By any measure, the substantial and permanent plant closings and employe layoffs announced Tuesday by U.S. Steel Corp. represent a profound shift in industrial strategy by the nation's largest steel manufacturer.
For one thing, Big Steel doesn't want to become the Chrysler Corp. of the 1980s, marching in step with its union workers to Washington in search of financial aid to guarantee survival.
Thus, U.S. Steel management is making the sort of decisions now that many insist Chrysler should have taken in earlier years -- closing down unprofitable operations, cutting out some products from its heretofore full-line of steel manufacturing, reducing its payroll and paying off the steep costs involved in such a permanent retrenchment (a one-time charge of up to $750 million or more).
U.S. Steel Chairman David Roderick emphasized yesterday that continuing productivity and equipment problems at other company plants mean that additional shutdowns -- beyond the 13,000 permanent layoffs at 16 plants in seven states announced Tuesday -- cannot be ruled out.
At the same time, Roderick said his firm is committed to "continue in the steel business," even though U.S. Steel profits from basic steel operations have been marginal, at best, in recent years.
The plant closings announced this week, scheduled to be accomplished over many months, do not represent a substantial reduction in U.S. Steel production capacity.
Roderick said his firm is reducing by a million tons of raw steel a year the firm's overall capacity -- about 3 percent of current maximum output of 30 million tons.
Given this modest capacity cutback, announced by Roderick in a statement that was devoted primarily to a sharp attack on government regulatory costs, there was some speculation yesterday that the steel giant was using plant closings to dramatize its own unhappiness with government attempts to control imports and environmental costs.
In addition, with bargaining scheduled to begin early next year on a new contract with the United Steel Workers union, Roderick's statements that additional plants may be closed was seen as a warning to labor that the company is planning a much tougher position on future settlements and might abandon the industry's no-strike pact signed six years ago.
On costs associated with facilities required to meet federal pollution standards, U.S. Steel appears to have abandoned a previous policy of fighting implementation to the end, although the fate of some plants still depends on negotiations. And members of Congress were urgued by a company executive yesterday to ease tax and environmental laws to help the industry.
Imports are a more pressing issue, however. Confirming industry rumors that major steel firms are planning to file formal complaints soon about alleged dumping of steel in this country by foreign producers at below-cost prices, Roderick said yesterday that Washington has "flopped" in its enforcement of the laws dealing with what he called improper steel imports.
At a news conference in Pittsburgh, Roderick said that despite the treasury Department's so-called trigger price mechanism, imports are pouring in from Japan and Europe below costs of production. He said U.S. Steel does not support continuation of the program and indicated that anti-dumping suits could be filed before year's end.
The trigger-price system was installed in 1978 in an effort by the Carter administration to head off antidumping suits that could bring about bitter trade fights with key allies. Foreign producers -- mostly owned or heavily subsidized by their governments -- are supposed to pay a special duty when offering steel priced below the "trigger" levels.
Recent U.S. Steel studies have concluded that the government is failing to account properly for inflation in the price mechanism, however, permitting foreign producers to undercut U.S. prices by more than 7 percent.
Steel imports last year accounted for a record 18 percent of U.S. consumption compared with 14 percent a decade earlier. For the first six months of 1979, imports were 13 percent of consumption, according to the American Iron and Steel Institute. But imports have been rising more recently and stood at 17.6 percent in September.
As for U.S. Steel's relations with its workers, Steel Workers President Lloyd McBride said yesterday "we won't leave a stone unturned to see if the decisions (on plant closings) can be reversed." He joined Roderick in blaming foreign imports for the lay offs, stating that "steel is still being dumped here by Europe."
Noting that he was given no advance notice of the closings, McBride expressed surprise at the extent and timing of the decision. But "the signals have been there for some time . . . when the company isn't investing money in a plant, when a facility is not being modernized, you know it's likely the plant will be closed," he added.
Another union official, who asked not to be named, said: "This whole matter is a combination of things . . . It's tied to the recession, to troubles in the auto industry [with falling sales, more use of aluminum]. . . . There's also the desire of the domestic steel industry to reduce its share of domestic steel production . . ."
In effect, this union man said, "what U.S. Steel is doing is saying that it can't compete any more with outmoded plants. A lot of what's happening now has been predicted over the past 20 years . . ." There are only about two or three mills in the country that are technologically up-to-date . . . (domestic) steel is a no-growth industry."
The real question is what will happen in the future. In this week's developments, the most significant fact may be not that some closings of outmoded plants are being accomplished. A more substantial development could be the evidence that U.S. Steel has no plans to grow as a steel manufacturer for the forseeable future and plans, instead, what management now sees as more profitable diversification.
Planners at U.S. Steel now envision no expansion of capacity to meet growing demand for steel and that can only more imports in the future. For example, U.S. Steel has shelved plans for a fully integrated plant at Conneaut, Ohio. Because profitability is so low (return on equity is under 10 percent for the steel industry vs. 15 percent for all manufacturing), U.S. Steel has decided to stay on the steel sidelines until the industrial environment changes and government policy encourages investment.
Sen. Adlai E. Stevenson (D-Ill.) addressed such problems in a recent speech at the Massachusetts Institute of Technology. Current policy for industrial innovation and modernization, he said, is "ad hoc."
A sound industrial policy "would help businesses adjust to change and meet government subsidized competition abroad," he stated, but U.S. policy now "resists change." He called for government help in developing international trade and other measures but opposed the sort of trade restrictions sought for many years by the steel industry.
"Contrary to popular notions about the omnipotence of free enterprise and the irrelevance of government, the most innovative and competitive industries are those which have benefitted the most from government support for technology, including American agriculture and the computer and aerospace industries. If by inadvertence the government stimulates an aerospace industry that dominates world markets, imagine what might be done by calculation," Stevenson declared.