U.S. Steel (X - Analyst Report) has acquired AK Steel's (AKS - Analyst Report) interest in Double Eagle Steel Coating Company (DESCO) – a leading electro-galvanized steel maker – in an effort to strengthen its foothold in the automotive space. DESCO’s rolled steel products are used by automakers and suppliers for parts such as doors and body panels.

DESCO was a 50-50 joint venture between U.S. Steel and Dearborn, MI-based Severstal North America, Inc. AK Steel acquired the 50% stake in DESCO last year with its purchase of Severstal North America’s operations.

DESCO’s 700,000-ton electrolytic-galvanizing line (EGL) will become a part of U. S. Steel's Great Lakes Works facility in Michigan. The transaction includes a one-time payment of $25.2 million to AK Steel and the transfer of assets and utilities to Great Lakes Works. Employees of DESCO will remain through AK Steel for 90 days after the deal closure till U. S. Steel decides the appropriate staffing levels.

The move represents a part of U.S. Steel’s “Carnegie Way” transformation strategy that includes a number of actions to improve the company's operating flexibility, cost structure and raw materials position.

The EGL line will provide automotive customers with world-class steel coated products for both exposed and unexposed applications. Leveraging the patented Carosel process, EGL is the only finishing line in North America capable of providing both EG (free zinc) or EGA (an iron/zinc alloy) coatings.

EGL will boost U.S. Steel’s ability to offer industry-leading Advanced High Strength Steels (AHSS) and high-quality exposed steel for automotive body and closure applications. AHHS provides automakers with greater flexibility to lightweight their vehicles.

U.S. Steel remains hamstrung by weak steel market fundamentals. The U.S. steel industry remains rattled by surging steel imports. This, in addition to the oversupply in the industry, is pressurizing prices and prospects of steel producers.

Moreover, several energy companies are dialing back drilling plans in the face of the oil price slump, thereby affecting demand for U.S. Steel’s products in the energy market. A flood of cheap steel imports coupled with lower oil prices dented U.S. Steel’s top and bottom lines in the first quarter of 2015.

The combined impact of the oil meltdown and imports has also forced U.S. Steel to idle a number of production facilities, resulting in the layoff of thousands of workers.

Amid a difficult operating environment, U.S. Steel is aggressively pursuing actions to improve its cost structure and boost revenues on a sustainable basis through its Carnegie Way program.

U.S. Steel is a Zacks Rank #3 (Hold).

Other steel companies having favorable Zacks Rank are Olympic Steel Inc. (ZEUS - Snapshot Report) and POSCO (PKX - Analyst Report). While Olympic Steel retains a Zacks Rank #1 (Strong Buy), POSCO sports a Zacks Rank #2 (Buy).