The CEO of U.S. Steel says more jobs likely will be cut
U.S. Steel Corp. expects to lay off more workers this year, an acceleration of cost cuts that underscore the huge decline of what was once the nation's largest employer and most valuable company.
The Downtown-based steel manufacturer has laid off 2,800 workers since the beginning of the year — including 165 in West Mifflin — and warned 6,200 more they could lose their jobs at plants from Alabama to Minnesota. The company's shrinking footprint has been accelerated by a slump in demand from energy companies caused by falling oil prices, low steel prices and a surge of cheap foreign imports.
CEO Mario Longhi said Wednesday those conditions appear to be worsening, which “caused us to lay off a significant number of our employees and will likely result in the number of layoffs increasing going forward.”
“We have many cost levers that we can pull in response to a downturn in market conditions,” Longhi told analysts on a conference call to discuss first-quarter financial results. “And we are pulling them as quickly and as hard as we can.”
With 23,000 employees at the end of last year, those cuts could drop U.S. Steel's workforce to about 14,000 — a tiny fraction of the more than 300,000 workers the company had after World War II, said James Craft, a professor at University of Pittsburgh's Katz Graduate School of Business.
“U.S. Steel has declined dramatically,” Craft said.
“It was once the most valuable company in the country,” he said. Now U.S. Steel is not even included in the Standard & Poor's 500 index of largest companies.
During the 1980s and 1990s, as domestic steel companies contracted, employment in the overall industry dropped from 450,000 workers to 150,000. U.S. Steel closed its Homestead Works and Duquesne Works plants, laying off thousands, in the 1980s.
The loss of major factories was devastating for many Mon Valley communities.
Edward Wehrer, the superintendent of the Steel Valley School District, said his father and grandfather both worked at Homestead Works before the plant closed in 1986, two years after Wehrer graduated from Steel Valley Senior High School.
The district today is a very different place compared to when he was a student, he said. Wehrer graduated with a class of about 235 people, dwarfing the size of today's classes, which hover around 130. The school has no wrestling team anymore. The district's communities have experienced significant declines in their populations and tax bases, he said, despite construction of the sprawling Waterfront retail and entertainment complex on the old mill site.
“It is difficult to overstate the impact that this community felt with the closing of Homestead Works,” said Wehrer, 48, of Munhall.
Craft predicted U.S. Steel is only going to get smaller as it further reduces costs to become more competitive with its foreign rivals.
“They aren't going to be the biggest producer anymore,” he said.
U.S. Steel has issued notices to workers in Alabama, Texas, Indiana, Ohio, Illinois and Minnesota that they could be laid off because the plants where they work are being temporarily idled or closed permanently.
The company closed its tubular plant in McKeesport last year, laying off 180 workers. This month, it temporarily laid off 165 workers at its Irvin Plant in West Mifflin. It is planning to move out of its iconic steel-clad tower Downtown, which it built at the height of its power in the late 1960s, to save money.
On the analyst call, Longhi didn't provide specifics on potential layoffs. Spokeswoman Sarah Cassella declined to comment.
Exacerbating U.S. Steel's troubles, Longhi has said, is a torrent of steel imports not experienced by the industry in more than 15 years. In the late 1990s, cheap imports were blamed for the bankruptcy of 29 steelmaking companies and the loss of 21,000 jobs industrywide.
“Today, across the country, once again, mills are idled. Plants continue to be shut down. American workers are laid off,” Longhi told Congress last month in a plea for the United States to slap tariffs on imports to prevent a similar decline.
Then-President George W. Bush implemented tariffs on foreign steel in early 2002 but lifted them about 20 months later.
The United Steelworkers union shares Longhi's concern about imports.
“We're in the middle of this trade fight,” said Tony Montana, a spokesman for the union in Pittsburgh. “Two weeks ago, our union had 600 activists in Washington, D.C., lobbying the Capitol.”
But on the potential for more workers to lose their jobs, Montana said: “Unless he talks about a specific facility, we can't predict that far in the future.”
U.S. Steel expects the plant idlings, layoffs and other short-term cost-cutting moves could save it more than $200 million this year. That's on top of long-term savings the company is instituting through its Carnegie Way initiative. Longhi said those improvements will total $340 million this year, up from an earlier prediction of about $150 million.
While there are no signs demand from energy companies will pick up anytime soon, Longhi did say that the automotive and construction industries — major purchasers of steel — are getting stronger. Higher demand from those customers, along with the possibility that steel prices have bottomed, are giving Longhi some hope that conditions will improve later this year.
When that happens, he pledged to “bring our people back to work.”
Staff writer Chris Fleisher contributed to this report. Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or [email protected].