It was recently announced that US Steel will be acquired by Tokyo-based Nippon Steel for a measly $14.1 billion , ending the former’s 122 year history as a former US industrial powerhouse. Yet what happened to degrade what was once the number one steel maker in the world upon its formation out of two existing industrial giants in 1901 into a has-been? This is the topic that [Brian Potter] dives into in a recent article.
Most of the how and why can be condensed into a simple reluctance to follow industry innovations, often passing on new technologies. This went well until the post-WWII era, when foreign competition began to heat up, with this competition more than happy to embrace whatever new steel making technologies became available. Case in point was the replacement of open hearth furnaces with basic oxygen furnaces by the early 1950s, which US Steel only began to adopt in the 1960s. These were then themselves largely replaced by contemporary electric arc furnaces, in a constant renewal process that US Steel failed to adapt to, unlike its more nimble competitors.
By the early 1980s US Steel’s US market share had already dropped to around 20% as Japanese steel makers in particular were eating its lunch. As US Steel and other US steel makers kept falling behind on the competition, shedding plants and workers in an attempt to stay profitable, it should come as no surprise that this would be US Steel’s ultimate fate.
(top image: Edgar Thomson Steel Works in the mid-1990s (Credit: David Rochberg – Own work, CC BY 2.5) )
I’m surprised the sale was allowed for defense purposes. I haven’t looked into it but I’ll assume the military has another source now.
During the Clinton era, the US Army had to buy some of their equipment from China, at the expense of companies within the US.
(go figure)
He was referring to supply chain requirements for military hardware.
If Fukuyama is wrong and there’s another real war—not wounded dog kicking proxy war—then the US is in serious trouble.
“then the US is in serious trouble.”
IF… the US is still around in a 100 years it will be a “3rd world country”
Shareholder profits above ALL ELSE is killing us.
You are exactly right. The biggest shareholders are rich politicians and celebrities that worship money.
Tell that to every working stiff that owns a 401k or is lucky enough t to have a pension fund. That’s the majority of shareholders.
Jeez, this has got to be the most ignorant post I’ve ever seen on HAD…
WE are the shareholders.
not really, no
almost nobody in the usa is a shareholder, and they definitely aren’t shareholders in the places they’re offshoring to
The assets are still producing steel. One of the largest plate producers for the US Navy is Ervaz, Russian owned domestic assets.
Correct me if I am mistaken, but the future of warfare will not be made of steel.
It is more likely that lightweight and durable space-age materials will be used for drones, combat elements, body armor, lasers, robots and transport.
“Most of the how and why can be condensed into a simple reluctance to follow industry innovations, often passing on new technologies.”
Which is typical of many industries in many countries. Major manufacturing involves a lot of investment capital, and few companies (or a government that may sponsor them) can afford to keep updating their processes with each innovation.
So, there can be ebb and flow between competitors.
But, more government involvement (or interference) can aid or hinder any or all manufacturing in a country. In the USA, pollution regulations, labor laws, taxation, and sometimes grift have placed domestic manufacturing at a disadvantage to competing companies and nations.
Very true. In the early 1990’s I worked for a major U.S. semiconductor company that wanted to expand one of its wafer fabs in the the U.S. Our company agreed to all local requirements up front but was told that the approvals and paperwork would take 18 months. It was pure bureaucracy. We couldn’t wait that long to stay competitive with capacity and so we set up the fab expansion offshore in six months. True story.
“Most of the how and why can be condensed into a simple reluctance to follow industry innovations, often passing on new technologies.”
This is true.
But it’s a little unfair to not recognize that sometimes it’s not so easy for a capital-heavy manufacturer to be nimble.
If you’re still paying off the hundreds of millions of dollars in corporate bonds you issued to build a fleet of Bessemer furnaces during the war years, you’re not going to be super excited doing it again just a decade later when oxygen reduction comes along. And then after you start modernizing plants with basic oxygen as the old furnaces age out, doing it *again* with electric arc.
Even if *you* can look down the track 20 years and see your market position slipping, that might not matter to your shareholders who have let you know that, as the company owners, they value the current dividend payment more than the company’s long term market position.
