'Nominal' sale small price for U.S. Steel's Serbia pullout
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Early on during its Serbian adventure, one of the biggest challenges U.S. Steel faced was persuading workers at the formerly state-run mills to behave like Western workers. That meant wearing a hard hat, something many workers never had seen before; not drinking on the job; and understanding the concept of profit sharing.
As monumental as those challenges seemed then, they pale in comparison to the problems that caused U.S. Steel to pull the plug on its Serbian operations, which reverted to government ownership Tuesday.
U.S. Steel said the sale price was "nominal." Serbian government officials said it was $1.
The red ink was anything but nominal. Chairman and CEO John P. Surma told analysts Tuesday the Serbian operations lost about $65 million in the fourth quarter alone. Losses for all of 2011 exceeded $200 million, he said.
"We simply could not continue to incur operating losses in Serbia," Mr. Surma told analysts during the steel maker's fourth quarter earnings call.
Viewed through the earnings models that serve as compasses for Wall Street analysts, unloading Serbia at whatever the cost was a good thing.
"I'm knocked out on the Serbia sale," one gushing analyst told Mr. Surma. "Really impressive that you were able to do it so quickly and so cleanly."
As much relief as the divestiture brings investors, any post-mortem of U.S. Steel's Serbian initiative deserves a broader perspective.
When the Pittsburgh steel maker paid $33 million for mills in Smederevo and Sabac in 2003, Serbia's unemployment rate was 30 percent. Its economy was ravaged by a U.S.-led NATO bombing campaign in 1999. The purpose of the U.S. offensive was to cripple the economy and discredit the policies of President Slobodan Milosevic, who died as an invited guest at a war crimes tribunal.
First Published February 5, 2012 12:00 am
