History of United States Steel Industry
History of the United States Steel Industry and how they are trying to fix the problems also know as reconstruction.
History of U.S. Steel Industry
In order to understand the restructuring of the United states steel industry in the latter half the 20 century you must understand many factors that caused the fall and restructure of the steel industry. First you must understand the events that caused the fall or sharp decline of the United States tell industry. Then the restructuring of the steel industry is easy to explain once you understand why it fell apart. Also a brief history of the United States steel industry is required to gain a background information on how the United States steel industry go to what it was before it started to decline.
The steel industry in the around the 1900s is the setting up point in history where it started to take off and grow rapidly. In this time period there are a few key factors that shaped the steel industry. First was Andrew Carnegie, an immigrant from Scotland, was a salesman, promoter and financier, but not an engineer; he did not directly supervise his steel mills. His company's great innovation was in the cheap and efficient mass production of steel rails for railroad lines. It was based in Pittsburgh, Pennsylvania, the center of the American industry until the late 20th century. In the late 1880s, Carnegie Steel was the largest manufacturer of pig iron, steel rails, and coke in the world. A consolidation of Carnegie's assets and those of his associates occurred in 1892 with the launching of the Carnegie Steel Company.
By 1900 the US was the largest producer and also the lowest cost producer, and demand for steel seemed inexhaustible. Output had tripled since 1880, and prices fell. Productivity-enhancing technology encouraged faster and faster rates of investment in new plants. However during recessions, demand fell sharply taking down output, prices, and profits. Charles M. Schwab of Carnegie Steel proposed a solution: consolidation. J. P. Morgan and Elbert Gary led the team that worked with Carnegie and Schwab to create United States Steel, by far the largest non-railroad corporation in the world in 1901.
US Steel combined finishing firms with two major integrated companies, Carnegie Steel and Federal Steel. It was capitalized at $1.466 billion, and included 213 manufacturing mills, one thousand miles of railroad, and 41 mines. In 1901, it accounted for 66% of America's steel output, and almost 30% of the world's. This is the base for most on the entire United State’s steel industry when it was first developing.
The United States retained its premier position in metal‐making until the 1970s, when international competition, higher production and labor costs, and questionable managerial decisions led to the collapse of the U.S. Steel Corporation, the direct heir of Carnegie's empire. In Pittsburgh and other locales in the Northeast, the effects were devastating. This region, which had profited so handsomely in the Age of Steel, was forced to look to service industries, education, and information technologies to rebuild its economic base. In other venues, however, the American steel industry staged a renaissance by the 1990s and succeeded in producing quality products in efficient and profitable mills, some large, others belonging to smaller competitors. The history of the steel industry is important to understand the key building blocks behind the massive steel industry that would later collapse and remerge much smaller then what it was.
Flaws in U.S. Steel Industry
There are many things that have been said that causes the collapse of the United States steel industry. Here are some major key factors why the steel industry fell collapsed. The first thing that helped the collapse of the steel industry along was something that the United States brought upon themselves. A major objective of the United States foreign policy during the 1950s and 1960s was to promote a rapid economic development in both Japan and Europe. This has been accomplished to such a high degree that the United States created strong rivals, especially in the steel industry. The United States also accused these rivals of exporting their steel products at prices below cost. This was a major problem because this was the starting point in which the steel industry realized that they were to good at what they did by sharing their steel production methods and information with other countries.
Another key factor that plays a important role in the downfall of the steel industry is technology. By the 1970s the united states clam to be at the for front of steel making technology. This was not a true statement at all once a close look is taken at the United States steel industry verse the Japanese steel industry. To start of the heart of steel making is the blast furnace. The entire U.S. industry was using old style open hearth furnaces verse the Japanese oxygen furnace. The oxygen furnace is much more efficient the open hearth furnace. So instead of upgrading to the O.F., the U.S. just made bigger O.H.F to make up for the lack of efficiency. The reason for this was because it was cheaper to build bigger not more efficient furnaces.
Another process was continuous casting, Japan had been using this process ten years earlier then the United States this would cost the United States more efficiency in the long run. The last piece of technology that the U.S. took a long time to put in their plant was computers. With computer Japan could deliver product faster, better customer service, and automate some function in the plant. The U.S. would take almost a decade in order to get caught up in the computer upgrade. A small but key factor was the U.S. mentality about themselves and the other countries. The U.S. refused to see the writing on the wall when it came to their flaws. They chose not to see that they were falling behind in the race to produce steel faster and more efficient. They also did not believe that their rivals could not match them in technology and production rates. The U.S. was wrong in their mentality; they were falling behind in the research & development of new steel producing methods and being out produced in volume in the world steel industry. These three factors where major reasons why the steel industry collapse and need to be restructured, bit what would it take to get the U.S. steel industry back in the game.
Restructuring of Steel industry
The restructuring of the steel industry would be a simple one since the problems within the industry caused the collapse of it, but will take time to get it back up and running. The government’s helping hand in the effort to shore up the failing steel industry has served to reduce the sense of urgency heretofore experienced by both industry and the general public. Cutting of cost, more layoffs, trimming of capital spending and contracting of capacity base are the steel industry apparent future. One of the main questions that has to be answered by the steel industry Is how do we remedy inefficiency? Only the combine efforts of involved in the manufacturing of steel can answer that question. Unless the operating philosophy of the American steel industry changes, from the CEOs down to the floor sweeper, the steel industry may suffer the worst result and that will be total failure.