This is, of course, what famously happened to Kodak, where they actually *invented* digital imaging, but were unable to capitalize on it and eventually lost their market to their own creation. Kodak management, while not exactly covering themselves in glory, fully understood that the stockholders did not want to plow a billion dollars into a new business line where they’d face an uncertain future of hard competition with no guarantee, they just wanted to keep milking the cow until it died.
Now, we can, and rightfully do, criticize this as short-sighted, but in the real world we each do this all the time. At some point everybody makes the decision about their metaphorical cow. You can use the milk to feed a calf and thus have a fresh cow for the next cycle or you can sell the calf and use the milk for something else, knowing you’re going to be forgoing the future value of the calf and the aging cow will slowly become less and less productive.
You may not have an actual cow, but you’ve probably said something like “I’m not doing another expensive repair to this old car, I’m into diminishing returns here, I’m just gonna patch it and run it till it dies.”
I’m not saying that this is a noble act, especially when it applies to venerable old manufacturing companies like Kodak and US Steel, but I am saying that when you run a business like a business sometimes fiscal reality is gonna be complicated and ugly.
All my cows are spherical.
In the same vein of mismanagement a good read is All Corvettes are red.
Perhaps it went over my head.
All Corvettes Are Red, was the story of how Dave Hill
and a group of devoted visionaries kept the Corvette alive.
Producing the C5 (1997-2004) model.
I know the book, have it on my shelf. Read it many times.
Soul Of A New Machine is also a good read.
The idiotic management decisions of GM could fill
a separate book.
If you like the Mustang, thank Lee Iococca (who bucked
stale Ford management to get the car to market). Look
up William Durant (one of the founders of GM).
Mary Barra, experienced engineer or not – she (and her
modern predecessors) couldn’t hold a candle to the
visionaries that built those automobile empires. Witness
their EV debacle. Speaks volumes on corporate
stupidity and cowtowing to the ESG left wing loons
and their war on fossil fuels/American way of life.
Enzo Ferrari had plenty of choice words.
“smug executives, worthless sons of whores”….. lol
Both parties are awful, but none of that is true. Count on the opposing party though to raise taxes and energy cost for working class people like me which they already have done.
The author neglects to mention the chilling effects of unions and regulatory strangulation – very real things. And not just in the steel industry, but across many facets of prior US industrial capacity, like chips and electronic component manufacturing. These things, in combination with new nationalized competitors with low-cost labor, narrowed the margins to the point where innovation and upgrades just weren’t fiscally in the cards if the products were to remain price-competitive on the international stage; those upgrades have to be financed, after all. When the money is no longer to be made in one location, that money goes somewhere else.
Mostly to China, as we have seen.
If this country had not had the unions you and ever other worrying person would be making Chinese wages and the rich would have bigger yaughts.
Yep. The people are employed at minimum wage in some service industry job instead, flipping burgers or selling coffee instead of making steel, since the manufacturing jobs that the unions were protecting all went away.
We have unions and that’s where we are now. Look around.
We *had* unions, and with most of the US work force without significant ability to bargain for a share of their surplus value, that’s where we are now.
OMG EVIL UNIONS
Give it a rest. If you don’t think workers deserve a fair share of the profits just say so.
As an ex union member and shop steward I can attest to claims that union members once past their probationary period, they become turtles like in their movements. I had the misfortune of being ” separated ” multiple times from Republic Aviation in Long Island, N.Y. in the 60s. I had first hand experience of observing an employee each and everyday of the work week clock in, go to his Craftsman tool box and retrieve some sort of book that he was reading and visit the bathroom until it was time for coffee break. This routine went on at lunch time and for second break before it was time to clock out. The company couldn’t do anything because he was a union member and very senior . I also worked for the most prestigious airline that existed at that time. PAN AMERICAN AIRWAYS. I observed the same work habits once past probation. For the sake of brevity , I’ll conclude by saying that the majority of the union workers are productive but those that simply expect to be paid just for being there , it rubs off on other employees performance. Thank you for allowing me to inject my two cents in this article about US Steel. Ben.
See it myself, today at The Boeing Company.
