“We’re so bad we know we’re good. Blowin’ your mind like we knew we would…” The parallel probably stops at this line. Of course, my beloved Bears went on to beat the New England Patriots 46-10 back in 1985. Somehow I doubt that some of these CEOs will come out as victorious.
Certainly US Steel CEO Mario Longhi has the “right” credentials. As a long-time metals industry veteran (he grew up inside the Alcoa organization and most recently held the top job at Gerdau), he knows his new employer will need to re-make itself à la GM (maybe just short of that). Rumor runs rife that US Steel faces very serious headwinds. It will take a big plant closure, pension reforms, and layoffs to help that company achieve a turn-around (US Steel last earned a profit in 2008). Longhi certainly knows something about cost-cutting, which US Steel will likely have a lot of.
But the mark of any good CEO comes not from what he can cut but what he can grow.
Which brings us to the consultants
In early September, Russian steelmaker Severstal OAO promoted Saikat Dey, a former associate principal from McKinsey, to the top job in North America. He also served as the chief strategy and procurement officer for Severstal. But Dey has his work cut out for him as the firm has failed to turn a profit since Q1, despite running at near capacity.
Dey also lacks industry experience, which may prove a liability. Nonetheless, some of the US performance metrics appear positive. At McKinsey, Dey worked on “developing integrated strategies for commodity companies to help manage cyclical demand, pricing and margin environments.” He’ll certainly need to put those skills to the test!
And another Russian steelmaker, Evraz, made some management changes from the same playbook as Severstal placing an ex-Booz consultant into the top job. But Conrad Winkler, unlike Dey, appears to have some real wins under his belt, including growing the company’s rail business to the number one spot in North America (according to an Evraz press release) and improving the rod and bar business. According to insiders, he possesses both a ton of smarts and solid operations and supply chain experience across many manufacturing industries. The short-term evidence seems to bear this out when examining the numbers from a North American perspective:
Source: Evraz (data in table from 2010-2013)
Steady as she goes
Despite the management changes at Evraz, Severstal, and US Steel, among others, a few companies have maintained some semblance of stability including Arcelor Mittal’s Michael Rippey, who has remained in his position since 2006, and Gerdau’s Guilherme Gerdau Johannpeter, who took the helm in June of 2011.
Nucor also made a CEO change in January of this year when Dan DiMicco handed the reigns to John Ferriola. But unlike nearly all of Nucor’s peers, the management change followed a carefully planned years-in-the-making process. Ferriola spent over 20 years at Nucor before taking the top job.
The CEO shuffle within the steel industry has brought changes that some say will permanently change the industry. The days of amity amongst steel chief executives in helping shutter excess capacity and bring the industry together to make it more globally competitive likely have passed.
And that’s too bad. The steel industry will need to find its game to outrun the aluminum guys.