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US Steel new CEO expected to slash more costs
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Thursday, 24 Oct 2013
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The USD 1.8 billion charge US Steel announced Friday is the first of several moves that industry analysts expect new CEO Mr Mario Longhi will make to revitalize a company that has not had a profitable year since 2008.

Mr Longhi who took over September 1 for Mr John P Surma, has been given a mandate to drastically slash costs and increase efficiency. So far, the former Alcoa executive has been largely silent about how he intends to do that. But analysts expect Mr. Longhi to rip a page from the playbook that most new CEOs rely on by getting the bad news out of the way early in his tenure.

Among the measures analysts expect is shutting at least one of the company's plants. They cite the glut of current capacity as well as new mills being built that are targeting one of US Steel's most profitable markets: tubular products used in the oil and gas industry.

Analyst Gordon Johnson of Axiom Capital Management in New York City said that "We remain in a structurally over-supplied market. Supply is going to continue to grow at an unhealthy clip."

The glut of steel is only one problem Mr. Longhi faces.

The automotive industry, the company's other attractive market, is being courted by aluminum producers. Alcoa is investing USD 575 million in new equipment to serve auto producers, betting that automakers will rely on aluminum to help meet stricter fuel efficiency standards.

Mr Longhi also inherited several problems, including an underfunded pension plan, which had a USD 2.7 billion deficit at year end.

US Steel has had trouble starting up the first of two units at a new coke substitute plant it is building at its flagship Gary, Ind., mill. Indiana environmental regulators said the first unit was idled during August for maintenance. The company would not comment on the maintenance issue but has said it has slowed work on the second module while it makes improvements to the first.

Source - www.post-gazette.com

(www.steelguru.com)


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