Union workers are a reflection of their management practices, if you believe unions ruin this industry then your wrong. I put 41 years of service to keep my plant competitive . Greed has killed this industry in the U.S.. Unions have always promoted safe and profitable practices but were shot down by company guru’s. There bonuses were more important. Listen , if Ussteel sales then there is a huge profit to be made with a consortium of people. The Carnegie pension fund was put in place for the steel workers union and company…..let’s see where this goes. P.S. don’t bullshit if you haven’t walked in a steel workers shoes.
Yes.
I’ve heard those stories before and been there and done that as a union rep. What you described is lazy management not doing their job. If management would utilize their progressive discipline the employee would eventually find his way put the door and there’s not an arbitrator in the world that would order the company restore the employee. And the union would not be inclined to spend member’s money pursuing such a fool’s errand. People like what you described typically get little sympathy from his fellow workers either. I dealt with a unionized company with 2,000 workers and they typically had one or more discharge hearings per week. If they did their paper trail, they would often succeed. If it was a shitty supervisor having a bad day and taking it out on someone, no, and that happened quite often as well and thank goodness the employees had representation.
Thank you Peter for a sensible voice. If workers are reading a book in the bathroom for their whole shift, this is not the union’s fault. Union contracts have a clear and specific process to fire bad workers. If the managers can’t be bothered to follow the process, then the manager is even worse than the lazy worker.
You make his point for him. Companies exist to be profitable. Competition is global. Unions encourage companies to offshore to lower costs.
Bulls eye! Unions demands cause a company to become lethargic. Union members cannot see it because theyve never ran a company before. Heres the next industry to fall due to unions: The big 3( not really big 3 anymore). Toyota, Volkswagon and Tesla are literally eating thier lunch. The big 3 will continue to shrink as they yield more to these non union competitive companies. Its the US steel story all over again. Just because Shawn Fain says “eat the rich” doesnt mean you deserve to be rich on a high diploma or less.
> Heres the next industry to fall due to unions: The big 3( not really big 3 anymore). Toyota, Volkswagon and Tesla are literally eating thier lunch.
Ah, so a heavily unionized automakers are having their lunch eaten by…. heavily unionized automakers.
https://en.m.wikipedia.org/wiki/Volkswagen_and_unions
https://money.usnews.com/investing/news/articles/2023-02-21/toyota-to-accept-full-union-demand-for-wage-hike-for-third-straight-year-asahi-reports
I hope the fact that you hold these unionized automakers in such high regards will help you see that actually unionized jobs can and do make great products, good profits, and all while treating workers fairly.
I absolutely agree with you that dumb union leadership can kill a golden goose, but blaming unions is often just a convenient scapegoat when the MBAs milk a company dry from the top down or choose a bad path due to incompetence.
So ban off-shoring and enact harsh physical penalties (imprisonment, forced labor, [redacted], etc.) for executives who try.
I think that is how it’s handled in the PRC.
Profits are the property of the owners of an organization. Workers deserve none of the profits. Workers deserve their wages; that’s what they agreed to work for.
The phrase one’s looking for is, “a raise”. A share of the companies success partially made by the employees.
Let’s not forget the stockholders!
B^)
If ye only pay me for me time,
I won’t break my back for your dime.
If ye cut me a profit share,
Me and my brothers may start to care.
All the owners smell the same from the factory line, I’ll just pack up and go down the street.
You’re saying American workers should drop the unions and accept Chinese working conditions to stay competitive? Take your pro-money, anti-human claptrap elsewhere please.
You are entitled to your opinion, but facts are facts and there is a reason almost every product is now made in China….
>there is a reason almost every product is now made in China….
Because we allow them to sell their goods here. We can stop that, you know.
US can’t stop it, look how badly the US-China trade war went, US-China trade deficit eclipsing 2017 levels, US-China overall trade hitting a record high.
The unions suck basically because I worked for Nucor (largest steel producer in the USA) and we had excellent wages, excellent working conditions and were non-union and we used innovative technology to overtake US Steel as the Number ONE steel producer in the USA. All of this was done without a union tapping into employees wages!
Does Nucor actually produce steel from raw materials or basically recycle scrap and form into new products?
