Industry experts say U.S. Steel Corp.'s choice of a seasoned leader from
outside the company as chief operating officer could signify it is looking
ahead to its top executive's eventual retirement.
The steelmaker on Monday named Mario Longhi, a former executive with Alcoa Inc., COO and executive vice president, a move some experts believe positions him to one day become CEO.
"I think he's a successor to (John) Surma," said Charles Bradford, an analyst for Affiliated Research Group in New York. "He's been a major (candidate) for a spot somewhere in the industry. People of his calibre are pretty few and far between."
U.S. Steel said Longhi, 58, hired for the position that has been unfilled since John Goodish retired in 2010, will work at the headquarters Downtown. The company did not make Longhi available for comment.
"I've been surprised they hadn't done this earlier," said Bradford. "It seems inconceivable Surma would want to be CEO and act as COO at the same time."
Company spokesman Charles Rice said Surma has "made no announcements" about retiring. He said Longhi's addition to "a very experienced executive operations team" would enable Surma to spend more time addressing the needs of customers and investors and U.S. Steel's strategic direction.
"Mario is a seasoned, strategic leader of operationally intensive, international metals businesses and is well known and highly regarded with the steel industry," Surma said in a statement.
Longhi will be responsible for U.S. Steel's North American flat-rolled, tubular and central European operations and for global operations services.
His hiring comes as the industry and the nation's largest steelmaker weather tough times, analysts noted.
In April, U.S. Steel reported a $219 million first-quarter loss, its 11th loss in the past 14 quarterly periods.
Standard & Poor's Ratings Services revised its outlook for U.S. Steel on Friday to "negative" from "stable," citing depressed steel prices because of too much supply from domestic production and imports. The New York ratings firm affirmed its "BB" rating on the company's creditworthiness.
"The real overhang is the economy," S&P analyst Maurice Austin told the Tribune-Review.
The industry "is a cyclical business," suffering from slow growth in the United States and China and even slower growth in Europe, he said.
The price of pipe and tubular steel, a big seller for U.S. Steel, fell to the lowest levels since January, and prices for hot-rolled steel coil, the main industry benchmark, dropped 20 percent since January, Bradford said.
S&P termed U.S. Steel's liquidity strong but projected the company would be "marginally free cash flow negative" in 2012. An analysis by Bloomberg News gave U.S. Steel a "3.5 percent chance" that it could miss debt payments in 2013.
Longhi was CEO at Gerdau Ameristeel Corp. from 2006 to 2011. He spent 23 years with Alcoa, working in his native Brazil, the United States and Switzerland.
"He'll bring a lot of Alcoa with him, which means he'll be good at managing people and on the marketing side," said Michelle Applebaum, managing partner of Steel Market Intelligence in Chicago, who has known Longhi for many years.
"But it's hard to say he's the next-generation CEO coming, when he and Surma are about the same age," Applebaum said.
U.S. Steel's move isn't the first time a Pittsburgh-based steelmaker has turned to an Alcoa veteran for help in tough times.
In 2003, Allegheny Technologies Inc. hired L. Patrick Hassey as its CEO. Hassey had been an executive vice president at Alcoa, where he worked for 33 years.
When Hassey took over as CEO from James L. Murdy in October 2003, ATI was mired in a streak of eight consecutive quarters of financial loses. It would stretch to 10 quarters before the red ink stopped.
The most important move in transforming ATI was the 2004 acquisition of most of the assets of J&L Specialty Steel LLC, which included a melting facility in Midland, Beaver County, and a finishing plant in Louisville, Ohio.
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