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U.S. Steel shuffles execs; shutdowns could cost millions, analysts say

| Friday, April 4, 2014, 12:01 a.m.

U.S. Steel Corp. announced management changes, including a new head of its restructuring initiative, which analysts said signaled the company intended to focus on being more innovative and on satisfying its customers.

The steelmaker confirmed temporary production shutdowns at plants in Gary, Ind., and Ecorse, Mich., which it blamed on unexpected effects of winter and a mechanical breakdown.

Analysts said the shutdowns could cost millions in lost sales and repair costs.

The Pittsburgh company said David L. Britten, senior vice president of tubular operations, will fill the new job of chief technology officer. In addition, Geoff M. Turk was named vice president-transformation, and will head the company's Carnegie Way initiative to improve results. It has not reported an annual profit in five years.

Turk joins U.S. Steel after 24 years at Caterpillar Inc., most recently as director of advanced components and systems product business.

David J. Rintoul, 56, who leads the Carnegie Way, will become senior vice president of tubular operations. Anthony R. Bridge, 59, vice president of engineering and technology, will retire at the end of May.

“These changes are designed to accelerate our return to profitability while positioning us for the future innovation that will support our successful growth,” CEO Mario Longhi said.

Britten, 53, joined U.S. Steel in 2011 from Sweden steelmaker SSAB, where he headed its Americas division. Turk, 50, has expertise in manufacturing leadership, business transformation, innovation and process improvement methods.

“I like the idea they are bringing in people from the outside. That's something they've needed for years,” said analyst Charles Bradford of Bradford Research Inc. in New York. “Britten has been the head of mini-mill producer SSAB and has a terrific reputation. U.S. Steel needed his kind of background, which was in electric-furnace steelmaking.”

In January, Longhi said U.S. Steel intends to use an electric furnace and scrap metal to produce steel for the first time in decades, a process that is more efficient than traditional methods. It would replace an aging blast furnace at a plant in Fairfield, Ala., that requires at least $100 million in upgrades.

John Tumazos of Tumazos Very Independent Research of Holmdel, N.J., said Turk's appointment to head the Carnegie Way “implies an effort to be more customer centric. Caterpillar is both a large manufacturer and a customer, and bringing someone in from a customer means there are profit and cost-reduction opportunities in the way U.S. Steel works with customers. The guy from CAT will take a broader view of things.”

U.S. Steel spokeswoman Courtney Boone said a March 27 breakdown of pollution control equipment at its Great Lakes Works near Detroit shut down production at one of two furnaces. “We continue to work on repairs and are in contact with customers to minimize the impact on their operations,” she said.

On Wednesday, U.S. Steel sent a letter to customers of the Gary Works, saying a shutdown of a blast furnace and steelmaking was caused by “unforeseen and unprecedented” ice conditions on the Great Lakes, delaying delivery of raw materials. The letter said such conditions have not happened in more than 30 years.

“We hope (conditions) will quickly improve as a result of recent warming temperatures,” the letter said.

Boone declined to comment on the letter and said no estimate of costs was available.

“It's like dropping a bomb on customers when you have plant outages,” Tumazos said. “It's a very bad break for U.S. Steel. Each location could cost millions a day, and the impact at Gary would probably be two-and-a-half times Great Lakes because of the relative size of the plants.”

Tumazos estimated the financial impact of the shutdowns at $1 a share or more in the second quarter. For 2013, U.S. Steel reported a net loss of $1.67 billion, or $11.56 per share,

John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or joravecz@tribweb.com.

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