Completely agree. Union oganizations reluctance towards job cuts and workflow changes along with demanding the absolute highest pay have a strangling effect on a company. Ive witnessed local regulatory agencies bear down on a company at the exact time when a union strike was taking place. Our Union government brethren are partially responsibe for this epic collapse. Unions kill just as a parasite kills…slowly and surely.
Replace a 20 year machinist with a rolling exchange of six month temp workers to save on labor costs. Now do it for 80 positions in one plant. Now do it in all the plants. How good is that tractor going to run?
How’s a six month temp going to give you a patent worthy process improvement? She has no stake here.
No worries mate, just sue the customers that try to fix it themselves and we charge the customer for every repair, we make that sale profit four times over in service fees.
Hmm…wonder why sales are declining.
How’s a six month temp going to give you a patent worthy process improvement? She has no stake here.
So it goes…
Yeah I read Hackaday since I’m just a typical hacker who has my finger on the pulse of tech and society.
That means I support open source software, I will never feel bad for piracy or otherwise screwing over big corporations (the villain in every movie as you may recall), and of course my entire political ideology happens to be 40 year old Reaganite drivel…
My beliefs are very self-consistent! Separately, I wonder why people hate weird libertarian tech bros?
Unions and regulations might have saved this company. Companies are killed by corporate greed and the various knock-on effects it has (cutting corners, lack of investing in the future, skirting regulations, etc), not by overpaying their employees.
Corporate greed is also what drove jobs overseas. You can’t treat an American worker badly enough and pay him little enough to compete with oriental manufacturing. An American worker cannot afford to live to do the job that way due to the US being a developed nation. Pretending worker protections made the difference instead of the pursuit of “shareholder value” is laughably naive.
No wonder domestic manufacturing has taken such a beating when people are cheering for the other team.
Unions, government regulations especially new environmental regulations, failure to adopt new technologies and failure of the US government to mitigate foreign tariffs on US steel. I bet it was a real headache trying to navigate and survive. US steel will go down with the likes of US made electronic devices(TVs, refrigerators, radios, cellphones).
A total misrepresentation of the decline of US Steel Corp. and US Mfr. in general by most likely an unpaid Blogger just repeating the usual misleading lies either through lack of independent research or with deliberate intention of perpetuating the lies. The reason why the US Steel industry lagged behind post WW II Germany ( where the new lower cost Steelmaking technologies like LD – called BOF in the US, and Continuous Casting were invented & developed during WW II ) and Japan is because Wall St refused investment w/ people like Alan Greenspan ( later appointed Chair of the Fed Reserve by Reagan ) actively sabotaging the US Steel industry, the Engineers at the top of US Steel being replaced by Bean Counters and MBAs.
President Kennedy explicitly threatened the steel industry.
And a little Known historical fact; the steel industry can be seen in the blurry photo of the grassy knoll!
(Tongue in cheek)
Wall St denied the US Steel industry the investment for modernization ( BOF, Continuous Casting ) , then to add to the damage imposed its own Management.
I worked for USSteel as a chemist. Management was slow to adapt to new technology. As a young man, I knew the company could not compete. I left for greener pastures. Most American companies have the same problem. Management is composed of accountants and business people who do not understand science and technology. American business schools have a demise record in this regard. Until the situation changes, American industries will fail. The selling of USS is a joke. Car manufacturing will fail next.
https://en.wikipedia.org/wiki/James_Burnham
Too many commenters think in terms of extremes or limit themselves to singular ideas.
The fall of US Steel has many factors, no single one of which can be labeled as the only reason.
Unions are both good and bad. They are good when they protect workers from being abused by companies, and they are bad when they become so powerful that they result in stagnation. They tend to be the result of a company that treats its work force as a commodity rather than as valuable team members.
Life isn’t binary. It’s all about balance. Everything is poisonous when there’s too much of it.
The electric arc furnace melts scrap iron and steel. so that it can be reformed into new product. It does not and cannot smelt iron ore.
Blast furnaces smelt iron ore. If there were no blast furnaces to produce iron from iron ore, there would be no scrap iron and steel to feed electric arc furnaces. They would be useless.
