Sorrow, uncertainty at Sparrows Point

Transition: As ISG takes over at the Beth Steel plant, many mourn the company that has been part of Baltimore since 1916.

May 08, 2003|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

A flurry of faxes, a few strokes of the pen in a Manhattan law office and the swift electronic shift of hundreds of millions of dollars yesterday ended the 99-year life of Bethlehem Steel Corp., an industrial giant emblematic of American economic power for much of the 20th century.

At Sparrows Point in Baltimore County, in Burns Harbor, Ind., and in four other Bethlehem plants across the country, handfuls of survivors surrounded by banks of high-tech, automated steel-manufacturing equipment mourned the company's demise.

"Ten years ago, even five years ago, I would've said no way," said John Thackston, 47, who has worked at Sparrows Point for almost a quarter of a century and whose parents worked there for more than 30 years.

Steel will continue to be manufactured at Sparrows Point by International Steel Group Inc. of Cleveland - which bought the Bethlehem assets for about $1.5 billion - but with far fewer workers and a cautious awareness of the daunting global economics of modern steel production.

Steel workers and industry experts have no illusions about the invulnerability of what remains of Bethlehem.

Malleable company

ISG, a steel producer with facilities salvaged from dinosaurs across the nation's industrial heartland, is as nimble an economic creature as Bethlehem was solid and predictable.

That flexibility - in work rules, manufacturing technology and identifying markets for its products - is essential in traditional industries like steel to survive, even the steelworkers union agreed this week.

"The one thing that they have going for them is they make their decisions quickly," said Tom Conway, a top negotiator for the United Steelworkers of America. "In today's business world, you can't sit around and apply science to everything. Sometimes you got to make decisions with your gut."

ISG chief financial officer Mitch Hecht had high hopes in an interview this week.

"We will be the most productive, integrated steel company in the world," he said. "We'll be among the lowest-cost producers of steel anywhere, equivalent with the mini-mills on a production cost-per-ton basis."

Bethlehem executives recognized the urgent necessity to change but, in the end, the inertia of tradition proved impossible to overcome.

In 1980, it took Bethlehem eight man-hours to make a ton of steel. By the early 1990s, the company had halved that number. And before its sale to ISG, Bethlehem had reduced it to two hours a ton.

ISG's corporate average is about one man-hour, and other mini-mill competitors can make a ton of steel in even less time.

Three major factors

Robert S. "Steve" Miller Jr., the final chairman and chief executive officer who presided over the company's bankruptcy and sale to ISG, said three major factors led to the company's demise: poor productivity, costly benefits for retirees, and a deluge of cheap imports.

"The productivity issue is paramount," Miller said in a recent interview. "Even though we had made great strides in reducing labor hours per ton of steel, we were still not as efficient as the best global competition or the mini-mills."

In the 1990s, Bethlehem tried to reverse its fortunes in the face of intense global competition by investing in plant improvements and new technologies that helped improve productivity and reduce manufacturing time. By the end of the decade, the company had spent more than $600 million on the Sparrows Point plant, including the construction of a more efficient cold-rolling mill.

But becoming more competitive produced its own economic pain - Sparrows Point lost 400 jobs when the cold-rolling mill opened - and the changes seemed never enough to compete successfully with increasingly cheap steel from mini-mills and foreign producers.

"The tragedy of great, shifting world economic forces and flows hit home in places like Sparrows Point," said Joseph L. Arnold, a professor of urban American history at the University of Maryland, Baltimore County. "In some ways, Baltimore has always been a city deeply affected by deep economic changes."

Rising pension and health care costs for retirees helped smother Bethlehem, Miller and industry analysts say.

Once, Bethlehem had 10 workers for every retiree. But that ratio reversed itself, saddling the company with billions of dollars in guaranteed benefits, Miller said.

`Lived in the moment'

Not surprisingly, union leaders vehemently disagree.

"I think for a long time, Bethlehem lived in the moment as opposed to preparing for the future," Leo W. Gerard, president of the United Steelworkers of America, said recently. "I always figured that Martin Tower [company headquarters in Bethlehem, Pa.] was an example of that, where everybody was in management and had country clubs."

ISG plans to keep Sparrows Pont and Bethlehem's other operations open and a majority of employees on the payroll. But Bethlehem's operations under ISG ownership will have far leaner management ranks and a work force about a third smaller than its current 11,000.

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