A master plan, a plan of action is needed in order to get the American steel industry was going to survive under the capitalist system. Every company will have to devise and fallow through its own plan, but there are irreducible elements of such a plan that must be accepted and implemented. Five general guide lines for good overall steel production are: 1) integrated steel production is the most rational and efficient method to make most of resources. 2) the efficient use of raw materials is urgently necessary 3) high grade steel products should be considered for saving steel consumption 4) operations should be modernized and mechanized 5) research activate on steelmaking must be streamlined and strengthen. These five guide lines are what the U.S. rivals have used to pass the United States in the steel industry and the United States must go back and start from scratch to rebuild.
Three key aspects of the steel industry must address management, technology and the labor/ unions. A new management philosophy was used to get the over mind set of the plants long and short term goals in the right path. First mental factor was the management has to always focus on the long term profitability not the short run. By doing this the plant may struggle now but will build up capital and continuous operations. Next they must continually pay attention to the market and realize when to switch to a more profitable product. Plant location is key, the plant should not stay in a location due to historical or personal reason, but move to achieve effect operations.
The next step in rebuilding the steel industry plants must adopt modern technology. In order to optimize the application and rewards of modern technology, direct and close contact must be reestablished between Research & Development operation and engineers and sales. Also the steel industry aggressively acquired new and developing technologies and adapted them to their plants. Also the phasing out of obsolete technology must be an ongoing process. This process of developing new technology and getting rid of the old equipment is an ongoing process and is key to rebuilding the steel industry. The next sector that needed to be redone is the labor unions.
The labor unions claim that they don’t make enough and they work to many hours. The steel managers claim that the workers don’t work hard enough and are not well trained. What was done is that the steel workers will be paid well, but must keep up on their training. The reason for this is because of all the new technology that will be integrated into the plants at a fast rate. The workers will have to be trained and updated in order to run the equipment. Both have agreed that they must work together, because they both depend on each other. The manager needs the workers to produce the steel and the workers need the manager so they have a job. So both must work together to achieve a long term relationship that benefits both parties.
Another major problem that needed to solve was where they are going to get the money to restructure the steel industry. They needed the money to build new capital and put money in to research & development of new technologies in order to bring the plants in to the new age of steel production. Since investing in the steel industry was not seen as a high profit investment due to its sudden collapse. So Most of the investors had to be shown that yes a profit was not going to be made with the next few years, but over a long term period of time thy could see a return on their money. They also sold investors on the fact that the steel industry is a key factor is defending the nation from invaders and securing our borders: they made it seem like it was a key factor in national defense. Over time they got people to invest in the steel industry.
My uncle and his father owned their own company before, during and after the steel industry restructuring. They were private company that would go out and find projects that were going to be built in the future. Then they would go out and find a company and price out how much it was going to cost. Most of these projects where steel based like bridges, railroads, and smaller building. My grandfather is 79 years old and his son is 51 years old, so combine they ran the company for about 50 years. My grandfather say that in the beginning It was easy to get contracts because everything was being built of steel because it was cheap in the 50s and 60. So his company was doing well, but he started to notice he says in the 70s that more and more imported steel was coming in to the United States. He also said that the steel was cheaper than the American made steel. Well for his business the cheaper the steel was the more money he could make because he could charge bigger commission on the project because the project manager was saving money on the low cost of steel.
When the American steel industry fell apart he said business was still plentiful, but there was not a lot of steel being made. There was the imported steel, but the prices had gone up since there was no real competition from the American steel industry. With the fall of the U.S. steel industry his company had to rely on lots more imported steel and less local steel. My uncle got in to the company right out of high school and only saw the business from the 80s to the present. My uncle says that the company was struggling because the imported steel was cheaper than the American steel due to the fact that the American plants and management system had to be totally redone. This was costing the American money and production efficiency.
Toward the end of the 90s my grandfather stepped down and retired, but he say the writing on the wall for the business. He said that it was not cheaper to go to a company outside of the United States and buy the steel and ship it overseas then it was to price out the order in the U.S. In 2005 the company was sold and everyone moved on to do other work. The main cause that my uncle says why the business could not stay open was the fact that it was built on cheap local steel which did not have a high transport cost and all the business was done in the united states. Also the fact that the company did not have the right connections and people overseas to do business with overseas countries. He says that if the steel industry had kept pace with its rivals overseas they would still be in business. My uncle now works as a salesman for a company that does the same thing his did but they are much larger and have more resources to pull from. He prices out how much projects will cost and were the cheapest steel Is for sale for the company.
The restructuring of the American steel industry was going to happen, but they did not want to realize it until it was too late. It affected many things from the company down to the floor sweeper in the plant. The steel industry was and still is a very important piece of the United States economy. It is growing slowly and taking baby steps to make sure that the same mistakes will not happen again, but as the American companies play catch up; other countries are moving ahead with new technology. The American steel industry will recover in the long run if it stays on track, but another slip will be worse than the last one.