Small Fry Seek Niches in Steel Slump
Small Fry Seek Niches in Steel Slump
Sep. 13, 1986
CUYAHOGA HEIGHTS, Ohio (AP) _ The widespread woes of the U.S. steel industry have not dampened Tom N. Tyrrell's enthusiasm for his newly founded American Steel & Wire Corp.
Tyrrell says there is a profit to be had making steel in the backyard of LTV Steel Co., the nation's second largest, but struggling steelmaker.
Formed by merger in 1984, LTV Steel found itself carried into bankruptcy court proceedings when its parent, Dallas-based LTV Corp., filed a Chapter 11 reorganization petition in July.
''While the steel industry is depressed, as in any depressed industry there are always going to be certain niches that are advantageous to get into,'' Tyrrell said.
He says a strong market exists for high-quality steel rod and wire used in automotive and welding industries. And if all goes well, Tyrrell says, the mill that began operations the day after Labor Day with about 100 people on the payroll could employ 300 steel workers in its third year and 450 in four years.
American Steel & Wire is on 260 acres adjacent to the Cuyahoga River in this industrial suburb. That includes 40 acres of factory or office space.
The site is the former Cuyahoga Works of U.S. Steel, the nation's biggest steel company, which changed its name to USX Corp. earlier this year.
U.S. Steel closed its Cuyahoga Works in 1984 after 74 years of operations. It had been refurbished in 1976 for $35 million and apparently was still profitable when it shut down.
The closing culminated tense labor-management discord. In December 1983, a year the Cuyahoga Works produced 270,000 tons of rod, wire and steel strip, United Steelworkers of America Local 1298 rejected a second round of wage concessions the company demanded.
''They kind of put the union in a corner,'' said Tyrrell, who has made his career in steel sales and management with Bethlehem Steel and Raritan River Steel before taking charge at American Steel & Wire.
''When you get involved in a situation like that, it's generally a no-win situation, and U.S. Steel had no choice but to shut the plant, because if they kept it open every bargaining situation they ever got into would have this as a precedent. They probably did something they really didn't want to do,'' Tyrrell said.
Frank Valenta, USW union District 28 director, agrees.
''It was a good operating plant with good equipment and made quality products,'' Valenta said. ''It was a shame it ever shut down, but it became part of U.S. Steel's rationalization program, when all of a sudden U.S. Steel said 20 plants are going down.''
Approximately 700 workers lost their jobs when the Cuyahoga Works closed. It lay dormant amid speculation that U.S. Steel would demolish the plant and sell the land while taking a tax write-off.
Instead, the plant was sold with some other mills in a $40 million deal to Chicago West Pullman Corp., a Cincinnati-based, short-line railroad holding company. The deal included assurances the U.S. Steel's Lorain Works would supply steel raw material to American Steel & Wire.
Top executives of Chicago West Pullman, businessman Roger Ach and lawyer John Peck, were seeking to acquire the Newburgh South Shore Railroad near Cleveland when they learned of the mothballed steel mill near the rail line.
With a $1.5 million state grant, a $4 million state loan and other financing from Westinghouse Credit Corp. and Central Trust Co. in Cincinnati, along with a minority interest taken by Cleveland's Primus Capital Fund, Ach and Peck acquired Cuyahoga Works and brought in Tyrrell to bring it back to life.
''I see it as some investors trying to keep the steel industry alive,'' Valenta said. ''I don't think in any way they fall into the category of being plant liquidators. They have real sincerity and honesty and want the plant in business.''
Tyrrell says his workers will receive wages averaging about 25 percent less than than the pay for workers in a traditional unionized mill, although he declined to give a specific pay rate. Steelworkers at USX were making $12.24 an hour before they went on strike last month.
Work rules at American Steel & Wire also will be more flexible than in a traditional mill. Furthermore, workers must put up from $100 to $300 of their own money to buy company stock as a requirement of hiring, Tyrrell said.
In return, the workers can expect a share in corporate decision-making and yields from a profit-sharing program.
''One of the big problems that you have in the industry today are huge wages, and every year you have to increase those wages,'' Tyrrell said. ''Then, when you have a problem, you either have to lay off people or cut salaries.
''The goal here is to bring on people only when we intend to keep them, and pay increases would be based on their contributions from a profit standpoint. The hourly people will put together teams that will rate various jobs in the plant and determine which have the greatest responsibility. That will be the format of our profit-sharing plan.''
Tyrrell said the company would not object to the workers unionizing, if that was their choice.
''We certainly have every intention in the world of organizing the plant,'' Valenta said. ''It's a matter of time. You have to speak to the workers and convince them it is in their best interest to have a contract.''
End Adv Weekend Editions Sept. 13-14