Peers say U.S. Steel CEO Longhi is good fit for struggling enterprise
By John D. Oravecz
Published: Saturday, Jan. 18, 2014, 10:30 p.m.
Mario Longhi intends to do the best with what he can control.
As U.S. Steel Corp.'s chief executive, he faces daunting challenges — no annual profit in four years; global overcapacity in the steel industry; imports from China, India and other nations; and low prices for major products, such as flat-rolled coil used in automobiles and appliances. Though its stock price improved since Longhi became CEO on Sept. 1, it remains well below levels from five years ago.
“It's a very challenging environment,” Longhi, who has not granted interviews since becoming CEO, told the Tribune-Review last year. “You have to control better what you can control.”
Steel executives, analysts and others believe Longhi is up to the task of finding solutions. They say he understands the industry's problems, has years of experience in operational details, and has a winning personality.
“He is focused on performance, safety and markets,” said Mike Rehwinkel, executive chairman of Chicago-based steelmaker Evraz North America and chairman of the American Iron and Steel Institute, the industry's chief lobbying group.
“His predecessor, John Surma, set a strategic direction through acquisition, whereas Mario's approach is cash generation through asset performance,” Rehwinkel said. “The steel industry is faced with a tidal wave of foreign imports, and he knows we cannot wait on government action alone to deal with this issue — he'll have to help control imports by optimizing his assets.”
Four months after taking over from Surma, the CEO for nearly nine years, Longhi permanently closed a steelmaking plant in Canada, two older coke batteries in Gary, Ind., and other operations that will save $75 million annually.
“This is just the beginning of our ‘Project Carnegie' efforts,” Longhi said, referring to an initiative announced in April to reduce costs.
He put forth a plan to rely more on U.S. Steel-owned iron ore supplies, an asset that analysts say is a significant advantage. And the company made management changes, led by the hiring of Chief Financial Officer David B. Burritt, who joined the company the day Longhi became CEO.
A leader to believe in
When U.S. Steel elevated Longhi, it wasn't the first time a steelmaker in Pittsburgh chose a former Alcoa Inc. executive as a leader.
Longhi, 59, spent 23 years at Alcoa, climbing the ladder to the aluminum maker's executive council in 2005 before leaving that year for a CEO job at Gerdau Long Steel North America, of Tampa, Fla., the nation's second largest operator of mini-mills.
Allegheny Technologies Inc. hired L. Patrick Hassey as its CEO in 2003. Hassey had been an executive vice president at Alcoa, where he worked for 33 years. Like Longhi, Hassey faced big challenges — 10 quarters of red ink before he halted losses.
“Mario is so typical Alcoa, very outward reaching,” said Michelle Applebaum, managing partner of Steel Market Intelligence in Chicago, who has known and followed Longhi since his days at Gerdau. “He's a leader, but not intimidating, and extremely likeable.
“Old steel was arrogant and standoffish. Alcoa people were always different and community-minded. (Longhi) is classic of all the Alcoa guys that I know, and there's a lot of Alcoa guys in the (steel) industry now,” said Applebaum. “Mario's the right kind of guy to keep them on the right track” — good at managing people and on the marketing side.
“His strength is he's a fabulous people person and an outgoing guy, enormously sincere and bright, the kind of leader at a company with U.S. Steel's history that people can believe in,” said Applebaum.
Longhi became CEO at Gerdau in June 2006, succeeding Phillip Casey. “Prior management had an acrimonious relationship with a strike. Mario brought a better relationship with the rank-and-file,” Applebaum said. He will accelerate change at U.S. Steel because “he's a great leader,” she said.
Longhi speaks highly of Hassey, a mentor at Alcoa in the late 1990s.
“He was my boss when we bought Cordant Technologies,” Longhi said at an event in August. He said Hassey assigned him the job of integrating Cordant, which Alcoa acquired in 2000. “In the end, we sold it in pieces. And I ended up becoming the president of Howmet Castings, which was the piece that we kept. Pat and I worked very well together.”
Hassey could not be reached for comment.
‘A big task for anyone'
So far, U.S. Steel doesn't appear to be contemplating acquisitions — assuming it has the financial punch to pull one off, said Tom Conway, international vice president of the United Steelworkers of America in Pittsburgh, who oversees bargaining with U.S. Steel.
But Longhi said in May that “consolidation of the industry will be required, going forward.” U.S. Steel must look at “everything that could enhance shareholder value.”
Conway said the company is making other moves behind the scenes that the union appreciates.
One is addressing the company's reliance on contract employees to do work that “our members are capable and willing to do. We've had a lot of disagreements on that.”
Conway would not discuss numbers of contractors, or other specifics, but said: “There's real money to be saved.”
Management is asking employees for ideas, he said.
“What they are doing is not new-age stuff, but a more formalized system to submit ideas,” Conway said. “Talking to your workforce is not a bad idea.”
Rehwinkel said Longhi is “approachable, and striking up a conversation with him is very easy. This will probably be Mario's biggest asset. He's humble and listens well — something the workforce will see and appreciate.”
Conway recognizes problems caused by factors company executives can't control.
“Pricing and imports are two that are very difficult,” he said. “I think it's a big task for anyone, and I don't know if there's any one person in this industry who can turn it around.”
Steel imports have risen 38 percent since 2010, executives have said. Longhi has cited imports of pipe from Vietnam, which increased from 145 tons in 2010 to 220,000 tons in 2012.
“I say anybody who says U.S. Steel could have made any money in the last few years doesn't understand the industry and what it has faced with structural problems,” Applebaum said. “Blast furnaces have to run constantly, and when the economy is in a stop-start mode, it's hard for the company to deal with. It's a matter of continuing to invest selectively, and potentially closing facilities where you don't have opportunities.”
Longhi left Gerdau in June 2011 when its Brazilian parent named a member of its controlling family to the post of president, according to media reports. He spent 10 months out of full-time work.
“The first thing I did was something I wanted to do for 30 years and couldn't — be with my family more. That was the first priority.”
To keep in touch with the industry, Longhi explored joining boards of several companies. One was Moon-based RTI International Inc., a titanium maker, where Longhi became a director last year.
Surma's calls, to discuss industry matters, led to his recruitment for U.S. Steel.
“We talked a lot about the future of the industry, and the challenges,” Longhi said. “There was sort of an alignment in what we thought would be necessary. And through the exchange of ideas on a more regular basis, the sort of opportunity evolved into what turned out to me coming to U.S. Steel. It really worked very well.”
He arrived in the company to help Surma, he said, recalling how he revered U.S. Steel while working at Alcoa. When hired by the aluminum maker, he was taken to dinner at Top of the Triangle restaurant, once located at the top of the U.S. Steel Building.
“That's why there is an interesting emotional side to my decision to come back to Pittsburgh — a lot of history,” he said.
John D. Oravecz is a Trib Total Media staff writer. Reach him at 412-320-7882 or email@example.com.
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