Avesta says jobs were goal, not a promise Manufacturing

January 06, 1998|By Jay Hancock | Jay Hancock,SUN STAFF

Avesta Sheffield East, sued by the state of Maryland for allegedly reneging on promised job growth after accepting a $1.1 million state grant, denied yesterday that a promise was made and said it won't pay back the money.

"We don't owe the money," said Roy Cooke, president of Avesta Sheffield East as well as an affiliate in New Castle, Ind. "We have not reached our aspirations on jobs, but we sure as hell have tried."

Cooke blamed bruising competition in the stainless steel business for a restructuring that put Avesta Sheffield's Essex employment at 115 now, far from the 291 workers the plant had in 1996 and even farther from the 350 the state says Avesta promised to employ.

"There were no guarantees," Cooke said. "We feel like we've done more than enough to generate business in Baltimore."

The dispute has its roots in 1995, after Sweden-based Avesta Sheffield AB bought Armco Inc.'s Eastern Stainless Corp. subsidiary in Essex and sought financial help from the state to refurbish the plant. Maryland's economic development department agreed to furnish $1.45 million -- $1.1 million as a grant and $350,000 as a loan. Avesta has paid back the loan.

But Avesta couldn't profitably maintain 350 workers in Essex, Cooke said yesterday. A production line that made narrow-width, stainless steel plates was old and uncompetitive against newer technology that can crank out continuously casted, coiled plate steel, he said. When that line was shut down, jobs disappeared.

"The business scene changed dramatically," he said. "I don't think we can be characterized as fly-by-night or that we're coming in here trying to trick the state."

While it was cutting jobs in Baltimore County, Avesta was adding a wide-width, non-coil plate line in New Castle, Ind. But Cooke denied that the moves were related. The allegation that jobs were shipped from Essex to Indiana "is not true," he said.

Avesta invested $2.8 million in the narrow-width Essex mill before it was shut down, and that $2.8 million is proof of the company's good intentions, Cooke added.

"There was an absolutely genuine attempt to keep old jobs," he said. "We've not been able to sustain the jobs that we told the state [we would sustain] and that we hoped we could sustain."

Worldwide, stainless steel consumption has been growing rapidly but production capacity has grown even faster, squeezing profit margins and causing constant cost-cutting. The Essex operation is still losing money, Cooke said.

State economic development officials concede that the performance requirements in the Avesta contract are not as concise or rigorous as those in deals that are being minted now. Even so, the state argues in its lawsuit, filed last month, that

Avesta agreed to "an exchange of mutual promises" when it accepted the money -- promises which it then broke.

All Avesta agreed to, Cooke said yesterday, was to make a

serious investment in Maryland and to try to run a profitable business here. The 350 jobs were a goal, not a promise, he said.

Besides, he added, Avesta hit the goal -- briefly. At one point in 1996, before the narrow-width mill was closed, the company had workers in Essex and was paying enough overtime to account for 50 more positions, he said.

Since it agreed to buy Eastern Stainless in 1995, Avesta has invested $90 million in the facility, Cooke said, including more than $20 million in new equipment and $14 million in environmental cleanup. The plant spends roughly $20 million annually on local suppliers, he said, and it has asked its parent company for another $6.3 million in capital investment.

"We're still pursuing a business plan that, hopefully, keeps this site running and hopefully will add more jobs than we have today," Cooke said.

Pub Date: 1/06/98

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