MOBIL'S LATEST move in the great merger wars is an extraordinary display of unbridled financial power. Mobil is now in single-minded pursuit of Marathon Oil's rich reserves in Texas and, in the heat of the chase, appears to be giving very little time to any larger consideration. Mobil wants Marathon's Texas properties, Mobil is prepared to throw staggering resources into this acquisition and, as far as Mobil is concerned, that's that. Checked, at least temporarily, by U.S. Steel, Mobil has now swung around with a threat to retaliate by taking over U.S. Steel itself.
Even those spectators who--like ourselves--are not sentimental about the steel industry will find this possibility dismaying. It has little to do with the traditional anti-trust rules. Both steel and oil industries are competitive, and no combination of mergers among these three companies would greatly affect that competition. The concern arises, rather, in the prospect that the country's largest steel company might come under the control of a different management, with an entirely different tradition and the single motive of stripping one asset away from a subsidiary.
Mobil's threat is credible. It has already offered $6.5 billion for Marathon. In contrast, all of U.S. Steel's stock, at current prices, is worth about $2.7 billion. No doubt a takeover would drive the price of the stock up substantially, but the point remains that by far the larger company--U.S. Steel, with nearly one-fourth the capacity of the entire American integrated steel industry--can be bought at a lower price than Marathon, the seventeenth-largest American oil company.
Two powerful trends over the past dozen years have profoundly changed the course of American industrial development. Energy has become very much more expensive, and international trade has expanded enormously. The first of those trends has enriched the large oil companies to a point at which their central preoccupation is to find useful ways of investing their profits. The second has severely restricted the markets, and the profits, of many of the older heavy industries in this country--notably including steel. It is necessary and right that the steel companies should have to shrink and move into higher technologies. But the large numbers of jobs in steel mean that this transition has to be accomplished within certain speed limits. Mobil, an exceedingly capital-intensive company of great technical skill, gives little indication of possessing the patience that this process will require, or the sensitivity to the social strains that it will impose.
The rise in oil prices has shifted the flow of wealth among American businesses, benefiting the energy sector greatly at the cost of nearly everyone else. Mobil's challenge to U.S. Steel sharpens the question of whether it will be necessary for Congress to impose a brake, not to try to stop change, but to prevent the lucky companies from running roughshod over the rest. The remedy is not more anti- trust regulation. The remedy is an increased windfall tax on oil.