The last five years have been filled with red ink at U.S. Steel (NYSE:X). Indeed, there's a reason why the shares are trading at around $40 after peaking in 2008 at over $175 a share. But, this iconic steel maker has managed to survive, and it's starting to look like it might thrive, too. Management wants you to understand just what that means.

Changing with the times
U.S. Steel CEO Mario Longhi noted during the company's second quarter conference call that management is "increasing our commitment to research and development to expand and accelerate our capability to provide steel products and solutions of the future." While that may sound like marketing speak, there's some real activity behind that statement.

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For example, the company's dedicated auto research facility is working with car makers to create lower weight, yet still strong, auto parts. And U.S. Steel is doing much the same thing in its dedicated tubular steel research facility, working with customers to better understand their needs and produce solutions to oil and gas drilling problems.

This partnership approach shows that U.S. Steel isn't sitting still; it's working to shift away from commodity based products toward specialized ones. That, in turn, should provide higher margins and help return the steel giant to profitability.

Foreign competition
Still, steel is a commodity, and that will always be a problem U.S. Steel has to deal with. And right now that's a big issue since the world is facing steel overcapacity issues. The best example of that is in oil country tubular goods (OCTG), the industry segment that provides pipes to the oil and gas drilling sector.

The United States is going through something of an energy Renaissance, and business has been good in the domestic OCTG sector. But, foreign countries have seen this and flooded the market with product, often at prices that are below the cost of production. That's a fight that's been taken to the Department of Commerce and the World Trade Organization. But these fights aren't easy to win and take a long time.

That's why Longhi noted, "While we are pleased that the DoC has granted us some relief in their recent ruling on the OCTG trade case, we do not anticipate that any benefits will be realized until after the third quarter." The end result will be relatively flat performance in a group that should seemingly be thriving. Foreign companies selling below cost, or dumping, is still a big issue to watch.

Cash AND debt
During the second quarter, U.S. Steel lost $0.12 a share. That's not good news, of course, but it isn't as bad as it sounds, either. For example, CFO David Burritt was pretty explicit about the company's goals when he noted, "we have been placing much more focus on cash flow." To that end, the company added over $800 million of cash to its balance sheet through the first half.

(Source: Milad Mosapoor, via Wikimedia Commons)

That increased the company's cash balance from around $600 million to over $1.4 billion. That's almost double the amount of cash the company had laying around at the same point last year.

That said, you can raise cash in a number of different ways, such as taking on more debt and issuing shares. But, U.S. Steel did neither of those things between January and June. In fact, Burritt made sure to note that the company's cash balance was left after repaying $322 million of debt.

In fact, he pointed out, "As a result of this significant increase in our cash position and the debt repayment, our net debt has improved by almost $1.2 billion since the end of 2013." Clearly, U.S. Steel is looking to fortify its balance sheet for the road ahead.

Phase 1
The interesting thing about the positives taking shape at U.S. Steel is that they are part of "Phase I" of the company's "Carnegie Way" plan. According to CFO Burritt, "Our strategy has two phases. Phase I is earning the right to grow, Phase II is about driving profitable growth. We are clearly still in Phase I."

He added, "While we are pleased with our Carnegie Way journey, we recognize the large improvements required to deliver sustainable profits and we are collaborating with appropriate stakeholders in a mutually beneficial way."

Some of the notable achievements so far include new products, enhanced customer relationships, notable debt reduction, and more cash on the balance sheet. A trade case win along the way was nice, too. All in, U.S. Steel appears to be executing well on a foundation that should support the opportunities that lie ahead. If you are looking at steel makers, keep an eye on U.S. Steel and how well it executes the Carnegie Way.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.