Swedish company eyes Eastern Stainless Corp.

October 06, 1994|By Ross Hetrick | Ross Hetrick,Sun Staff Writer

The troubled Eastern Stainless Corp. in Baltimore County may get a new lease on life because of a tentative agreement by Armco Inc. to sell the mill to one of the world's largest stainless steel companies, Swedish-based Avesta Sheffield AB.

"This action certainly clears the air and sets sail in a very positive direction," Mark L. Wasserman, secretary of the state Department of Economic and Employment Development, said yesterday. "You can feel the fresh air wafting in."

Officials for Avesta, which has its headquarters in Stockholm, said they plan to continue operations at the plant on Rolling Mill Road in Essex and want to expand the facility. The sale is expected to be completed early next year.

"Our intent is to grow our share in the stainless steel plate business," said Ted Hart, vice president of operations of the Avesta plant in Newcastle, Ind. "We view this as something positive."

Mr. Hart also said the company has a framework for an agreement with the United Steelworkers of America, which represents the 277 workers at the plant. The company is not seeking concessions but more flexible work rules, he said.

David Wilson, district director of the United Steelworkers of America, said he was optimistic about the possible sale. "If they put some capital in there, it's good news for the people," he said.

Mr. Wilson said the union must negotiate a shutdown agreement with Armco and a new contract with Avesta before the sale is completed.

Once an independent company, Eastern Stainless has been losing money since the mid-1980s. After filing for bankruptcy in 1986, it was bought by Cyclops Industries Inc., which in turn was acquired by Armco in 1992.

Eastern is technically a separate corporation, with Armco owning 84 percent of its stock. In 1993 Eastern lost $17.2 million on sales of $116.7 million compared with a 1992 loss of $22.9 million on sales of $132.3 million.

Individuals and groups, which hold the remaining 16 percent of the stock, will receive nothing from the sale, Armco said. The plant's work force has declined from 1,500 in the early 1980s to its present level.

The Pittsburgh-based Armco said it is selling the assets and certain liabilities to Avesta for an undisclosed amount.

But Armco said that Eastern's remaining liabilities will consume all the cash it receives in the deal and that it will have to take a $15 million special charge in the third quarter in connection with the sale.

Armco, which is struggling to make itself profitable, announced in August that it also plans to sell its stainless steel rod and bar plant on East Biddle Street in Baltimore, which has 50 workers, to Republic Engineered Steels Inc., an employee-owned steelmaker based in Massillon, Ohio.

If both sales are completed, Armco will stop making stainless steel in the Baltimore area after 48 years.

Avesta is the world's largest producer of stainless steel plates, which are used for industrial applications such as large storage tanks and pollution control equipment.

"I think it's a good move for Armco, and I think it's a good move for Avesta," said Clay L. Hoes, a steel analyst for Kemper Securities Inc. in Chicago.

Avesta "has a good reputation and they've been around for years," he said.

One of the biggest hurdles in completing the sale will be the antitrust review by the U.S. Justice Department since the production at Eastern and Avesta's New Castle plant would account for more than 40 percent of the U.S. stainless steel plate market.

But Mike R. Rinker, president of Avesta's U.S. marketing and sales arm, said the acquisition would help the stainless steel plate market since production costs would be lowered.

Avesta also plans to make a multimillion-dollar investment in a new annealing and pickling line at Eastern, which removes scale from coiled stainless steel on a continuous basis, Mr. Rinker said.

He said the plant would work in tandem with the New Castle plant, with Eastern making plates that are 72 inches and narrower, while the Indiana plant produces plates that are wider than 72 inches.

Mr. Hart is scheduled to be the president of the Eastern operation.

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