Longhi to become CEO at U.S. Steel; Surma to retire at end of year
U.S. Steel Corp., whose earnings and stock price have been in a slump, said on Friday that longtime chief executive John P. Surma will relinquish day-to-day control of the nation's second-biggest steelmaker next month as he prepares to head into retirement.
Surma, 58, will become executive chairman until he retires, which will be by the end of the year. He will be succeeded as CEO by Mario Longhi, the company's president. Longhi, 59, was tapped in April to lead “Project Carnegie,” the steelmaker's initiative to improve and maximize results, and is viewed by analysts as having the background to help reverse the company's slide.
The change in leadership is going deeper than just the CEO. The company announced a replacement for its chief financial officer, who previously disclosed plans to retire, and said its longtime general counsel was leaving.
“Mario is an experienced CEO, and we have benefitted from his strong leadership as we position our company for the future,” Surma said in a statement. Surma did not say when he will retire.
U.S. Steel has lost money each year since 2008, and its share price has declined 21 percent this year. The stock hit a peak of $191.96 on June 25, 2008. It closed at $18.82 on Friday, down 7 cents, before the leadership transition was announced.
Surma's departure was “long, long overdue,” said Charles Bradford, a veteran industry analyst at Bradford Research Inc. in New York. “There aren't too many company CEOs who survive when their stock is down more than 90 percent from its peak.”
The leadership transition is probably the first of big changes to come. Longhi told financial analysts on July 30, when the company reported a second-quarter loss of $78 million, that the initiative he was leading is “much more than a cost-cutting exercise.” He said “everything is on the table,” including selling assets and closing operations.
The company blamed the second-quarter loss on a labor dispute in Canada, slower economic growth and increased repair and maintenance costs. It has reported a profit in only five of the past 18 quarters.
U.S. Steel adds Longhi's name to those of Carnegie, Frick and Schwab in leading the historically significant company. When founded in 1901, it was the world's largest corporation.
“In the tradition of the U.S. Steel CEOs who have preceded me in the last 112 years, I am pleased to turn the leadership of our company over to Mario, who has earned the respect and trust of our board and our employees, our customers and our investors, and is ready for this important challenge,” Surma said.
Longhi, a former executive with Alcoa Inc., joined the steelmaker 13 months ago as chief operating officer and executive vice president, a move some experts said positioned him to become CEO. The company added president to his title on June 1.
Longhi was CEO from 2006 to 2011 at Gerdau Ameristeel Corp., an operator of mini-mills known for efficiency. He spent 23 years with Alcoa, working in his native Brazil, the United States and Switzerland.
U.S. Steel has “made major errors” under Surma, Bradford said. For example, the company sunk about $400 million in improvements to a steel mill it acquired in Serbia, only to sell it for $1 to the government there last year.
“Why is U.S. Steel losing money when they have a tremendous cost advantage over other steel companies in that they have their own iron ore?” Bradford said.
Bradford was bullish about Longhi, because he has a much deeper metals industry background than Surma's Marathon Oil and accounting background.
“Longhi has the management skills,” Bradford said. “What he needs is someone to give him an honest review of the company, operation by operation.”
Seth Schofield, who serves as presiding director of the company's board, said: “Our board extends its appreciation to John Surma for his many contributions to our company during his decade as CEO, which included some of the most challenging years in U.S. Steel's long history. We are equally excited about the company's prospects under the leadership of Mario Longhi, who is uniquely qualified to lead U.S. Steel into the future.”
The company announced that David B. Burritt will succeed Gretchen R. Haggerty as chief financial officer and an executive vice president. Haggerty had announced she will retire on Aug. 31. Burritt served as chief financial officer for Caterpillar Inc. from 2004 to 2010, and will report to Longhi effective Sept. 1.
U.S. Steel said James D. Garraux, general counsel and a senior vice president, plans to retire by the end of the year after 34 years with the company.
John D. Oravecz and Thomas Olson are staff writers for Trib Total Media.