USX-U.S. Steel Group
Founders: Elbert H. Gary and J. Pierpont Morgan.
Distinction: When launched, it was the largest business enterprise of
Primary Products: Sheet, tubular, plate, and semifinished steel.
Annual sales: $5.380 billion.
Number of employees: 19,266.
Major competitors: Bethlehem Steel, LTV, Nucor.
Chairman and CEO, USX: Thomas J. Usher; President, U.S. Steel
Group: Paul J. Wilhelm.
Headquarters: Pittsburgh Pa.
Year founded: 1901
Web site: www.ussteel.com.
Over the past hundred years, few companies have mirrored the ups and
downs of American industry better than U.S. Steel. Beginning under the
visionary guidance of an immigrant who once earned $1.20 a week, it
evolved into the largest corporation of its time…in less than two decades.
It helped build the railroads and other key enterprises that shaped a
growing nation, produced vast fortunes for those who founded and
expanded it, pioneered a variety of business and manufacturing
innovations, played a profitable role in both World Wars, and made an
economic powerhouse of the town in which it was headquartered.
At the same time, the firm has always been forced to scramble in a
consistently volatile industry. It suffered as foreign competitors usurped its
market share. Its product fell from favor when cheaper alternatives were
developed. It had to lay off workers, cut the wages of those who
remained, seek help from the government, and battle a hostile takeover
attempt. It ultimately regained its footing, though, by forging joint
ventures, launching foreign subsidiaries, acquiring companies that
provided diversification, updating its business and manufacturing
procedures, and even entering the world of e-commerce.
As result the company remains the top steelmaker in the United States
and a major global source of oil and natural gas. It now also fabricates
commodities out of tin, produces domestic coal and iron ore, provides
engineering and consulting services, and even develops real estate
projects. It has boosted its own exporting operations as well, currently
shipping more than 1 million tons of steel products to some 40 countries
Called the U.S. Steel Group today, it is now one of two publicly traded
units of the USX Corporation–a sprawling energy conglomerate that also
includes a company formerly known as Marathon Oil, which can trace its
roots back even farther than its sister. But despite such credentials and
the resurgence it enjoyed over the past several years, the firm's
significance is no longer near what it was when U.S. Steel was the 19th
century's Microsoft and its driving forces were the era's Bill Gates.
Andrew Carnegie was 13 in 1848 when his family moved from Scotland to
Allegheny, Pennsylvania. The industries younger immediately landed a
$1.20-a-week job as a bobbin boy in a cotton factory, and quickly moved
on when he heard about a better position at O'Reilly's Telegraph in
Pittsburgh. There, he rapidly worked his way up from messenger to
telegrapher. Most of the telegrams he handled were from businessmen,
who were the service's primary customers at the time, and by reading
them Carnegie soon grew very knowledgeable about the world of
commerce and industry. This would, of course, suit him well in the years
In 1852, Carnegie met Tom Scott, who at the time was head of the
Pennsylvania Railroad's western division. Scott offered the young man a
position as his secretary and assistant, and while it paid just $35 a month
Carnegie eagerly accepted for the opportunity to learn about the business
from one of its leaders. His intuition proved correct and over the next
several years he was integrally involved in several important industry
innovations, including the introduction of Pullman sleeping cars. When the
Civil War began, Scott was named assistant secretary of war and Carnegie
followed him to Washington to again serve as his aide. After its conclusion,
Scott offered his protégé the post of railroad superintendent. Carnegie
refused, however, deciding it was time to strike out on his own.
Carnegie had managed to save a little money and initially made
investments in several companies. Recognizing the increasing importance
of iron and steel, he ultimately sold most of them and in 1872 bought the
Homestead Steel Works in Pittsburgh–a city he was familiar with, and one
perfectly positioned to become the center of the growing industry by virtue
of its access to raw material and potential markets. By 1888 his business
was booming, becoming one of the first "vertically integrated" industrial
concerns to control cots at all levels of operation from the limestone
quarries and iron-ore mines to the steel plants and rolling mills. In 1899
he consolidated everything under the Carnegie Steel Company banner.
Steelmaking was a glamorous field at the end of the 19th century, and
magnates like Carnegie were famous as well as rich. It had advanced over
the years into a big-time business that attracted entrepreneurs and
financiers anxious to have a hand in the industry responsible for building
railroads and other important products like the newly introduced
automobile, and by the late 1800s some 20 major companies were vying
for the lead in production.
