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Originally posted by Scopulus Argentarius
I agree with some of what you say, however you tend to paint with a broad and omni-condemning brush (an observation, not an insult). Please let me know what/who your sources are.

Even back in Cellar Mark 1, I have been pointing to big American steel as perfect examples of bad management. This anti-innovation attitude in Bethlehem Steel, LTV, Jones and Laughlin, Inland Steel, National Steel, etc has been well documented in The Economist, Wall Street Journal, Philly Inquirer, as well as some books that specialize in particular plants such as Sparrow Point and Fairless Hills, and, of course, the PBS documentary Skyscraper. Which of my hundreds of sources would you have me cite?

How about when Honda started making cars in Ohio about 1980. In order to get locally produced steel, Honda hired Nippon Steel to teach Inland Steel how to make steels that were commercially standard most everywhere, were not available in the US, and that were required for the Honda Accord. I believe that is from the book "Honda Story".

Steel industry management arrogance was even exposed by John Kennedy in a very embarrassing exposure of the industry's collusion to set monopolistic prices. Setting prices when they had so much cash, they could build an entire integrated steel mill - then considered THE most expensive manufacturing plant - state of art - without any outside financing.

We have known for the past 20+ years that the enemy of big steel was its own anti-innovative management. Read the accounting rags of 20 years ago that paraphrased management mentality. Back then the problem was said to be that capital was so expensive. Classic MBA thinking that always pointed to steel plants as examples. Of course those same accounting rags forgot to mention that semiconductor fabs cost more and yet had no problem returning a profit. Which industry innovated? Capital is always too expensive when your are only rebuilding the same old obsolete technology.

Capital was not the problem. 20 years ago, Nucor was innovating, also raised capital, and scored a profit every year in those 20 years. Still no one noticed the problem? It was not capital. The Economist bluntly stated it again on 4 Jan 2001:

Over the past 25 years, steel from domestic mini-mills has taken far more of the integrated giants’ market share than have foreigners. Nucor is now worth more than the three leading integrated makers combined.

Nucor did not even exist 30 years ago. Who was so blinded by a blast furance as to not see the steel industry story for all 20 years? Certainly not the MBA management. They traditionally never worked where the work got done. They had no idea of what was innovative meaning management had not a clue about electric arc furnances. Avoid risk which meant avoid innovation.

Did Nucor just appear out of thin air? Why were overseas steel companies even in countries with higher paid workers also earning profits when USX, et al were covering up their losses by playing money games with pension funds and running for government protection? Remember that 1990 story during the George Sr administration of grossly underfunded big steel pension funds? Meanwhile, even when paying their employees more money, Nucor was earning profits.

Big steel managment has been the enemy for decades. When it came to new alloys, Japan was world dominant. Zincometal is a classic story. In the 1980s, a roll of US steel would not lay flat on the table. Japanese steel lay flat, easy to layout, every time. New manufacturing methods were by Korea, Japan, and Europe. At one point, the world leaders in steel were British Steel and Unisor. Neither US Steel nor Bethlehem Steel could make the list that represented most industrialized western countries. Once US Steel and Bethlehem Steel were one and two on that list. Even Russian and Kazah steel now costs less to manufacture than American steel. Two world dominate steel manufacturing countries, Japan and Russia, lead an international program about three years ago to reduce excess capacity in world wide steel production.

World top steel companies today: Unisor, POSCO, Nippon Steel, LMN, Corus, NKK, ThyssenKrupp.

When it comes to playing money games, MBA dominated companies such as USX, Bethlehem Steel, and LTV were champions. Even during the Bush Sr administration, these companies were in gross violation of underfunding their pension funds - more money games.

