British Steel in Bethlehem

January 27, 1991

Bethlehem Steel's decision to join with a foreign partner, British Steel Corp., to make rail and construction products has been hailed by business analysts. The deep pockets of Britain's largest steelmaker, tapped to help expand and modernize the electric furnaces in Steelton, Pa., is welcome news for a company that had to spend $1 billion bringing just one plant -- Sparrows Point -- up to competitive standards. Low-cost "mini-mills," recycling old steel and operating with state-of-the-art equipment, had gobbled up a third of the American structural steel market, putting Bethlehem's product lines under siege.

British Steel, which had been seeking a U.S. partner, hopes to boost sales by persuading architects and builders to use more steel, as it has done in Europe. In supplying rails, Bethlehem is one of two remaining U.S. producers for a market that right now can use only about a quarter of the available capacity. Replacing the rails now on the roadway provides potential opportunities, however. And the European tie opens up export possibilities.

One of the biggest question marks hanging over the success of this joint venture will be the reaction of the United Steelworkers union. To make the venture a success, Bethlehem has taken a $550-million pretax restructuring charge, sinking its year-end profits, and announced plans to end steelmaking at its Bethlehem, Pa., plant. That will cost 2,000 jobs, and it is not surprising that union representatives say they intend to make sure the new investments are designed to boost productivity rather than just eliminate jobs.

At Sparrows Point, the $1-billion-plus job of overhauling basic steelmaking, upgrading the steel finishing facilities and choking off the pollution that has for too long been a hallmark of Bethlehem Steel continues apace. Sparrows Point, a leader in cost-cutting and implementation of newer, more streamlined work rules, is apparently not involved in the joint venture. Even if it were, however, the heavy investment already made, added to the work now being done under federal Clean Air Act demonstration programs, would appear to preclude major cuts. The Point's quality improved dramatically during the 1980s as its costs fell, putting it in a league with many offshore plants even before its finishing mill modernization began.

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