Saving Steel

A labor-management agreement of a type rarely reached in the history of the Sparrows Point plant has brought innovation and cooperation to the facility and a way to combat global threats faced by the industry.

August 21, 2005|By Paul Adams | Paul Adams,SUN STAFF

WITH ORDERS for steel plunging and the new owners of Baltimore County's Sparrows Point steel mill scouting for places to cut costs, labor leaders and management at the plant sat across a table from one another in May and did something that rarely happened in the 87 years the plant was operated by Bethlehem Steel.

They agreed.

Gone were the days when the two sides could afford the kind of stalemate that doomed the once-mighty industrial giant to bankruptcy and cost thousands of Maryland workers their pensions and health care benefits. The new way of making steel on the shores of Chesapeake Bay called for innovation and cooperation in the face of global threats.

In the weeks that followed, steelworkers and management at the sprawling mill came up with a package of temporary layoffs and cost cuts that saved Mittal Steel Co. $4 million in June and $6.8 million in July.

The Netherlands-based multinational, which bought the plant about a year after Bethlehem had sold it in bankruptcy to International Steel Group Inc., was so impressed that it instead idled a blast furnace in Weirton, W.Va., and moved much of the work to Sparrows Point until the market rebounds.

"The steel is going to go to the most cost-effective plant," said William Brake, an executive vice president who oversees Mittal's operations in the eastern United States. "[Sparrow's Point General Manager] John Lefler and [Steelworkers President] John Cirri have really stepped up to the plate and on their own have come up with some aggressive and breakthrough thinking in the way they run that plant to be more cost-effective. In a down market, you compete for your tons."

The episode is symbolic of the seismic shift in both labor relations and efficiency that has taken place at Sparrows Point in the years since the plant came perilously close to extinction during the reorganization and subsequent sale of Bethlehem Steel to ISG in 2003.

But it also points to the dangers the aging mill still faces as it strains to hold its ground within a global steel company that is locked in its own battle for supremacy in a fragmented world market. Mittal and its next largest rival, Arcelor SA, own just 15 percent of the world's steel-making capacity despite years of industry consolidation.

Lakshmi Mittal, an Indian-born entrepreneur who created a steel empire by buying up distressed plants in 14 countries, formed Mittal Steel in April with the purchase of ISG for more than $4.5 billion in cash and stock. The deal created by far the largest steel producer in the world with $31.8 billion in sales and 165,000 employees.

The timing was awful. The transaction occurred in the middle of an industry downturn that has seen spot market prices for hot-rolled steel fall 39 percent, to $460 a ton last month from a peak of $756 a ton in September, according to Purchasing, an industry trade magazine.

Mittal has responded by cutting production companywide by 1 million tons while pledging to make the business grow and keep all of the former ISG plants operating. But the deal left some at Sparrows Point wondering whether the owner's reputation for centralized control and cost-cutting might lead to permanent job cuts or a disruption in the new culture of cooperation and independent thinking at the plant.

At stake are nearly 2,500 high-paying jobs and the future of a manufacturing powerhouse that is woven into the history and culture of Baltimore's blue-collar neighborhoods.

`Anxiety'

"There is anxiety, but it's because of what we went through with Bethlehem," said Cirri, president of United Steelworkers of America Local 9477. The union gave its blessing to the sale of ISG after Mittal pledged to maintain the union's existing contract and grow jobs.

"We all thought pensions were guaranteed," Cirri said. "We all thought jobs were guaranteed, and Bethlehem taught everybody a lesson: Nothing is guaranteed."

Company officials say workers at the plant have nothing to fear, and the union and most analysts expect Sparrows Point to benefit from Mittal's global access to raw materials.

But banishing the ghost of Bethlehem Steel, which employed nearly 31,000 steelworkers at its peak in 1959, will be one of Mittal's challenges. The fear and insecurity among workers remain a powerful force at Sparrows Point two years after the plant was revitalized by ISG.

Despite Mittal's assurances about jobs, some workers say rumors of layoffs and plant shutdowns swirled when the company's sale became public in October. Some considered retirement, while others rushed to use up vacation time out of concern they might soon lose it. But hardened steelworkers who have seen their paychecks signed by three different owners in three years are mostly philosophical about the mill's prospects.

"I don't listen to no rumors," said Robert Madison, who works in the control room of the plant's huge blast furnace - the heart of Sparrows Point.

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