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US Steel Closes Detroit Plant, Lays Off 1,500

Wednesday, January 8, 2020

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U.S. Steel recently announced the impending closure of Great Lakes Works, a company steel mill located near Detroit. The closure is slated to occur April 1. The portion of the mill that rolls sheets of steel will also be closing by the end of next year.

The decision is expected to impact more than 1,500 workers, after the company already laid off 200 employees in 2019.

What’s Happening

According to CNN, Great Lakes Works is closing its iron and steelmaking operations in an attempt to reverse operation losses forecasted for its fourth-quarter revenue. However, the company has reported on the possibility of keeping some adjoining operations opened by customer demand.

"We are conscious of the impact this decision will have on our employees, their families and the local community, and we are announcing it now to provide them with as much time as possible to prepare for this transition," said CEO David Burritt. "These decisions are never easy, nor are they taken lightly."

Reports also state that the U.S. Steel mill will be making cuts on its capital spending plans by $75 million this year, other various cuts to cost and labor costs as well. The company also plans to cut its dividend by 80% to 1 cent a share and will be ending its share repurchases program.

As for the remaining operations, some of the steel production will move to the company’s recently invested $750 million plant in Gary, Indiana, where city and state tax breaks aimed to keep almost 4,000 jobs at the plant. Steel production will also continue at Big River Steel—an Arkansas-based company U.S. Steel is in the process of acquiring.

Another plant located near Pittsburgh will also continue to produce sheets of steel and is currently in the midst of a $1 billion upgrade for its casting operations.

In addition, the company reports that it will remain involved in the steel tube business, where it recently invested $280 million in an Alabama electric furnace to melt down steel scraps for new products.

Burritt adds: “In order to further accelerate our strategy of creating a world-competitive ... U.S. Steel, we must make deliberate but difficult operational decisions. In this case, current market conditions and the long-term outlook for Great Lakes Works made it imperative that we act now, allowing us to better align our resources to deliver cost or capability differentiation across our footprint.”

Regarding U.S. Steel’s decrease in shares and misfortunes, Peter Navarro, the White House's director of the office of trade and manufacturing policy, stated that the company, “did not adapt with the times,” and that the issues were the company’s responsibilities and not a result of the recent tariff deals put in place by President Donald J. Trump.

However, reports claim that the domestic steel industry did receive help through the 25% steel import tariff put in place in 2018, but after a short-term rise in price, issues returned to the industry. In October, U.S. Steel reported its first loss since the tariffs went into effect.

Tariff Deals

In March 2018, Trump imposed tariffs on steel and aluminum imports from other countries. The assigned duties were 25% on steel products and 10% on aluminum.

Companies that felt they needed to use steel or aluminum from another country—because that particular product wasn’t made in the U.S., for example—had the opportunity to apply for an exemption.

By June, the U.S. allowed the tariffs to go into effect for Canada, Mexico and the European Union, after months of discussion of possible exemptions. The U.S. Department of Commerce also announced the first round of exemptions, while noting that it would be investigating whether some companies in the market were taking advantage of the duties and raising prices unduly.

In the spring of 2019, as Trump continued work on updating the United States-Mexico-Canada Agreement, Steel Dynamics CEO Mark Millett went on the record to say he believed a quota system would replace the current tariffs that the steel and aluminum industry were subjected to.

However, some in the aluminum industry were reportedly against the quotas, in fear that they would raise prices on aluminum-dependent goods. In May, Trump announced that the U.S. would lift its steel and aluminum tariffs imposed on Canada and Mexico in exchange for a new monitoring and enforcement system that will prevent import surges into the U.S. As a part of the agreement, Mexico and Canada would also lift its retaliatory tariffs on American products.

In July, Trump signed an order that would see the expansion of the use of American-made iron and steel in federal projects. The “Buy American” platform aims to push the domestic content threshold from 50% to 95%.

And on Dec. 10, officials from Canada, Mexico and the United States signed the deal once again, as Trump has been striving to revamp the 1994 agreement. Though the revised version was signed more than a year ago, Democrats, who controlled the House of Representatives, held out for significant changes to labor rights.

   

Tagged categories: Business management; Business matters; Business operations; NA; North America; Program/Project Management; Steel; Structural steel; U.S. Steel

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