The belief that the electric arc furnace is now the best technology for producing steel – that it replaces the blast furnace (They didn’t modernize! They got what they deserved!) – is false.
Nothing against the electric arc furnace. We need them. But these are the facts.
The electric arc furnace is a much more energy-efficient way of producing steel compared to a blast furnace. The steel consumer doesn’t care about the type of furnace used; they just care about quality and price. In a world where the two methods can both exist, you’d be foolish to ignore the more efficient method. A wise company would adopt both processes and use each to its best advantage. U.S. Steel wasn’t wise. This is just one of several technologies that they didn’t adapt to until too late.
It seems that you have missed my point. There will be no new steel without blast furnaces.
As you mentioned, steel companies could use both blast and electric arc. If there are any in the US, how important they are to the economy?
Companies such as Nucor have nearly eliminated basic steel in the US by using only the electric arc furnace. It may be cheaper, although the quality of the steel is lower, but it is living off our steel capital to grab some impressive short-term profits. If we want steel for the long haul, we must have blast furnaces.
Here is statement by a veteran of the steel industry, in response to a recent article in the Washington Post:
“…It mentioned Nucor being able to produce new steel products that are less polluting than steel from blast furnaces. This is true, but the crux of the problem is that Nucor uses scrap steel — such as from old cars and appliances — and remelts it to create new steel products in an electric furnace. The problem is how scrap steel is produced in the first place. This is called “basic steel,” which is produced in a blast furnace using iron ore (usually taconite), limestone and coke. You can’t have one without the other…”
I didn’t miss your point at all, but you seem to have missed mine.
The fact that you can’t have one without the other doesn’t mean that if you produce one you can ignore the other.
That’s why new car dealers also sell used cars.
So, is the handegg team included with the purchase?
Management and the union hand in hand killed US Steel. I hauled into and out of various US Steel plants, the result was always the same. They acted like they were protecting their processes when those processes were stolen years before and were mostly out of date. It took twice or three times as long just to get in the gates, and you had better make sure the load was where you wanted it on the trailer because just as soon as they cut loose from it, they disappeared into hiding. I could go to several other steel plants, some union, some not, and be in and out in a couple of hours most times. I once hauled a couple of coils from AL to OH, they waited until I got them uncovered, stamped them with a paint stamp, then I covered them back up and hauled them back to AL, WTF? They could have sent the stamp to AL and stamped them there, but no, I had to haul them 600 miles up and 600 miles back. Some stupid union regulations. At least it paid me decent. I finally got banned from being on their property. Why you ask? Because I had a 20 lb Boston Terrier in the truck with me. Nobody said anything when I went through the gate, but a rent a cop security guard wanted to force her hand. When I got back out to the gate, the gatekeeper wanted to know why I wasn’t unloaded, I told him Japan has done stolen your secrets and they didn’t need my load anymore.
Some facts to ponder:
Unions are no longer needed because there are Federal laws in place now. Also, executives awarded themselves big bonuses instead of reinvesting. Executives can find a job faster than a layman can.
I was a union member and saw bad employees protected. Union demands decrease profits, i.e., retirement funding.
A company can be well and have good benefits without unions.
No matter what side if the aisle you are on, everyone buys Chinese slave labor made crap now. So blame yourselves.
Hmmm … various successive (!) steps of iron and steel production are mixed up here, as well as parallel existing technologies for different steel-types (!) and different raw materials (!) (i.e. basic oxygen furnaces and electric arc furnaces).
But the production of (first) iron and (then) steel is quite complex, and laypeople cannot naturally always identify the various production levels and -aggregates. There are literally thousands of steel types, and accordingly also different production processes.
Labor v mgmt strife in steel industry has a rich and violent history. The owners and banks turned Carnegie Steel Company into USS in 1901. 123 years later Starbucks has 10x more employees than USS.
https://guides.loc.gov/chronicling-america-homestead-strike
The $14.1 billion acquisition of US Steel by Nippon Steel may be seen as a strategic move to prevent consolidation in the American steel industry. By getting US Steel, Nippon Steel might be trying to keep things balanced in the industry, making sure it doesn’t get too dominated by just a few companies.
Interesting article, thank you for sharing…