U.S. Steel to focus on energy, autos, profits and image remake, CEO Longhi says
Instead of relying on “one-dimensional cost cutting,” taking advantage of energy and automotive opportunities and perhaps undergoing an image remake focused on technology are key to incoming CEO Mario Longhi's plan to revive U.S. Steel Corp.
“We pretty much focused on surviving for a long time,” Longhi, now president of the nation's second-biggest steelmaker, told a group of about 200 business leaders on Thursday at a Pittsburgh Technology Council breakfast briefing.
Longhi, 59, who is spearheading an initiative to improve the struggling steel company's performance, provided a glimpse of what to expect as he prepares to take over from longtime CEO John P. Surma, 58, on Sept. 1. His promotion was announced last week.
Under Surma, U.S. Steel has not produced an annual profit in four years, and its stock price is near a five-year low.
Longhi, who is viewed by analysts as having the background to help reverse the company's slide, said no cost-cutting targets will be disclosed for Project Carnegie, the initiative he is leading to help turn around the company. And he emphasized the importance of technology and creating opportunities for increased use of steel in auto manufacturing and drilling.
The company has expanded oil and natural gas tubing production, he said. U.S. Steel spent more than $200 million on tubing projects at its Lorain, Ohio, plant, and it took full control of its McKeesport Tubular plant two years ago to take advantage of drilling demand.
On the consumption side, it uses gas in its blast furnaces and other processes, consuming 130 trillion cubic feet in North America last year.
“Our team at our research center (in Munhall) is playing a role in these activities through research and computer modeling,” he said. “That includes continued focus on optimizing the blend of fuels used in our blast furnaces to maintain the lowest carbon cost.”
Longhi began his 35-year career in 1978 as an engineer in his native Brazil before he joined Alcoa Inc. in 1982 as a construction supervisor at an aluminum refinery. He worked for Alcoa for 23 years in Brazil, the United States and Switzerland. In 2006, he was named CEO of Gerdau Ameristeel Corp., an operator of mini-mills, and joined U.S. Steel in 2012.
His background in aluminum is helping him identify growth opportunities for the steelmaker from the government's mandate that automakers meet a 54.5 mpg target by 2025.
“Having worked in aluminum for many years, I understand the importance of what the auto market represents,” Longhi said. “Competing materials like aluminum have moved aggressively for years to gain a bigger share of vehicle curb weight.”
On Wednesday, U.S. Steel met with Chrysler, which Longhi said is “pushing the boundaries of development methods.”
“We have offered them a solution that if put to use ... can probably mean a 25 percent to 30 percent weight reduction and meet the (new) standards,” Longhi said. “... It's a very exciting time for us.”
U.S. Steel is an “amazing” technology company, Longhi said, mentioning computers that guide blast furnace operation, controls for “sophisticated shapes or rolled products” and software that manages financial analysis.
“Regardless of the fact that many times the steel industry portrays itself showing just a blast furnace with flames, it is profoundly more scientific that just that,” he said.
Longhi said his review of ways to improve the company's operations and financial performance will emphasize “a new way of doing business (that stands up) under all market conditions” rather that just cost cuts.
”There is little strategic vision behind a one-dimensional cost cutting program,” he said. “Instead, we'll view this as a profitability and value enhancement initiative.”
John D. Oravecz is a staff writer for Trib Total Media.