Transcript: What’s next for US Steel?

This is an audio transcript of the FT News Briefing podcast episode: ‘What’s next for US Steel?’

Kasia Broussalian
Good morning from the Financial Times. Today is Monday, January 6th, and this is your FT News Briefing.

Businesses in the UK are planning to boost prices. And we take a look at what’s next for US steel. Plus. CrowdStrike has bounced back after causing a global IT outage last summer. 

Stephanie Stacey
It reported a 97 per cent customer retention rate. So it really hasn’t lost many major customers. 

Kasia Broussalian
I’m Kasia Broussalian and here’s the news you need to start your day.

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A new survey from the British Chambers of Commerce says that more than half of UK companies are planning to increase prices soon, and they’re putting the blame on rising labour costs, especially those that were introduced in October’s budget. The government has come under fire for its decision to increase the living wage. It also raised the amount employers had to contribute to national insurance. So now businesses are facing a bit of a confidence slump heading into 2025.

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US President Joe Biden blocked the takeover of US Steel by its Japanese rival, Nippon, on Friday. And there’s a lot at stake here with this decision. For one, it’s a pretty big break from America’s tradition of being open for investment. Biden’s move also puts US Steel’s fate in limbo. The company has been struggling financially. Here to walk me through the situation is the FT’s Taylor Nicole Rogers. Hey, Taylor. 

Taylor Nicole Rogers
Hi. Thanks for having me.

Kasia Broussalian
Thanks for coming on. Now, obviously, I know you’re not a mind reader, but what do you think is behind Biden’s decision to block the merger? 

Taylor Nicole Rogers
The president cited two main things, the first of which is national security, which is something that has really been up for debate because Japan obviously is a close friend. The second of which is the supply chain. A lot of US industries, energy, transportation, also the military really rely on domestic steel production. So the big debate is if we sell our third largest steel producer to a company owned by another country, even if that country is a friend, will we be able to guarantee that our car manufacturers and our defence contractors still have access to steel, even if, say, Japan needs it more?

Kasia Broussalian
Got it. Now I’m curious about the possible consequences of blocking the deal. How might international investors see this? 

Taylor Nicole Rogers
It’s kind of a big ‘US is closed for business’ sign to our foreign investors who we really rely on as we’re trying to kind of reindustrialise our country, particularly in the steel space. And it’s complex because the US steel industry is really lagging behind. Everyone knows that we need to completely renovate and redo most of our mills. And for a long time, the general consensus is that the best way to do that is through foreign investment. But now that plan is kind of out the window and everyone is just really confused as to how the industry moves forward. 

Kasia Broussalian
And are there sort of like economic repercussions that we could see from that? 

Taylor Nicole Rogers
Definitely. The first is we have to figure out a new path for the steel industry and for all of the industries that rely on steel, I mentioned. And then secondly, you have a lot of communities that are based around mills in Indiana and Pennsylvania, where US Steel is one of the biggest, if not the biggest employers. And if that company is in really dire straits, then you have to kind of figure out a new way to keep people employed. 

Kasia Broussalian
Well, walk me through that just a little bit more. What does the end of the Nippon deal mean for US Steel in particular? 

Taylor Nicole Rogers
It means that the company is, as one person put it to me, in crisis mode and would have meant a couple billion dollars to kind of update everything, to guarantee jobs, to renovate the mills or at least that’s what the company said. Everyone kind of agrees that they can’t continue forward on the path that they’re on. They rely really heavily on these really big and expensive blast furnaces to create virgin steel. And they’re really bad for the environment. They’re really expensive to maintain. And everyone kind of agrees that this is going to be a difficult way to provide the country with the steel that it needs if we cannot get new technology and more importantly, money to implement the new technology. 

Kasia Broussalian
Taylor Nicole Rogers covers US Labour for the FT. Thanks, Taylor. 

Taylor Nicole Rogers
Thanks, Kasia. 

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Kasia Broussalian
The European Central Bank hasn’t been cutting interest rates fast enough. That’s according to an FT survey of more than 70 Eurozone economists. Almost half said that the ECB has moved too slowly to help the region’s stagnating economy. Now, the central bank did cut rates a few times last year. That’s after inflation started falling faster than expected. But economic growth across the bloc also stumbled during that time. And it’s looking like that’ll continue. The IMF predicts that the Eurozone will grow 1.2 per cent in the next year. That’s a bit less than half of what’s expected for the US.

