National Steel Corporation

National Steel Corporation was a large American integrated steel producer formed in 1929 through a combination involving Weirton Steel, Great Lakes Steel, and steel, iron-ore, shipping, and furnace interests associated with the M. A. Hanna Company. Headquartered initially in Pittsburgh, the company developed an integrated production system spanning raw materials, transportation, blast furnaces, steelmaking, and finishing operations. Its facilities were concentrated in the industrial Midwest, including Weirton, West Virginia; Ecorse and Zug Island in Michigan; Buffalo, New York; and the Lake Superior iron-ore region. The company was created during the onset of the Great Depression, yet it performed unusually well during the early 1930s. Its proximity to Detroit automobile manufacturers gave it an important customer base and helped reduce freight costs. National Steel reported profits in both 1930 and 1931 and remained profitable throughout the Depression according to historical accounts. Its Great Lakes Steel operation, including the Ecorse works, became a major part of the corporate system. In 1931 the company completed a substantial expansion program, including the construction and commissioning of major steelmaking facilities. National Steel was included in the Dow Jones Industrial Average from 1935 through 1959. After the Second World War, strong demand for steel produced record or otherwise substantial profits. The company remained a significant producer through the postwar decades, but its performance became increasingly volatile in the 1970s as imported steel, changing industrial demand, and structural problems in the American steel sector put pressure on domestic producers. National Steel also diversified beyond steel, acquiring or developing interests in financial services and data-processing-related businesses. The downturn intensified in the early 1980s. Weak demand and growing imports damaged the core steel business, while the company’s diversified structure made management more complex. In 1983 shareholders approved the creation of National Intergroup as a holding company and reorganized the steel operations into separately managed units. The Weirton operation was sold to its employees in 1983, creating an independent employee-owned company. In 1984 Nippon Kokan K.K., a major Japanese steelmaker, acquired a 50 percent interest in National Steel from National Intergroup; it later increased its interest to 70 percent. National Steel experienced further financial and operational difficulty in the late 1980s and early 1990s, including workforce reductions and a bankruptcy crisis. It announced in 1991 that its longtime Pittsburgh headquarters would move to the South Bend, Indiana, area. A contentious 1994 management overhaul brought in much of the former executive team of U.S. Steel’s Gary Works, leading to litigation that was settled out of court in 1995. The arrangement with the Japanese owners remained difficult, and several of the executives recruited in 1994 later left. The company’s final years were marked by continuing industry pressure and a corporate corruption case involving executive James Squires, who was convicted in 2001 of receiving kickbacks from scrap suppliers and sentenced in 2002. National Steel ultimately ceased to exist as an independent company in 2003 after its financial decline and bankruptcy-era restructuring. It should be distinguished from the earlier National Steel Company founded in 1899, which became part of U.S. Steel and was unrelated to the 1929 corporation apart from the name.

