The answering machine at RG Steel's Sparrows Point plant hasn't been working much better than the accounts payable department or the sales operation.
"Thank you for calling Severstal's Sparrows Point general office," the voice mail prompt said as recently as a few weeks ago, even though Severstal North America hasn't owned the plant since March.
Demand for Sparrows' construction steel is miserable. The plant is still scrambling to regain customers that vanished after it was all but mothballed last year.
It's probably losing millions of dollars a month, analysts say, and it seems to have severe cash problems. Suppliers say they can't get paid.
To save money, employees and vendors say, management is shutting down the plant's main machine shop, the metalworking heart of the maintenance operation that keeps the mill in business. The work is being outsourced — contrary to the union contract, employees say. And the shop's expensive lathes, grinders and boring mills are getting sold off.
Sure, it's a tough economy out there. But for anybody who expected RG Steel, parent Renco and luxury-loving patriarch Ira Rennert to be any better for the mill than its other four owners over the past decade, the check is still very much in the mail.
"I've never, never seen anything like this — what they're doing here," said Robert Henry, a machinist who's dismayed that he and more than 30 co-workers in the shop are being reassigned. "Just right in front of your face — taking your work away from you."
Vendors aren't any happier. RG Steel owes Sherwin-Williams $24,000 for paint and supplies, according to a lawsuit filed in Baltimore County District Court.
RG Steel is also overdue on bills from Kinder Morgan, a critical supplier of iron ore and coke, the raw materials of steel. Kinder Morgan spokesman Joe Hollier wouldn't say how much, adding, "They are making payments, and they are getting ready to be current."
The mill not only owes $48,000 to maintenance contractor A-Tech Hydraulics, said A-Tech owner Ron Forster. It also evicted A-Tech as a Sparrows Point tenant after ending a deal in which Forster's company agreed to be paid for plant maintenance via rent subsidies rather than cash.
"They said, 'You need to pay us all the back rent,'" Forster said. "I said, 'You need to pay me what you owe.' The arrogance of these people is alarming."
RG Steel did not response to several detailed requests for comment.
In recent weeks, much of Sparrows Point's machine-shop equipment — 40 machines or more, according to employees — has been sold to companies across the region. Machine-shop work once performed by unionized mill employees is being outsourced.
Chalmers & Kubeck, a large machine shop in Aston, Pa., bought between 10 and 15 of Sparrows Point's machines, said the shop's general manager, Jim Moore Sr.
Economic development officials hoped that billionaire Rennert, who built a house on Long Island with more square footage than many supermarkets, would invest in the Point. Instead he's doing the opposite, selling off capital equipment.
Steel plants elsewhere have outsourced machining work as they try to cut costs, said industry analyst Charles Bradford. At Sparrows Point, management has contemplated idling the machine shop for years. Mittal Steel moved to downsize the shop when it owned the plant in 2006, but it was blocked by the union.
Why the United Steelworkers aren't raising holy heck this time is a mystery. Machine shop employees, who can make $50,000 a year and a lot more with overtime, feel the union is asleep. The union local president, Jeffrey Mikula, was unavailable because of a death in the family. David McCall, district director for the union, didn't return my calls.
Machinist Henry has filed an independent complaint against RG Steel with the National Labor Relations Board, alleging that the outsourcing violates the labor agreement.
Several factors hurt Sparrows Point. Until construction picks up, it will face limited demand for one of its most important products. There is far too much global steel manufacturing capacity. Without its own iron mines, RG Steel has to bear high costs on the wholesale market. To woo back customers, it must slash prices.
"It's a very tough time, even for the most efficient plants," said consultant Bradford. "But because this plant was closed for a while, they lost their customer relationships. Which means you have to buy your way back in" with discounts.
Nobody likes to lose money. At least give Renco credit for operating the plant and employing 1,800. That's more than Severstal was doing. But surely the company knew its investment in Sparrows Point, as well as in Severstal mills in West Virginia and Ohio, would include accounting and cash losses in the early part of its ownership.
From the start, people who care about Sparrows Point had low expectations for Renco, which has a reputation for cost-cutting and flipping assets. By closing the machine shop and leaving unpaid bills all over town, the company is following the script.