The consolidation of the domestic steel industry will help mills weather the falling production levels of U.S. automakers, one of its major customers.

"It's (U.S. auto production) been tracking down for several years now," said Christopher Plummer, managing director of West Chester, Pa.-based Metal Strategies. "The second half of the year is expected to be even worse."

Total 2008 production for the country's domestic automakers, both U.S.-based and transplants, is pegged at 12.5 million vehicles, said John Anton, director of steel economic research and forecasting for Waltham, Mass.-based Global Insight. Vehicle production will remain static until 2011, he said.

Outside the construction industry, which remains healthy in the nonresidential sector, U.S. car and truck manufacturers traditionally have been one of the largest users of steel, Plummer said. About 1 ton of raw steel is used in the production of automobiles, with double or more that amount used to build light trucks, large sport utility vehicles, or vans, he said.

The lower auto production levels, the lower the demand for the steel used to manufacture vehicles. But lower steel shipments to automakers shouldn't have the same effect the drop would have caused before the recent -- and ongoing -- consolidation of the integrated steel industry, Anton and Plummer agree.

"It's going to have less effect by far on the steel industry than in the past because they are doing a better job managing the business," Anton said. "You're not seeing inventory overhang and prices crashing. Companies are not overproducing, so (steel) prices should hold, but at lower volumes."

The mind-set of the steel industry has changed since 2000, he said.

"Before, people were prouder of being the biggest, rather than the most profitable," Anton said. "With consolidation, people can make more rational decisions."

The integrated mills along Lake Michigan produce much of the flat rolled steel used in a vehicle production. U.S. Steel Corp., for example, shipped almost 18 percent of its domestic flat rolled capacity to the transportation market, including automakers in 2005, the last year the data is available.

The Pittsburgh-based steelmaker acknowledged the importance of the industry in its 2006 annual report.

"Many of U.S. Steel's customers are in cyclical industries, such as automotive, appliance, container, construction and energy," it states. "Future downturns in the economy in the U.S. or Europe or any of these industries could reduce the need for U.S. Steel's products and adversely affect our profitability."

Company spokesman John Armstrong agrees consolidation helps the company weather market changes.

"If you have a dozen blast furnaces, as opposed to only a few, you're not affected as drastically by a downturn in the market," he said. "You can reduce production at one or take it off-line. In addition to your ability to adjust production, you have the synergies that let you reduce SGA (sales, general and administrative) costs."

Although steel remains a "classic cyclical business," since consolidation it has been able to control its capacity, inventory and costs, Plummer said.

"And they can do it better than when it was a life-and-death struggle to survive," he said.