A group of top steel company executives led by US Steel Chairman, CEO and President Thomas J. Usher and Nucor Corporation Vice Chairman, President and CEO Daniel R. DiMicco have agreed on the need for immediate action by the federal government to deal with the effects of injury to the domestic US steel industry caused by surging imports and to encourage necessary consolidation and capacity reductions in the industry.
The steps needed include a strong and comprehensive remedy under Section 201 of the US Trade Act of 1974 and the removal of barriers to consolidation. Such steps would encourage market-based, individually determined consolidation and capacity reduction to take place in the domestic industry.
These steps have gained the support of numerous members of both the American Iron and Steel Institute and the Steel Manufacturers Association.
The first step that needs to be taken is a decision by President Bush to implement a strong, comprehensive and lasting Section 201 remedy.
‘Without this the US steel industry will have little opportunity to make the changes in the structure of the steel industry needed to ensure a successful and lasting recovery,’ said Usher.
‘The American steel industry started this 201 process unified, and we remain unified. Now it is up to the President to follow though and provide a strong remedy to get the industry going again,’ said DiMicco.
Usher and DiMicco emphasized that – as a minimum – a 40% tariff rate is a critical part of the remedy. The tariff must extend for a four-year period and cover the full range of products where injury has been found by the ITC. These products include slabs, all flat roll, steel pipe and tubes, rebar, and other long products.
Anything less than the 40% tariff remedy would not provide enough relief for the industry and would likely make consolidation too risky for any company to undertake.
The second step needed from the government is the removal of the principal barrier to consolidation – employee-related obligations that certain steelmakers have accrued through prior restructuring actions as well as those that will result from future rationalisation activities.
Usher and DiMicco concur that such obligations of domestic steelmakers that may be acquired by other domestic steel companies, as well as obligations to workers displaced in any subsequent rationalisation, should be reassigned to relevant governmentagencies, with existing government programs absorbing that cost to the maximum extent possible.
Usher and DiMicco noted that no direct government payments to any steel company are contemplated and that acquiring companies would remain responsible for their own obligations. DiMicco commented that under this approach the government would be assuming the same obligations that would have become its responsibility via the Chapter 7 liquidation process.
Such steps by the government would permit meaningful, individually determined consolidation of the domestic industry to take place. Consolidation would reshape the industry, which is highly fragmented and chronically undercapitalised, and make it more stable, financially secure and globally competitive. Failure to consolidate is likely to result in a chaotic process of bankruptcies and liquidation in the domestic steel industry, which would be disruptive for customers, suppliers, employees, creditors, shareholders and communities.
Usher and DiMicco and other steel industry executives expressed their agreement on the importance of maintaining a healthy American steel industry, noting that the steps described above would also be responsive to the Bush Administration’s call for steel industry restructuring in connection with its international steel trade initiative, an initiative fully supported by the US steel industry.