In his first major interview since taking over as CEO of U.S. Steel X -2.97%, Mario Longhi said the company needs to change to remain competitive. Below are edited excerpts of his conversation with The Wall Street Journal.
WSJ: Why haven’t you been more specific about your so-called “Carnegie Way” cost-cutting program, which you say amounts to $435 million this year?
Mr. Longhi: We’re not going to be very specific about what we’re doing because it’s a competitive world, and we’re not going to tell our competitors everything we’re doing.
WSJ: Why does U.S. Steel need to change?
Mr. Longhi: This company has been losing money for 5 years in a row. We were having to go to the banks and borrow money to pay debt. We said this can’t go on forever, this is a road to destruction.
WSJ: Could U.S. Steel change fundamentally? In 10-20 years, could it be a very different company, with all electric arc furnaces, for example?
Mr. Longhi: It could. Everything is on the table, and it needs to be explored, because the world changes, and if you don’t change accordingly, or faster, you get in trouble. We’ve made a decision that [electric furnaces] are going to be part of the portfolio. Is it going to be all? It’s too soon to tell, but we are embarking on that journey.
WSJ: What are you doing to change the culture?
Mr. Longhi: The ultimate goal is that this becomes embedded in how the organization works. Some of our supervisors walk around with three chips in their pocket. They should ask their people a question three times a day and say thank you.
WSJ: How important is headcount reduction?
Mr. Longhi: That’s not the goal. We don’t have a goal to success by firing people, We’ve had a lot of services, for example, that we are in-sourcing. I’ll offer you the opposite of what has been cliché. You fire people, you reduce headcount and that’s a cost improvement. We have lots of contractors. We actually have work going on where we’re training more of our people to do it in-house, better than the contracted work is. And we want to free people from doing just transactional stuff.
WSJ: What’s an example of transactional stuff?
Mr. Longhi: You take a plant controller, who has been spending massive amount of time reconciling all those tables, to make sure the numbers are right. We’re going to take control and automate it, and make sure these people have ability to create different scenarios. And then they create financial scenarios that can tell you where is it where we’re having waste.
WSJ: Where are you starting?
Mr. Longhi: Gary Works [in Indiana] has the widest variety from a product perspective to the levels of complexity. This is where the real beast lies. We’re not going to table with a small thing. We’re structured to go into there. They have sessions where workers give feedback. The plant manager. He now spends 100% of his time on the shop floor with the people.
WSJ: What’s an example of what you’re doing?
Mr. Longhi: Maintenance. Most of the maintenance we used to perform is called reactive maintenance. Now we’re being proactive. We used to just buy the cheapest bearing. Now maybe we pay 30% more for a bearing but it lasts twice as long. There are thousands of fronts going on right now. This is about empowering people.
WSJ: What do you expect out of negotiations with the union next year?
Mr. Longhi: The union employees are a key part of the success of the Carnegie way. There is nothing in the Carnegie way that goes against what the union wants, which is success for the company.
WSJ: So what’s an example of a service that’s been in –housed?
Mr. Longhi: Some mechanical repairs, where there is this outside company that does mechanical repair. We’re training our own people and they’re going to do it better.
WSJ: How do you plan to market your steel better?
Mr. Longhi: The other day, we were on an oil drilling ship. We went there to talk to operators. We’re talking to customers about what kinds of new steels we need to design and create.
Source: The Wall Street Journal
- metaljunction »
- Metal News
Metal News & Events
METALJUNCTION PUBLICATIONS
Coal Insights (English) Monthly
Coal Insights is a ready reckoner for anyone associated with coal. This publication is aimed at tracking everything related to coal in India.
India Coal Market Watch(English) Monthly
ICMW is a one-stop source for all news, data and research pertaining to coal demand, consumption, stocks, spot- and long-term prices with respect to the Indian Market.
India Steel Market Watch (English) Monthly
ISMW is a brand new high-end steel market report, covering all aspects of the steel industry in India.
Steel Insights(English) Monthly
Steel Insights delves into various facets of the domestic and global steel industry such as market fundamentals, raw material price trends, price forecasts etc.