OM in the News: U.S. Steel’s Last Stand–Alabama
“At this unionized U.S. Steel World War I-era mill near Birmingham, the construction of a new furnace signals a major shift for American steelmaking, as the country’s major steel producers face mounting pressure from a flood of low-priced imports,” reports The Wall Street Journal (June 19, 2015). U. S. Steel’s first electric arc furnace in decades is a step toward replacing the iconic steelmaker’s stable of iron-ore-reliant blast furnaces with a more flexible scrap-based process that allows for stopping and starting production when there isn’t enough demand to keep churning out steel.
Just over an hour’s drive away, in Decatur, Nucor, the other big American steelmaker, has been turning old cars and refrigerators into fresh batches of steel for more than a decade, with 2 electric arc furnaces and a flexible, nonunion workforce. The 2 companies are the only U.S.-based steelmakers left in the top 50 global steel producers, a list now dominated by Chinese companies. But they represent starkly different approaches to the same business. U.S. Steel has 2,500 workers currently laid off. Nucor has an unofficial nonlayoff policy. U.S. Steel has lost money in 5 of the last 6 years, while Nucor has been consistently profitable.
The Nucor plant in Alabama produces roughly the same amount of steel as U.S. Steel, 2.4 million tons, but employs 1/3 the workers. Managers and workers emphasize their unique brand of steelmaking. Nucor employees call each other “teammates” and talk up their competitiveness. The company’s incentive-based salary structure means worker salary can range from over $100,000 to less than half that. Workers get a scorecard assessing their performance each time that they make a batch of steel. “A high percentage of our teammates are athletes or military,” said Nucor’s plant manager. “We hire can-do innovative guys who want to bust their butts every day.”
Classroom discussion questions:
1. Outline the human resource differences between the companies.
2. Why are there only 2 American steel producers?