The US Steel Industry in 2004: Still in Need of Protection?
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Case Code: ECON006 Case Length: 20 Pages Period: 2001 - 2004 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.600 Organization : - Industry : Steel Countries : USA Themes: Economics, Politics and Business Enviornment |
Abstract Case Intro 1 Case Intro 2 Excerpts
Early History
The US steel industry has been in existence since the late 19th century. At that time, competition in the industry was intense and at times destructive. Production and prices of steel were decided by loosely knit agreements, but these agreements collapsed very frequently. Thus, the need for greater stability to control production and prices was felt. Between 1898-1900, the industry consolidated and only a few large companies such as Federal Steel Company, American Steel & Wire Co., National Tube Company, American Tin Plate Co., American Steel Hoop Co., and American Sheet Steel Co. remained in the market.
Andrew Carnegie, and John Pierpont (J.P.) Morgan played a dominant role in the formation of these companies. However, the consolidation failed to provide stability to the industry. The newly formed organizations often fell out over production and pricing decisions. These fights affected the organizations adversely. Steel producers came to realize that cooperation was more profitable than competition, and so in 1901, with the help of J.P. Morgan, they decided to form a giant steel company - the U.S. Steel Corporation (US Steel). In the first year of its operations, US. Steel controlled around 65% of the United States'steel capacity.
Though the stated motive of the creation of US Steel was to form a completely integrated steel company, and to develop export trade, analysts believed that the main motive was to monopolize the industry. In fact, soon after its formation, US Steel acquired properties like coking coal and iron ore mines (essential raw materials for steel) that would give it a dominant position in the industry...
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