U.S. Steel gave chief operating officer Mario Longhi the additional title of president Thursday, a promotion one analyst said could bolster the cost-cutting campaign Mr. Longhi is directing.
That effort is critical as the Pittsburgh steel producer attempts to record its first profitable year since 2008. U.S. Steel shares are down 90 percent from their June 2008 peak. A weak short-term outlook for the industry and the possibility that the recovery, as tepid as it is, could eventually turn into another recession makes it all the more important for Mr. Longhi to succeed.
Analyst John Tumazos said the purpose of giving Mr. Longhi more responsibilities is to "attack costs and bring a fresh perspective from the outside."
"The company is attacking their costs for their survival and the prosperity of the company," the Holmdel, N.J., analyst said. "What U.S. Steel is doing is the right thing."
Chairman and CEO John P. Surma announced last month that Mr. Longhi will head a cost-cutting and efficiency initiative expected to generate significant savings. Mr. Surma declined to put a number on the target.
"Our spending in these areas is in billions of dollars annually, and a small percentage reduction would be very meaningful to results," he told analysts during a conference call.
Mr. Longhi, a former executive at Alcoa and Brazilian steel producer Gerdau, joined U.S. Steel in July as chief operating officer. As part of his promotion, which takes effect Saturday, he will be given responsibility for risk management and human resources.
According to a securities filing, his salary was increased 10 percent to $900,000 and he qualifies for a long-term incentive award valued at $1.6 million if the company meets performance targets this year.
"Mario is a high quality guy. He has a broad perspective outside the industry," said Steel Market Intelligence analyst Michelle Applebaum. "You have two very powerful, very strong leaders at the top of the company."
Promoting a relative newcomer in an entrenched, political company such as U.S. Steel could give Mr. Longhi more clout to do the job he's been asked to do, said longtime industry analyst Charles Bradford.
"It's just a difficult thing for an outsider to do. This may be the board's way of telling management he's our guy," Mr. Bradford said. "It's a pat on the back from the board to help him get more things done."
The promotion also fuels speculation that Mr. Longhi will replace Mr. Surma, who has been CEO since 2004.
U.S. Steel reported a first quarter loss of $73 million. Mr. Bradford said the company's outlook for the immediate future "is not very favorable" despite the $50 per ton price increase recently announced for its sheet steel. Some industry analysts said the move was more of an attempt to prevent prices from moving lower than it was an effort to raise them.
The industry's prospects are mirrored in the steady decline of U.S. Steel shares since hitting their post-recession peak of $70.95 just over three years ago. The stock closed Thursday at $18.25, up 20 cents. The shares are off 23 percent this year.
U.S. Steel is not the only metals producer suffering. Mr. Tumazos said Pittsburgh specialty metals producer Allegheny Technologies and aluminum producer Alcoa also have failed to capitalize on the recovery.
"All three companies are the same. None of them are in good shape if six to 12 months from now we have a recession," Mr. Tumazos said.