The steel industry, staggered by the recession and collapse of auto production, is emerging as the next target of the Carter administration's new "industrial policy."
A committee of government, industry and labor officials is expected to agree Monday that the industry is facing a critical cash shortage. The industry needs to invest more than $5 billion a year in the early 1980s to modernize basic steel-making plants and meet health and safety requirements but is likely to fall short by at least $2 billion a year, according to committee members.
The steel committee, headed by Commerce Secretary Philip M. Klutznick and Labor Secretary Ray Marshall, is not expected to offer a proposal next week for closing the gap, however.
The answer backed by the industry and the United Steelworkers Union is major reduction in federal taxes for the ailing steel firms, but the Carter administration -- facing a potentially hazardous debate on tax policy with the Republicans in the fall campaign -- is not ready now to back a specific tax-relief plan for the steel industry.
Although some industry officials say that progress has been made toward finding a new trade policy to replace the administration's trigger-price mechanism, aimed at preventing foreign companies from dumping unfairly priced steel in the United States, no policy proposal is expected from the steel committee next week on that issue, either.
Nevertheless, officials involved in the steel meetings said the three sides -- companies, union and government -- have drawn closer on some of the critical issues involving the industry. The search for a common policy on the steel industry follows the meetings this spring involving auto industry leaders, whose report was released in Detroit last week by Carter.
Klutznick said he believes the steel committee will be able to issue a report on the industry's trade, capital and environmental problems before the end of August, to provide the administration's economic policy advisers with a foundation for critical decisions on aiding the industry.
Industry and union officials have no idea how the Carter administration will resolve the policy issues but agreed that there is now a closer understanding of the problem.
"There seems to be a consensus that the industry faces a huge capital shortfall and improving capital depreciation is one way to get at that," said Richard Schubert, vice chairman of Bethlehem Steel Corp.
The industry's bleak financial condition is expected to be underlined soon when the second-quarter financial statements are released. Many of the major steel companies are expected to report losses, some of them substantial.
Since May 3, when the industry was using nearly 82 percent of its plant capacity, steel production has dropped like a stone.Last week, only 53 percent of steel-making plant capacity was in use.
With the industry facing one of its worst years ever in 1980, and facing the prospects of a slow recovery next year, it lacks the resources to replace aged steel-making facilities with newer, larger blast furnaces, electric hearth furnaces and continuous casting equipment, the kinds of modern facilities the basic steel manufacturers must have to remain competitive against European and Japanese competitors, the industry says.