There is nothing new about industrial restructuring on a grand scale.  In the United States, the late nineteenth and early twentieth centuries witnessed a battle royal for industrial control, led by all-conquering companies such as Standard Oil and Carnegie Steel and by all-powerful individuals such as John D. Rockefeller and Andrew Carnegie.  Indeed, the breakout strategies of Rockefeller and Carnegie remain prescient.  It was Rockefeller who gathered 40 companies into the Standard Oil Trust in 1882 to control 90 percent of refining capacity in the United States.  The master plan was to invest massively in a network of pipelines connecting oil fields with refineries and to concentrate production in a small number of highly efficient refineries.  This bold move was driven by the potential to cut the costs of production dramatically through the realization of economies of scale.  It paid off handsomely.  Standard Oil became highly cash generative and applied its enormous financial resources to integrate backwards into crude oil production and forward into distribution.

Carnegie likewise was driven by the logic of economic efficiency.  He was the first steel magnate to build an integrated Bessemer steel rail mill, the Edgar Thompson Works in Pittsburgh, which began production in 1879 and was for decades the world’s largest steel plant.  He moved quickly to take control of other steelworks and make major technological improvements.  Carnegie had a passion for measuring costs and experimenting to reduce them, and, like Rockefeller at Standard Oil, he pursued vertical integration, investing backward to secure supplies of coal and ore and forward into fabrication.  At every turn, he instilled the need to produce goods of the very highest quality.  The upshot was that Carnegie created, by dint of first-class strategy and brilliant implementation, the best-managed and most profitable steel company in the world.

The enduring logic of industrial consolidation, given full expression by the likes of Rockefeller and Carnegie, is manifest today in the global restructuring strategies of conquistador companies such as Mittal Steel, cement maker CEMEX, and EADS, the European Aeronautical Defense and Space Company.  The parallels between Carnegie Steel and Mittal, which by 2005 was the largest steel company in the world by volume, with a production capacity of 70 million metric tons, are striking.  Mittal has its own Andrew Carnegie in the form of Lakshmi Mittal, who has led the company in its transformation from Indian minnow to global giant over three decades.  His conviction, stated and restated, is that the global steel industry simply has too many players to be truly efficient and profitable.  In a highly cyclical business, he reasons, the stability needed to think long term can be attained only by progressively eliminating small and inefficient producers.  By concentrating production, massive economies of scale can be achieved through the employment of state-of-the-art technologies and world-class management practices and through greater control over the supply chain.