capital unless it raises funds on its own, steel management and labor will be under greater pressure to reduce costs.

“It would put a fence around the steel business,” said Peter Anker, a steel industry analyst with First Boston Corp. “They are trying to demonstrate to all of the parties in the company’s steel business that steel has to stand on its own,” Anker added.

News of the plan comes in the midst of U.S. Steel’s contract talks with the United Steelworkers, and some industry analysts believe the company may have leaked the proposal in order to force the union to accept its demands for contract concessions.

Union sources said Tuesday that J. Bruce Johnston, U.S. Steel’s chief negotiator, has recently demanded wage and benefit cuts of $7 per hour per employee, which would slash U.S. Steel’s average hourly labor costs to $18 from $25. If U.S. Steel won such steep cuts, its labor costs would be the lowest of any major domestic steelmaker and equal to those of Wheeling-Pittsburgh Steel, which is undergoing Chapter 11 bankruptcy reorganization. But union bargainers are expected to flatly reject Johnston’s demands.

In fact, union and company officials conceded that they remain far apart and that the company’s informal July 3 deadline for reaching a settlement won’t be met. Both sides indicated that the talks are likely to go down to the July 31 expiration date of the union’s contract.

Since the company and the union seem to be so much at odds, some industry observers are already predicting a long strike at U.S. Steel. That could cripple the nation’s biggest steelmaker, since its biggest rivals have already settled with the union and will be ready to steal customers away if U.S. Steel’s workers walk out.