Yahoo! Inc. (YHOO), Microsoft Corporation (MSFT): Reorganization Is Not a Panacea for All Corporate Problems

Reforming the workforce

Steel makers in the current global environment face falling steel prices and slim profits due to the 200 million tons of excess global steel capacity. United States Steel Corporation (NYSE:X) is no exception. The firm reported losses in four of the last six quarters. To reverse this trend, U.S. Steel is reforming the workforce.

Its large seven-story plant, Pro-Tec, in Leipsic, Ohio, is run by 312 nonunion workers. Compare this small workforce to the 5,880 United Steelworkers members who operate the U.S. Steel factory Gary Works in Gary, Ind. Pro-Tec’s workforce is both smaller and less expensive than other factories like Gary Works. United States Steel Corporation (NYSE:X) pays Pro-Tec’s workers $20 an hour, while United Steel workers make up to $27 an hour. Pro-Tec requires Pro-Tec’s workers to pay more for health insurance than union workers. Retirement benefits also cost the Leipsic factory less since workers have 401(K) plans instead of the union-demanded defined-benefit plans.

A nonunion workforce also makes the factory more flexible. U.S. Steel freely adds and cuts hours depending on the factories needs, not union demands. Pro-Tec is the step in the right direction for U.S. Steel. The factory helps the firm save on expenses. In the words of John Surma, the CEO of U.S. Steel, “This is probably the best, shining example of the direction for the company.” With an outlook like this and by pushing more of its workforce to be like Pro-Tec’s, U.S. Steel can end its losing streak. Pro-Tec proves that U.S. Steel can successfully reform its workforce and become profitable again.

Conclusion

Changing times call for changes in organizations. As firms reorganize their management, hierarchy, or workforce they hope to overcome present challenges and bring new strategies to their companies. Some efforts will pay off, such of those made by Yahoo! and U.S. Steel. Others, such as Microsoft, may find all their effort go to waste. As an investor, don’t get too caught up in the excitement of reorganization. Instead focus on the likely results.

This article was written by Michele Milheim. She has no position in any stocks mentioned. The Motley Fool recommends Yahoo!. The Motley Fool owns shares of Microsoft.

The article Reorganization Is Not a Panacea for All Corporate Problems originally appeared on Fool.com and is written by Marie Palumbo.

Marie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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