U.S. Steel's selection of former Gerdau and Alcoa executive Mario Longhi as its No. 2 executive took some industry executives by surprise.
Mr. Longhi, 58, was named chief operating officer of the Pittsburgh steel maker as part of a management realignment that analysts said will give chairman and CEO John P. Surma more time to focus on long-term strategy.
He will report to Mr. Surma and be responsible for U.S. Steel's sheet mills in North America, its plant in Slovakia and the tubular business.
A native of Brazil, Mr. Longhi was previously president and CEO of Tampa, Fla.-based Gerdau Long Steel North America, a unit of Brazilian steel producer Gerdau. Prior to his six years at Gerdau, he worked at Alcoa for 23 years.
Analysts noted that Mr. Longhi has more experience managing aluminum production and that his steel-making experience was with a non-union producer that made bars and beams, products that U.S. Steel does not make. Moreover, Gerdau produces steel by melting scrap in an electric furnace while U.S. Steel relies on iron ore melted in blast furnaces to produce sheet steel.
Charles Bradford, of Bradford Research in New York, said that while Mr. Longhi's steel industry experience does not relate to U.S. Steel's processes or products, he has good management and people skills that will help the company.
Mr. Longhi will be paid a base salary of $820,000, according to a disclosure U.S. Steel made with the Securities and Exchange Commission on Monday. He was awarded $200,000 in restricted stock that will vest in three years and is eligible for another $200,000 in performance awards if the company achieves certain targets over the next three years.
In a statement released by U.S. Steel, Mr. Surma described Mr. Longhi as "a seasoned strategic leader of operationally intensive, international metals businesses."
U.S. Steel also said the three longtime executives who manage each of its business units will report to Mr. Longhi. They are George Babcoke, who heads the company's European operations; Doug Matthews, who is in charge of the tubular business; and Mike Williams, who oversees the North American sheet business.
Mr. Longhi arrives at a time when U.S. Steel and its competitors face severe challenges from imports, overcapacity and weakening economies in Europe, China and other parts of the globe. The third quarter "looks pretty gruesome," Mr. Bradford said.
On Friday, the stress prompted Standard and Poor's to cut U.S. Steel's credit outlook to negative from stable.
Moreover, U.S. Steel and ArcelorMittal, the world's largest steel producer, are in the midst of contract talks with the United Steelworkers of America. The union represents production and maintenance workers at the companies' U.S. mills. Labor agreements that the two producers negotiated with the USW just prior to the financial collapse in the fall of 2008 expire Sept. 1.
USW officials said both companies want to reduce health care and retirement benefit costs for active and retired employees. They said ArcelorMittal proposed a $28-an-hour cut in wages and benefits.
"I think Mario is going to have a lot to worry about," Mr. Bradford said.
Negotiations on issues at individual mills are already underway between the USW and U.S. Steel. Talks on wages, benefits and other national issues are scheduled for later this month.
U.S. Steel closed Monday at $20.93, up 33 cents. The shares are off 21 percent this year.
Len Boselovic: email@example.com or 412-263-1941. First Published July 3, 2012 12:00 AM