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Down And Dirty In The Steel Belt

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Thomas J. Usher, president of U.S. Steel, was talking to his secretary on the afternoon of May 31 when the first fax arrived. It relayed a one-line resignation from V. John Goodwin, manager of the company's most important plant, U.S. Steel's Gary (Ind.) works. Stunned, Usher asked his secretary to get him the No.2 at Gary, David L. Peterson. But while she was hunting for him, a second fax arrived--with Peterson's resignation. On it went, with Nos.3 and 4. By the next day, a fighting-mad Usher had seen the entire five-man leadership at Gary--plus a sixth recently retired manager--defect to Japanese-owned National Steel Corp.

U.S. Steel Group, a division of USX Corp., promptly sued National Steel, its Japanese owner NKK Corp., and the defecting managers--accusing them of "an insidious raid" designed to "cripple" the nation's No.1 steelmaker and steal its trade secrets. But at hearings on June 6 and 7 at Indiana's Lake County Courthouse in Hammond, Usher and his lawyers vented more steam than evidence, and their request for a preliminary injunction against National was denied. Goodwin and team, meanwhile, quickly took charge of the ailing No.4 integrated-steel company.

More raids could be coming, as the steel industry moves into a new, down-and-dirty era. Competitors have already lured away key plant managers from ultra-efficient minimill operator Nucor Corp. Now, PaineWebber Inc. analyst Peter F. Marcus foresees a "death spiral" for high-cost producers such as National--unless they improve fast. In this climate, Pittsburgh's genteel tradition of refraining from raiding rivals is kaput. "We have a one-word vision, and it's called survival," says Goodwin, who on June 1 replaced Ronald H. Doerr as National's president.

Survival was certainly the concern for NKK's owners in Toyko. Since buying control of National in 1984, they have plowed $2 billion worth of new equipment into the $2.4 billion company, signed a trend-setting labor-management pact, and waited for a turnaround. It hasn't come. Instead, despite last year's recovery in steel, National slid further into the red (chart). Productivity plummeted. And as Japan's recession ravaged NKK's home market, pushing the company to a pretax loss of $736 million for the year ended in March, NKK's patience wore thin. In February, Tokyo told the president of NKK America Inc., Yoshitaka Fujitani, to start head-hunting.

Goodwin was a logical target. The cigar-chomping 50-year-old had come to the Gary works in 1987 following a bitter lockout and had quickly smoothed labor relations, turning a disaster of a mill into one of the world's best. Gary now produces 6.6 million tons annually, more than half of U.S. Steel's total. It has won top quality awards from Detroit and boasts productivity of only 2.9 man-hours per ton--30% better than both the U.S. and Japanese averages. Despite this success, the Japanese knew that Goodwin, who had missed a promotion to Pittsburgh, was growing antsy. "We had a hint that he was looking for a job," says New York-based Fujitani.

HOUSE OF USHER. In late February, Goodwin flew to Washington for a secret meeting with Fujitani and Donald F. Barnett, a Virginia steel consultant. Later, in March, he met in Chicago with two of National's five Japanese board members: Kenichiro Sekino and the chairman, Osamu Sawaragi. They spoke through an interpreter, discussing National's woes. It was at another Chicago meeting on Kentucky Derby day, May 7, Goodwin recalls, that he asked them if they would be interested in the rest of his team. They said yes. Despite widespread anger in Silicon Valley over Japanese hires, Fujitani maintains that the raid was business as usual. "Job-hopping is prevalent in the United States," he says.

On May 31, Goodwin was driving back from Chicago to Gary when he heard on his car phone that his entire team had jumped. He knew Usher would be livid. Later that night, Goodwin offered to help with the transition, but, he says, "we both decided that it would be better for me to clean my desk and hit the road."

What now? Goodwin says he plans to study National before he announces changes. But he knows time is short. National's Tokyo-controlled U.S. board is both impatient and bold. That's a volatile mixture--as he and Tom Usher have just discovered.Stephen Baker in Pittsburgh, with Nancy Pieters in Hammond, Ind.

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