National Steel Corporation was incorporated in Delaware on November 7, 1929, shortly after the stock-market collapse and during a period of extensive consolidation in American steel. Its formation brought together Weirton Steel, the newly developing Great Lakes Steel Corporation, Michigan Steel, and selected subsidiaries and assets connected with M. A. Hanna. The combination included steel plants, blast furnaces, iron-mining assets, ore carriers, and related industrial companies. Great Lakes Steel had been incorporated earlier in 1929, and its Ecorse, Michigan, works was built on marshland that required extensive filling and preparation. The resulting enterprise was among the largest steel companies in the United States. At formation, its stated capacity included approximately 3.5 million tons of iron ore, 1.75 million tons of pig iron, and 2 million tons of steel ingots. In January 1931 National Steel acquired the assets and assumed the liabilities of Michigan Steel Corporation, whose Ecorse sheet mill had been established specifically to serve the automobile industry. National Steel also completed a $36.5 million expansion program in August 1931, with the principal portion devoted to the Great Lakes works. National Steel’s location and industrial mix helped it withstand the early Depression better than many competitors. Its facilities near Detroit were well positioned to supply automobile manufacturers, reducing transportation costs for sheet steel. The company reported profits in 1930 and 1931 and historical accounts describe it as profitable throughout the Depression. Its common shares were reorganized in the 1930s and split in 1950. National Steel joined the Dow Jones Industrial Average in 1935 and remained there until 1959. The postwar period brought high steel demand and strong results. National Steel continued to operate as an integrated producer, combining raw-material interests, transportation, ironmaking, steelmaking, and finishing operations. During the 1970s, however, profits became more uneven. Imported steel gained market share, domestic demand fluctuated, and the American steel industry faced aging facilities and rising competitive pressure. Beginning in 1980, National Steel suffered a pronounced decline in demand and profitability in its central steel business. The company had also diversified into financial services and information-processing activities. In 1979 it acquired United Financial Corporation, the parent of Citizens Savings & Loan Association of San Francisco. During the savings-and-loan crisis, Citizens was combined with institutions in New York and Miami, creating First Nationwide Savings. National Steel contributed substantial cash to the consolidation and sold a minority interest in First Nationwide to the public in 1982; Ford Motor Company acquired First Nationwide in 1985. National Steel also spun off its Genix computer-data subsidiary, which subsequently separated from the corporation. In 1982 the steel business was reorganized into independently managed units, and in 1983 shareholders approved National Intergroup as a holding-company structure. The Weirton operation was sold to its employees that year, becoming an independent employee-owned company. In February 1984 Nippon Kokan K.K. acquired half of National Steel from National Intergroup for $292 million. Nippon Kokan later increased its stake to 70 percent in 1990 as National Intergroup sought to reduce or exit its involvement in the steel business. National Steel continued to face financial distress, layoffs, and competitive pressure, with bankruptcy becoming a threat in the early 1990s. The planned headquarters move from Pittsburgh to the South Bend area was announced in 1991. In 1994 the company carried out a dramatic management replacement, hiring nearly the entire senior executive group from U.S. Steel’s Gary Works. U.S. Steel sued over the recruitment, and the companies settled in 1995. V. John Goodwin became president but left in 1996 after a dispute with the Japanese ownership. By 1998, most of the executives recruited from U.S. Steel had departed. The corporation’s final period was further damaged by an internal-corruption case. An auditor acting on information from an unidentified source discovered that longtime executive James Squires had accepted millions of dollars in kickbacks from scrap suppliers. Squires was convicted in federal court in August 2001 and received a two-year prison sentence in 2002. National Steel did not survive the prolonged downturn in American steelmaking as an independent corporation and ceased operations as a standalone company in 2003. The 1929 corporation was unrelated to National Steel Company, founded in 1899 and later absorbed by United States Steel.

1. 2003National Steel ceases as an independent company

   The corporation ended its existence as an independent steel producer after prolonged financial distress and restructuring.

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2. 2001Kickback conviction involving an executive

   James Squires was convicted of receiving kickbacks from scrap suppliers after an internal investigation.

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3. 1991Headquarters relocation announced

   National Steel announced plans to relocate its headquarters from Pittsburgh to the South Bend, Indiana, area.

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4. 1990Nippon Kokan increases ownership

   Nippon Kokan acquired an additional 20 percent interest, bringing its reported stake to 70 percent.

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5. 1984Nippon Kokan takes a 50 percent stake

   Nippon Kokan K.K. acquired half of National Steel from National Intergroup.

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6. 1983National Intergroup reorganization

   National Steel’s businesses were reorganized under a holding-company structure with separately managed units.

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7. 1979Diversification into savings and loans

   The company acquired United Financial Corporation, broadening its activities beyond steel into financial services.

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8. 1935National Steel enters the Dow Jones Industrial Average

   National Steel became a Dow Jones Industrial Average component, remaining in the index until 1959.

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9. 1931Michigan Steel assets are acquired

   National Steel acquired the assets and assumed the liabilities of Michigan Steel Corporation, strengthening its automotive sheet-steel operations.

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10. 1931Great Lakes expansion is completed

    The company completed a major expansion program centered on the Great Lakes Steel works at Ecorse, Michigan.

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11. 1929National Steel Corporation is incorporated

    The Delaware holding company was incorporated on November 7 after a combination involving Weirton Steel, Great Lakes Steel, Hanna interests, and related industrial assets.

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A vertically integrated American steel producer serving automobile manufacturers and other industrial customers, with operations covering iron ore, transportation, blast-furnace iron, steelmaking, and flat-rolled finishing.

