The state of U.S. steel manufacturing is emblematic of broader challenges facing American industry today.
For decades, American manufacturing jobs have been steadily migrating overseas, driven by cheaper labor costs, less stringent regulations, and aggressive foreign competition. The result has been a hollowing out of a once-thriving sector, leaving behind communities dependent on these jobs and a nation increasingly reliant on foreign steel.
This trend is deeply troubling, not only for the economic impact but also for national security concerns. Maintaining a robust domestic steel industry is crucial for infrastructure, defense, and economic independence.
Given this backdrop, strong leadership from American companies has never been more important. Effective leaders can navigate these turbulent waters, advocating for policies that support domestic production, investing in innovation, and ensuring financial stability.
Unfortunately, Cleveland-Cliffs, an Ohio-based steel company, has recently exemplified the opposite, displaying a series of reckless and irresponsible decisions that jeopardize its future and that of its shareholders.
Since 2023, Cleveland-Cliffs has been on an acquisition spree that defies financial logic. The company's relentless pursuit of acquiring its rival, US Steel, is a prime example of its fiscal irresponsibility.
Despite having total assets amounting to only $6.5 billion as of March 2024, Cleveland-Cliffs made a $7.3 billion offer for United States Steel Corp. — a proposal predictably rejected and ultimately lost to Nippon Steel. Instead of recognizing its financial limitations, Cleveland-Cliffs continues to express interest in U.S. Steel, disregarding the clear fiscal mismatch.
This is not strategic business acumen; it's financial recklessness that endangers shareholder value.
Moreover, Cleveland-Cliffs is reportedly trying to acquire the U.S. Midwest division of NLMK, Russia's largest steelmaker, for approximately $500 million. This not only raises significant national security concerns but also underscores the company's inability to manage its current financial resources effectively.
Pursuing such acquisitions, given the company's precarious financial standing, is a glaring red flag that should alarm every shareholder.
The consequences of these reckless strategies are evident in the company's stock performance. As of June 25, Cleveland-Cliffs stock price was $1.80 per share lower compared to the same time last year.
In the past month alone, the stock has dropped by $12.48, significantly more than the industry average loss of 6.38%. Wall Street analysts have taken notice, with JP Morgan's Bill Peterson downgrading Cleveland-Cliffs from "buy" to "hold," citing the company's excessive operational spending and diversion of cash away from shareholders.
Similarly, GLJ Research analyst Gordon Johnson downgraded the stock from "buy" to "sell." Currently, over 70% of analysts covering Cleveland-Cliffs do not have "buy" ratings for the company.
At the heart of this turmoil is CEO Lourenco Goncalves, whose leadership style has raised numerous concerns. Rather than focusing on the company's operational and financial health, Goncalves seems more intent on building a media persona.
His public appearances often involve downplaying the company's underperformance, attacking ongoing deals, and berating analysts who issue negative ratings. For instance, during an earnings call, Goncalves lashed out at an analyst, saying, "We are going to screw these guys so badly that I don't believe that they will be able to only resign, they will have to commit suicide."
Such behavior is not only unprofessional but detrimental to the company's reputation and stability. Shareholders need a CEO who is committed to logical, level-headed leadership — someone who prioritizes the company's health over personal vendettas and media appearances.
The broader issue at play here is the systemic failure of U.S. manufacturing, largely due to federal overreach. Excessive regulations, burdensome taxes, and misguided policies have stifled innovation and competitiveness.
Companies like Cleveland-Cliffs find themselves struggling to navigate a hostile business environment, leading to poor decision-making and financial instability. Instead of fostering a climate of growth and innovation, federal policies have hamstrung American manufacturing, leaving it vulnerable to mismanagement and foreign competition.
Cleveland-Cliffs' recent actions and trends are a cause for significant concern among its shareholders. The company's reckless pursuit of merger deals despite being short on cash and suffering in the stock market highlights the urgent need for a change in leadership and strategy.
Shareholders must voice their concerns and demand responsible management to protect their investments and secure the future of Cleveland-Cliffs. The time for action is now, before more reckless decisions lead to further financial decline and potential ruin.
Charlie Kolean is the Chief Political Strategist at RED PAC. Charlie has worked as a senior policy adviser for numerous state legislators, multinational corporations and think tanks. Mr. Kolean has been involved in politics for over a decade as an activist, candidate, political consultant, and party leader. Kolean was a bundler on the Trump Finance Victory Committee. Charlie is a member of the American Association of Political Consultants. Readmore of his reports — Here.