TIME: Almanac 1995

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<text id=93TT0182> <title> Aug. 09, 1993: Big, Battered and Besieged </title> <history> TIME--The Weekly Newsmagazine--1993 Aug. 09, 1993 Lost Secrets Of The Maya </history> <article> <source>Time Magazine</source> <hdr> TRADE, Page 52 Big, Battered and Besieged </hdr> <body> A government panel blasts a hole in steel firms' protection against imports By JOHN GREENWALD--With reporting by John F. Dickerson and Jane Van Tassel/New York and Joseph R. Szczesny/Detroit In their relentless decline since the 1950s, American steel giants have become a symbol of the country's lost industrial might. Beset by foreign competition, decaying plants and ceaseless labor strife, Big Steel sank into a 30-year slump from which it has only recently begun to recover. That fragile comeback suffered a heavy blow last week when a U.S. government panel tore down many of the protections that the Commerce Department had erected in June against steel imports. In a ruling that stunned the industry and Wall Street, the International Trade Commission overturned most tariffs on imported steel. Though the decision gave U.S. firms one victory--upholding tariffs on most high-quality, rust-resistant steel used in car bodies--the overall ruling could open the door to a flood of imported steel from Europe, Latin America and Asia and could force U.S. firms to roll back their recently increased prices. For the industry, reeling from losses in the billions last year, such bad news could not come at a worse time. Declared an angry Curtis Barnette, chief executive of Bethlehem Steel: "It's inexplicable to me how the commission found that those unfairly traded imports were not a cause of injury." The decision also rattled Wall Street. Investors who had bid up the price of steel-company stocks earlier this year quickly drove them down. Shares of Bethlehem Steel closed Friday at 14 1/2, down 3 7/8 for the week; USX (U.S. Steel) finished trading at 30 1/8, down 6 1/4. Foreign competitors are not the only ones Big Steel must worry about. The larger, older companies now face brutal competition from a nimble new breed of American firms, called minimills. Paced by Charlotte, North Carolina-based Nucor, minimills have swiftly grown to claim about a third of the $60 billion U.S. steel industry. The little guys recycle old car bodies and other scrap into steel and hire mostly nonunion workers. That makes them far more efficient than the cumbersome giants that must create pig iron before making steel and that employ aging, unionized work forces. The bottom line: minimills can produce a ton of steel for about 15% less than larger steelmakers. Such savings enable minimills to post profits while their big brothers rack up losses. Nucor last week reported a $30.4 million gain for the second quarter, up 75% from a year earlier. On the same day, USX reported a $311 million loss for the second quarter. Bethlehem Steel fared somewhat better, narrowing its loss for the period to $5.3 million from $51.7 million a year ago. Major steel firms "are hobbled by a big corporate structure and enormous layers of management," maintains Ken Iverson, Nucor's outspoken chairman; he adds that they are saddled with plants "so antiquated that they should be shut down." The most disturbing thing is that the red ink continues to flow in an industry whose members have been striving for more than a decade to become first-class competitors. Though they have built only one new plant since World War II, American steel giants have invested more than $30 billion since 1980 in modernizing their facilities. The giants have also slashed their labor forces from 375,000 workers two decades ago to about 125,000 today. All that has paid off in greater efficiency and better-quality steel. "For several years, we used 50% Japanese steel," says Craig Corrington, the manager of a Chrysler stamping plant that punches out steel hoods, roofs and fenders. "We did it because of the quality. Now that the Americans have closed that gap, it just makes more sense to buy domestically." Still, it seems that the big American firms are not quite ready to compete in the world economy. They owe many of their tenuous gains to the weak dollar, which jacks up the price of foreign steel; that has helped reduce the imports' share of the U.S. steel market from a peak of 26% in 1984 to about 16% today. "The nonunion companies are world-class leaders," says John Tumazos, who follows the steel industry for the firm Donaldson Lufkin Jenrette. "The competitiveness of the large, traditional companies results primarily from the weak dollar." The future of Big Steel may ultimately rest on how well the major firms can compete with the homegrown and highly profitable minimills. The big companies "have done a lot, but they still spend far too much, and their labor is far too expensive," says Robert Crandall, a Brookings Institution economist. "Their most sensible strategy would be to gradually phase down their operations and focus on their best plants." While the giant steelmakers lost a battle to their foreign rivals last week, the real war is shaping up as an all-American struggle. </body> </article> </text>