• Automotive sheet steelFlat-rolled steel1923

  Sheet steel was a central product line, particularly through Michigan Steel and Great Lakes Steel operations near Detroit. The location enabled National Steel to supply automobile manufacturers efficiently and made automotive demand a major factor in the company’s early profitability and later market exposure.

• Pig ironIronmaking1929

  National Steel’s integrated system included blast-furnace production of pig iron. Its assets included furnaces in Michigan and Buffalo as well as iron-ore resources and transportation capabilities, allowing the company to control important stages before steelmaking.

• Steel ingotsBasic steelmaking1929

  Steel ingots were part of the company’s reported integrated production capacity. They represented the primary steelmaking output feeding downstream rolling and finishing operations serving automotive and other industrial customers.

• Iron oreRaw materials1929

  Through Hanna-related mining assets, National Steel controlled iron-ore interests that supported its blast furnaces and helped distinguish it from less vertically integrated producers. The company also owned or controlled ore carriers used to move raw materials.

• 1994Replace the senior executive teamOther

  National Steel sought a major management reset during continuing financial and competitive difficulties.

  What changed. Nearly all vice presidents, the president, and the chief financial officer were removed and much of the U.S. Steel Gary Works executive team was recruited.

  Aftermath. U.S. Steel filed suit; the dispute was settled in 1995. President V. John Goodwin resigned in 1996 after a dispute with the Japanese owners.

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• 1984Sell a 50 percent stake to Nippon KokanM&A

  National Intergroup sought capital and a strategic owner for the troubled steel business.

  What changed. Nippon Kokan K.K. acquired 50 percent of National Steel for $292 million.

  Aftermath. Nippon Kokan later increased its ownership to 70 percent in 1990.

  Acquisition consideration. USD 292 million (1984)

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• 1983Reorganize the company under National IntergroupStrategy

  Weak steel demand, import competition, and diversification into financial and other businesses made the existing structure difficult to manage.

  What changed. Shareholders approved a holding-company structure and the company organized its businesses into independently managed units.

  Aftermath. The reorganization separated the steel business from other activities and preceded the sale of a major stake to Nippon Kokan.

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• 1983Sell the Weirton operation to employeesM&A

  The company was restructuring its steel assets amid a prolonged downturn in the American steel industry.

  What changed. Workers purchased the Weirton mill, forming an independent employee-owned corporation.

  Aftermath. Weirton ceased to be a National Steel operating unit.

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• 2001Scrap-supplier kickback caseControversy

  An internal auditor discovered that longtime executive James Squires had received millions of dollars in kickbacks from scrap suppliers. Squires was convicted in federal court in August 2001 and sentenced to two years in prison in 2002.

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• 1994National Steel replaces most of its senior management

  The company dismissed nearly all vice presidents along with its president and chief financial officer, recruiting much of the former U.S. Steel Gary Works executive team.

  Leadership change
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• 1994U.S. Steel files suit over National Steel executive hires

  U.S. Steel challenged National Steel’s recruitment of its former Gary Works executives; the dispute was settled out of court in 1995.

  LawsuitLeadership change
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• 1991National Steel announces relocation of headquarters

  The company announced that it would move its longtime headquarters from Pittsburgh to the South Bend, Indiana, area.

  Other
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• 1984Nippon Kokan acquires a major stake in National Steel

  Nippon Kokan K.K. purchased a 50 percent interest in National Steel from National Intergroup for $292 million.

  M&A
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• 1983National Steel creates National Intergroup

  Shareholders approved a holding-company reorganization intended to manage steel and diversified businesses through separately administered units.

  Other
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• 1983Weirton workers acquire their steel operation

  Employees purchased National Steel’s Weirton operation and formed an independent employee-owned steel company.

  M&A
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• 1931National Steel completes major Great Lakes expansion

  The company completed a $36.5 million expansion program, including the principal Great Lakes Steel works at Ecorse, Michigan.

  Other
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• 1929National Steel Corporation is formed through a steel-industry combination

  A new holding company was formed through the combination of Weirton Steel, Great Lakes Steel, selected Hanna interests, and related iron, shipping, and steel assets.

  M&AOther
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1. National Steel Corporation