While not nearly as controversial as his still unconfirmed pick of Steven Mnuchin as Treasury Secretary, in another widely telegraphed choice the WSJ reports that Donald Trump is expected to name billionaire Wilbur Ross Jr. “a fellow businessman whose name rings out in the Rust Belt” to serve as his Commerce secretary, according to a transition official.
Ross, the son of a lawyer, grew up in suburban New Jersey and dreamed of being a writer. Instead, he went to Wall Street and became a bankruptcy specialist at Rothschild Inc. in the 1970s, working on high-profile bankruptcies and restructurings, including Texaco, Continental Airlines and TWA.
With an extensive background in both the steel and restructuring industries – both of which will come in handy – Ross acquired key assets, such as LTV Corp., Bethlehem Steel and Weirton Steel in 2001 when the US steel industry was undergoing a crisis period. By cutting jobs and legacy costs, as well as negotiating new deals with unions, he was able to put mills back on their feet, before selling them at a profit.
His background puts him in a precarious position: for some, this made the 79-year-old New Jersey native nothing short of a savior of the steel industry—someone willing to risk his money to save thousands of jobs. For others, he was a vulture who cut jobs and pensions, and forced pain on a once proud industry. It’s a role that Ross, in another storied and wide-ranging Wall Street career, has played in other industries, including auto parts, coal and textiles.
Ironically, Ross even represented bondholders in Trump’s Taj Mahal casino in Atlantic City. The creditors were angry about a possible missed payment and debated whether to seize control of the casino. Ross argued that Trump’s properties were worth more with the man involved and helped negotiate a plan to keep him in charge. Ross eventually became a key Trump ally, backing his campaign for president and helping him raise money from Wall Street executives.
But, as the WSJ puts it, it’s in the steel industry’s consolidation that Mr. Ross arguably made his largest mark. “He was the right person at the right time,” when steelmakers were struggling, said John Surma, former CEO of U.S. Steel Corp., in an interview. Even some former adversaries acknowledge that in addition to cutting thousands of jobs, Mr. Ross played a major role in a restructuring that preserved other jobs.
“There’s no denying he saved thousands of jobs,” says Charles Bradford, now an independent analyst, who worked for banks and investors that mounted competing restructuring proposals to those of Mr. Ross in steel bankruptcy proceedings. “He doesn’t like to be called a vulture, but a vulture investor is somebody who finds a distressed asset that still has good bones and turns it around and flips it. And that is what he did.”
In 2002, for example, Mr. Ross’s company W.L. Ross & Co. bought the assets of LTV Corp., once the nation’s third-biggest steel mill, for $125 million in cash and $200 million in environmental and other liabilities. At the time, Mr. Ross said the new company would employ about 3,000, less than half of the 7,500 LTV had employed.
In 2005, Mr. Ross sold his International Steel Group Inc., to the world’s largest steelmaker ArcelorMittal for $4.5 billion, netting billions in profits. Mr. Ross is still an independent director on ArcelorMittal’s board, one of many business ties he would have to sever if he joins the cabinet.
He was the force assisting in the consolidation of the steel sector,” says John Packard, publisher of Steel Market Update. “He managed to save mills that might have been shut down if they hadn’t been consolidated.”
He’s had his share of down days: in 2006, an explosion at a mine in Sago, W.Va., under control of his International Coal Group Inc., killed 12 workers, prompting criticism of ICG’s safety precautions. Mr. Ross called it “the worst day of my life.” In a statement, he added, “I don’t know what is harder—trying to get to sleep at night with Sago hanging over me or getting up in the morning to face another day of internal sorrow and external criticism.”
In his role as commerce secretary, Ross will now have a vastly bigger playfield in which to demonstrate his skillset of restructuring and rescuing distressed companies, sectors and industries, hopefully making them competitive for the New Normal. Of course, should that fail, there is always Chapter 7.