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Chapter 13 U.S. Steel and Asset Redeployment “Rationalizing” was one of U.S. Steel’s favorite euphemisms for several years. Of late, U.S. Steel’s rationalization program as part of the company ’s strategic plan had evolved into its asset redeployment program. And by 1983 the company’s euphemism lexicon included a facility reconfiguration program as part of its asset redeployment program, which, of course, was all part of its rationalization program. Responsibility for fine-tuning and implementing the facility reconfiguration program’s objectives was placed in the hands of Thomas C. Graham, U.S. Steel’s newly hired vice-chairman and chief operating officer for steel and related resources. Most recently, Graham had served as president and chief executive officer for Jones and Laughlin Steel Company.1 Thomas Graham had been recruited by U.S. Steel CEO David Roderick and was highly regarded for his abilities as a steel company executive. He also was regarded as ruthless. Roger Ahlbrandt characterized Graham’s management style as “both combative and irreverent. He had a vision, communicated it throughout the organization, and saw to it that it was implemented. He had little patience for bureaucracy and saw himself as an agent of change.”2 In time, Graham’s fellow U.S. Steel executives, along with U.S. Steel stockholders, would come to regard him as the right man arriving at precisely the right time. Steelworkers and coal miners, on the other hand, would come to regard Thomas Graham’s facility reconfiguration game plan with far less enthusiasm. What Graham saw in U.S. Steel’s profit-and-loss situation helped set his plan in motion. His focus was on that part of the business that was weakening U.S. Steel’s overall performance: the company’s steel sector. The downward trend in company finances that had been bleak in 1982 continued in 1983. The company generated sales of $17.5 billion by the end of 1983, a drop of nearly $1.5 billion from 1982 sales. But the big drop came in 1983’s net income loss of almost $1.2 billion—more than three times 1982’s loss. Costs associated with shutting down plant facilities accounted for most of the loss, although a $634 million loss in steel sales alone contributed immensely to U.S. Steel’s red ink. The $634 million loss actually was an improvement over the previous year’s $852 million 170 U.S. Steel and Asset Redeployment loss. A 10 percent increase in tons of steel shipped helped to somewhat reduce the 1983 loss. Even so, the amount of raw steel produced at U.S. Steel plants remained at 50 percent below the company’s capacity. U.S. Steel continued to attribute its income and sales problems to foreign steel imports. Overall, 1983 imports were down only slightly from the previous year, although trade negotiations with the European Economic Community and Japan had resulted in a considerable steel import decline from producers in these two parts of the world. Taking their place were Third World countries eager to enter the American market with inexpensive , government-subsidized steel. Optimism that might have occurred over U.S. Steel’s increased steel shipments in 1983 was muted by the substantial decline in the amount of pipe and tubular steel included in these shipments. Tubular steel accounted for only 5 percent of the company’s total steel shipments in 1983—a sizable drop from 1982’s 11 percent and 1981’s 16 percent. The drop in shipments reflected a weakening in the oil business, since much of the tubular steel was destined for oil drilling use. Steep declines in drilling activity also affected U.S. Steel’s engineering and fabricating sector that manufactured oil well drilling platforms and related equipment. The sector, in fact, lost $137 million in 1983 on sales of $674 million. It had incurred an $18 million loss on sales of $1.3 billion in 1982 to compare with its $84 million income on sales of $1.8 billion in 1981.3 The remarkable swing from 1981’s gain to 1983’s loss reflected troubling times in the oil business. Driving the slowdown in exploration and drilling activity was the drop in the price for a barrel of crude oil.4 The direction in which oil was headed ordinarily would not have inspired much confidence among oil industry leaders. For U.S. Steel, though, income from its oil sector—however much it may have been reduced...

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