Weirton Steel Fares Better on First Anniversary of Employee Ownership
One year ago, thousands of steelworkers sacrificed the industry’s highest wage to save their company, Weirton Steel Corp., from becoming another rusted, idle monument to America’s lagging steel industry.
Today, their employee-owned company is nearly $60 million in the black--a far cry from the dark and shuttered plant it would otherwise be, although some worker-owners doubt it can continue at its current pace. It is also forging a new model for labor-management relations in the smokestack industries.
“We will come out about where we said we would in our feasibility study that started this company,” said company President Robert Loughhead. “Sales and shipments will be in the $1.1-billion range and shipments will exceed 2 million tons.”
The company gained 22 new customers in the first year. Profits through the third quarter totaled $48 million. Although fourth-quarter figures have not been officially released, Loughhead said the company will end the quarter in the black, with first-year profits near $60 million.
“In view of the slide in demand for steel in the fourth quarter and weakness in pricing, the year was fairly respectable,” Loughhead said. “We will be one of the few (steel) companies to report a fourth-quarter profit.”
Company officials say the key to the turnaround is cooperation between management and labor.
“We gave a lot of time to the people side of our business,” he said. “We are training our forces to deal with people. I don’t delude myself to think we are a raging success, but we do have more ongoing cooperation between labor and management than anywhere.
“Regardless of what we do in the market, how well we succeed is directly related to people.”
Walter Bish, president of the Independent Steelworkers Union at Weirton, agrees. “There is no one group that has taken more credit than the other,” he said, noting the many programs now in place that allow management and labor to talk on a weekly basis.
“Everybody is very excited,” he said of the first year. “It was a great opportunity for us. This is the eighth- or ninth-largest steel company in the country and a Fortune 500 company from day one (of the takeover).
“We have all learned a lot,” he said from his office featuring a poster proclaiming Weirton Steel as “America’s Steel Company.”
Approved Buy-Out
On Jan. 11, 1984, steelworkers in Weirton approved a $386-million buy-out from Pittsburgh-based National Intergroup, formerly National Steel. Employees took an average monthly pay cut of $300 to make Weirton Steel the largest employee-owned company in the United States.
The Weirton plant, which manufactures tin plate for use in the canning, automobile and appliance industries, would otherwise have shut down like other plants no longer profitable enough for their corporate owners.
In early 1982, National said profits at Weirton had become marginal and that it no longer wanted to operate the mill. Had the employees not bought the complex, company officials agree it would have been downgraded to a finishing mill, then closed altogether.
The acronym ESOP (Employee Stock Ownership Plan) became a household word for the 26,500 residents of this Ohio River town in the Northern Panhandle, sandwiched between Ohio and Pennsylvania. The buy-out meant a 71-year tradition of steelmaking would continue.
More than 1,000 workers have been recalled since the takeover, boosting the active work force to about 7,700. Bish said about 700 production and maintenance employees remain laid off with recall rights.
Not every worker shares Bish’s level of enthusiasm.
“I feel that it’s not as rosy as everybody says it is,” said Anthony Dibacco, back on the job since just before the takeover.
“I look for (the company) to not be as big of a mill as we see it now,” Dibacco said, noting the National Steel research that showed a smaller finishing mill would be more economical.
‘Tough to Compete’
“I think we’ll find it awfully tough to compete as a full mill. We must depend on other companies to supply the coke (coal-based fuel) to us. When the marketplace starts to get tighter, we’ll be the first to get cut off,” he said.
Weirton Steel is currently buying coke from Wheeling-Pittsburgh Steel Corp. and a Japanese firm, he said.
Dibacco estimated that while two-thirds of the employees are excited and content, one-third are “just there.”
“Some of the younger fellows think they may be laid off. The older ones are just biding their time,” he said.
With the employee buy-out, the city has gained economic confidence and increased business activity, but lost a major chunk of its tax base.
“The big change came when the sale was final,” Mayor Donald Mentzer said. “Housing sales were way down, now they’re really way up. When they (Weirton) came out with that first-quarter profit report, it produced a ripple effect in the community. New businesses started to look at Weirton.
“The city really got confident,” he said.
At least six new manufacturing companies and several retail businesses have expressed an interest in locating in Weirton, said Chamber of Commerce Director Joe Mayernick. In addition, between 20 and 40 property owners have applied for loans to remodel up to 60 businesses in the downtown area, he said.
While business may be good, the city lost an estimated $1.2 million in utility taxes when Weirton Steel decided to purchase cheaper out-of-state natural gas. Even though the company is retroactively reimbursing the city $800,000 as part of a one-time agreement, Mentzer said new revenue must be found or drastic cuts must be made in police, fire, and other public safety departments.
“We’ve yet to decide how we’ll raise the money,” Mentzer said, feeling no bitterness toward the company. “When you’re in business, you’re in it to make money.”
Between 40% and 45% of all Weirton residents are employed by Weirton Steel, including Mentzer.
“The people here are in their third or fourth generation of working for the company. My grandfather and my father worked there. I do now and so does my son. We all want to earn our own way,” Mentzer said.
Even better times are being projected by Loughhead. About $60 million in capital spending is planned for 1985, including the reworking of a continuous caster. A feasibility study is planned on the addition of a second caster, he said.
“It is not fair to say Weirton’s success signals the revitalization of the Ohio Valley,” Loughhead said. “If it signals anything, it signals that employee participation and participatory management is the wave of the future, ESOP or not.
“The year has been a satisfactory one. We have established our course in the marketplace. We’ve proven we can operate as a free-standing company.”
“Given a reasonable economy and demand, we can perform well into the future,” Loughhead added.