The Economist noted an underlying problem in 17 Sept 1998:

For a glimpse of what is wrong with America’s steel industry, drive along the southern shore of Lake Michigan. In the hour or so it takes to get from Gary, Indiana, to Chicago you will pass nearly half a dozen full-scale integrated steel plants, each with its own supplier network, inventory, production schedules, marketing and sales forces. In any other industry, somebody might have forged a single firm out of so many operations. But, as steelmen will tell you in sombre tones, their business is different. American steel has enjoyed protection of one sort or another for most of the past two decades. And this has allowed it to put off much-needed consolidation. ...
Even if big integrated steel firms manage to rebuff steel imports, they face two tougher threats. The first is the encroachment of “mini-mills .... For years, the big steel makers pooh-poohed such operators as small fry capable of making only low-quality steel. Yet Nucor, the most succesful mini-mill firm, has been relentlessly advancing on US Steel (see chart); it is set to become America’s biggest steel maker by the end of next year. The technology is so cheap and flexible that mini-mills, which accounted for only a fifth of American production 20 years ago, now make up almost two-fifths.

Ok, if you did not know 10 years ago how badly managed American big steel companies were, well how could you not miss the Nucor story by 1998 - unless you talked in those somber tones like myopic MBA educated big steel industry executives. Of course their industry is different because top management could not see an innovation if it bit their leg off. Consolidate? Instead, run to the government for more protection. It is more rewarding. That is what big steel has done about every five years.

Many countries have lead in steel innovation that was once an American tradition. Ispat is an Indian based international steel producer - just another example that innovation is alive and necessary in the industry. Economist of 8 Jan 1998:

[Ispat] was among the first to spot two trends in steel-making technology. One was a shift from traditional blast furnaces to more efficient mini-mills, which were championed by America’s Nucor. ... Mr Mittal also realised that the price of the raw material for mini-mills—steel scrap—would rise as more mini-mills were constructed. He therefore invested in a substitute for scrap known as direct-reduced iron (DRI), and now produces more of it than anyone else.

Cited were recent Economist articles because they are the most convenient. But let's take this gem by David Halberstam in 1986 of the year 1982. Even back then the American steel management was playing money games rather than innovating - as any product oriented person could easily see:

The steel industry was in dreadful shape. ... On roofs of their building were painted hugh for-rent signs with phone numbers ... in case anyone wanted to rent a steel mill. The steel business, even more than the auto business, was suffering dreadfully, unable to compete .... US Steel, once one of the most powerful and arrogant ... now hoping in fact to simply survive, had moved to merge with Marathon Oil. Only a partnership with a rich oil company, its executives believed, would offer it any kind of future. Who otherwise would buy stock in US Steel, an ailing company in a moribund industry that could no longer compete.

So while MBAs in big steel were playing money games (merging with big oil to coverup the lack of innovation), the industry's future (Nucor, et al) were already earning profits doing what MBAs cannot do - innovate. Since big steel could not innovate, instead they played money games as they still do today. The brush can paint broadly because big US steel companies have been that arrogant, and that anti-American for so long as to keep running to government for protection even during Reagan's days . Big steel should have been driven to near bankruptcy, like Chrysler and Ford, decades ago to eliminate the MBAs. Instead people like Reagan protected their criminally negligent asses. (When Reagn did that, my brother-in-law and his company were forced from American shores. Yes many of my sources are personal friends - even government inspectors in Sparrow Point MD). We pay to save their sorry asses in part because too many of us don't have a clue how anti-America big American steel has been for so long. Every five years they go running to government for protection from foreign competition that innovates - forgetting to mention that even little American innovators are costing them even greater business.

Why do we save their lazy asses?

Name significant innovations from a big American steel in the past decade. Zero? No innovation means economic recession. USX is so anti-American as to provide zero innovations- but will play Reaganomics with the pension funds.

Some of the WTC may go to Arkansas where a patriotic steel company innovates. But much of it will most certainly go overseas for reprocessing because USX does everything it can to put America in recession. Mankind is better off if that WTC steel goes to people who advance mankind - earn profits because they are innovative rather than bean counter corrupt like USX.