U.S. Steel Will Announce Restructuring Plans Today
U.S. Steel Chairman David Roderick will announce a major restructuring and a new name for the nation’s largest steelmaker at a news conference in Pittsburgh this morning, company officials said Monday.
Industry analysts believe that today’s announcement, which comes in the midst of the company’s tough contract talks with the United Steelworkers, has been timed to pressure union leaders to agree to wage concessions.
U.S. Steel sources said that under the proposed overhaul, U.S. Steel’s steel operations will be consolidated into a stand-alone subsidiary, a unit that the parent company would then force to sink or swim on its own.
Analysts say the move is designed to make it clear to labor that most of U.S. Steel’s losses have been coming from steelmaking rather than the company’s energy and natural resource businesses.
Word of a possible restructuring had been circulating all summer, but only on Monday did company officials reveal the timing of the announcement. Also, there were more details on how the company would be reshaped.
The company apparently plans to separate its basic steelmaking operations from its barge, iron ore and coal divisions, which have traditionally been consolidated into U.S. Steel’s steel segment on its balance sheet.
Industry analysts say that those relatively stable resource-related operations have reduced the losses reported by U.S. Steel’s steel segment during the continuing steel slump. In the first quarter, for instance, U.S. Steel’s steel segment posted an $8-million profit.
Meanwhile, U.S. Steel will to create a holding company with a new name that will become the firm’s parent organization.
Company officials have indicated that the name change for the parent unit is supposed to reduce the company’s identification with the steel industry, which now accounts for less than half of U.S. Steel’s business. Company officials declined to reveal the new name, but a company spokesman denied reports that the firm would be called simply USS.
Along with U.S. Steel’s recent oil acquisitions, Marathon Oil and Texas Oil & Gas, the steel division would become a wholly owned subsidiary under the new structure, with its own corporate staff and balance sheet.
While the steel division isn’t being spun off to management or shareholders to get it off U.S. Steel’s books, it will be forced to live off its own cash flow, putting added pressure on steel management and labor to cut costs.
U.S. Steel has already tried to convince its union members that its steel losses are worse than those reported in its quarterly earnings statement, but the campaign so far has had little impact.
Just before its contract talks with the union opened in June, the company sent to all its workers a 32-page pamphlet outlining the financial problems of its steel division. The pamphlet claimed that if steel operations were split out of the rest of the company, they would have posted a combined loss of $2.4 billion over the last six years. But union leaders denounced the pamphlet as propaganda, and said that such publicity drives by the company could only worsen relations between management and labor.