Among the biggest players in the game were banker J. Pierpont Morgan
and industrialist Elbert H. Gary, who in 1898 had jointly founded the
Federal Steel Company. Setting their sights on controlling the entire
industry, the pair began purchasing scores of competitors including
Carnegie's firm–paying an astounding $492 million for the right–and
following up with acquisitions of other companies such as American Steel &
Wire, American Tin Plate, and National Tube. In 1901 they launched the
consolidated amalgamation as U.S. Steel, which, with a capitalization of
$1.4 billion, was then the largest business ever formed. Gary, whose name
would to on to grace the Indiana city where its main plant was located,
became the company's first chairman.
While Carnegie turned exclusively to philanthropy, donating over $350
million to various causes until his death in 1919, Morgan and Gray shifted
U.S. Steel into high gear. And in its first year, their new company
accounted for two-thirds of all steel production in the United States.
Railroads, automobiles, heavy machinery and construction projects utilized
most of it, and the need grew so great as the industrial age proceeded
that a few other large companies also found profitable niches in the field.
The demand for its product kept increasing through both World Wars, and
U.S. Steel remained at the top of the heap. By the 1950s, however, the
trend lines started moving the other way. Fledgling European and
Japanese competitors rebuilt their facilities with newfangled production
techniques known as basic-oxygen and continuous-casting, giving them a
leg up on U.S. companies still using the open-hearth method employed
since the previous century. This allowed the overseas firms to underprice
domestic producers on the growing world market, and the American share
fell from 57 percent in 1947 to 29 percent a decade later. Imports by then
also accounted for nearly one-fourth of all steel used in the U.S., while the
emergence of plastic and aluminum further trimmed demand.
Mills and foundries shut their doors, employment dropped, and
Pittsburgh's once-booming industrial parks were abandoned. The 1980s
proved the most painful time of all, as industry-wide losses reached $12
billion. Some 60 percent of its 428,000 workers lost their jobs, those who
didn't were forced to accept dramatic pay cuts, and American companies
sought government help in limiting imports. U.S. Steel itself responded by
restructuring, selling off several units (such as an oil field supply business
and a domestic transportation subsidiary), and entering joint ventures with
companies based both in America and abroad.
The biggest change, however, came in 1982 when the company acquired
Marathon Oil–a huge Texas-based firm, founded in 1887, which
immediately led to the doubling of U.S. Steel's size. Four years later the
company purchased another giant energy business called Texas Oil & Gas.
It then changed its name to the USX Corporation to acknowledge its new,
The emergence of USX and the resurgence of profitability that followed
soon attracted noted corporate raider Carl Icahn, who tried and failed to
take over the company's steel operations in 1986. He did grab some 29
million shares, or slightly more than 11 percent of the firm, however, and
speculation raged in 1989 that he would try again. The slimmed down but
diversified company certainly warranted such attention at the time, as
profits from the steel operation along climbed to $501 million from $125
million the year before. USX had brought this about in part by pouring
millions into its facilities, replacing the open-hearth furnaces of old with
modern oxygen-fired designs long favored by foreign competitors. The
Reagan administration had also helped by implementing voluntary import
quotas, which pushed up prices. For the first time in decades, Big Steel
USX restructured in 1991 to make publicly traded units of its two arms,
which it renamed USX-U.S. Steel and USX-Marathon. It sold a number of
non-essential businesses during the following years, and entered new ones
like power generation. Additionally, it launched joint ventures in Europe
Entering its third century, U.S. Steel proved it wasn't stuck in the past by
purchasing a stake in an Internet company called e-steel and announcing
plans to sell its products online. It also bought Slovakia's biggest
steelmaker, VSZ, and committed $700 million to modernize its operations
and make it the most significance producer in the emerging markets of
central and Eastern Europe.
A slow-down in orders in mid-2000 raised some concern throughout the
industry, even as profits were rising at U.S. Steel and other American
firms. But while no one realistically expected the business to ever
recapture the profitability of its hey-day, when people like Andrew
Carnegie and J.P. Morgan made millions from it, observers did expect the
field's leading company to continue making as significant an impact in it as
it had for the past hundred years.