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CrowdStrike is staging an impressive comeback. The cyber security company made headlines last summer after a botched update took down millions of Windows PCs. The meltdown initially caused CrowdStrike shares to crash more than a third, but now they’re back up and worth more than they were right before the crisis. My colleague Stephanie Stacey has been following the bounce back and she joins me now. Hey, Stephanie. 

Stephanie Stacey
Hi. 

Kasia Broussalian
So first, can you just recap what happened with CrowdStrike back in July? 

Stephanie Stacey
Yeah, absolutely. So in July, CrowdStrike sent out a routine update that turned out to have buggy software in it. And that triggered a blue screen of death era on 8.5mn Windows PCs and servers. And what made the impact particularly big was that many major companies, such as banks and airlines, had turned to CrowdStrike as their first line of defence because it had such a good reputation for cyber security. And that meant that the impact caused passengers to be stranded and took broadcasters off air around the world, for example. 

Kasia Broussalian
Yeah, and I remember seeing all that chaos at airports, lines, it was crazy. But now tell me about CrowdStrike’s recovery. What do the numbers show? 

Stephanie Stacey
In CrowdStrike’s latest earnings update for the three months to September. It reported a 97 per cent customer retention rate, and that’s down less than a percentage point from the previous year. So it really hasn’t lost many major customers. It also beat analysts’ earnings expectations for the quarter reporting $1bn in revenue for the three months to September, which is up 29 per cent from the same period in 2023. 

Kasia Broussalian
Yeah. And you know, those numbers are really surprising to me because I would have figured that with such a major crisis, it really would have hit the company pretty hard. So what are some of the specific tactics that CrowdStrike has used to, you know, keep its customers? 

Stephanie Stacey
A lot of analysts have praised how CrowdStrike responded to the outages, particularly their communications and the accountability that they tried to take pretty early on. There’s also the fact that CrowdStrike has tried to turn the outages into what chief executive George Kurtz told me was a “competitive advantage” in some ways by using the outages to demonstrate that they have recovered by saying we’re prepared for the future and we’re not going to let it happen again. And also, they’ve offered free material and free software. So CrowdStrike was able to offer lots of customers these perks and now is hoping that it will convince these customers to keep going after the perks expire. 

Kasia Broussalian
And this kind of apology tour, it really seems to have worked. You mentioned that, you know, it didn’t really lose a lot of customers over the July incident. So I guess I’m wondering then, have there been any repercussions or even lessons from that kind of failure? 

Stephanie Stacey
Well, on the customer front, there is one major outlier of a customer that has not at all been satisfied with CrowdStrike’s recovery and CrowdStrike’s apology tour. And that’s Delta Air Lines, which cancelled thousands of flights during the outages and is now suing CrowdStrike for damages after it said that the impact cost it more than $500mn. But actually, what some analysts say could be the big outcome is not a turn away from CrowdStrike, but a turn away from Microsoft with increased focus on how Microsoft operates its products and what level of access Microsoft gives to companies like CrowdStrike. 

Kasia Broussalian
And so then, has Microsoft done anything to kind of remedy the situation? 

Stephanie Stacey
Microsoft says it’s stepping up plans to make Windows more resilient. And it hosted a summit in September where it put together alongside third-party software providers, including CrowdStrike, to talk about how they would build better security procedures to make sure that nothing like the outages happens again. 

Kasia Broussalian
Stephanie Stacey is a technology reporter for the FT. Thanks, Stephanie. 

Stephanie Stacey
Thanks. 

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Kasia Broussalian
And finally, the popcorn hasn’t been flowing as freely in Chinese movie theatres lately. Box office revenue in China fell by almost a quarter last year compared to 2023. North America saw just a 3 per cent drop during that same period. Now, Chinese theatres have looked a little emptier since the pandemic. Economic conditions are tough and youth unemployment is pretty high. So consumers have been turning to streaming services instead. On top of all of that, experts say that there just haven’t been as many smash-hit films to drive people to the silver screens.

You can read more on all of these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news. 

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