Steel Town’s Chance for a Fresh Start
In a town that measures its survival one tin can at a time, President Bush and his plan to protect the steel industry are worth about a penny.
A penny more for each of the billions of cans made from Weirton steel might be enough to keep blast-furnace electrician Phil DiMatteis from getting another layoff notice. It might keep customers coming to Dewey Guida’s BBQ rib restaurant, where $18.95 buys a full rack with a side of potato skins smothered in cheese sauce. It might even help Weirton Steel Corp. Chief Executive John Walker pull off a rarity in his beleaguered industry, a voluntary restructuring outside of Bankruptcy Court.
“Our hope is to be one of the last ones standing,” Walker said.
With its soot-stained buildings and smoky-gray skies, Weirton is the gritty incarnation of the political and economic upheaval that prompted a Republican president who preaches trade liberalization to practice protectionism. It’s a company town that feels betrayed by its traditional Democratic allies in Washington, a union stronghold that feels victimized by what many see as a vicious form of predatory commerce masquerading as free trade.
The past may be painful, the future dicey. But right now, with Bush’s tariffs of up to 30% set to take effect at the stroke of midnight March 20, it feels like springtime in the Upper Ohio Valley. Every year, Americans buy about 32 billion cans of green beans, sliced peaches, stewed tomatoes and other grocery staples. Every fourth can is made from tin plate that was cast, milled, plated and rolled at the sprawling Weirton Steel plant that towers over everything else in town.
Industry experts say Bush’s tariffs might cause steel prices to rise 10% as foreign steelmakers abandon the U.S. market or try to recover the import duties by charging more for their products. The White House says the tariffs are intended to counteract “dumping,” the practice of selling steel in the U.S. at below-market rates.
The duties could push a can of Campbell’s chicken noodle soup, which contains about 9 cents’ worth of steel, from 79 cents to 80 cents at the local Kroger. Weirton Steel’s revenue, about $1 billion last year, might go up $100 million.
Not everyone is ecstatic at the prospect. Bush’s rescue plan will not only inflate the cost of consumer products. Economists say the number of jobs saved in mill towns such as Weirton will be exceeded by the number lost in industries that use steel to make autos, appliances and other durable goods. The tariffs could prompt other countries to retaliate, and a trade war is the last thing the world needs as it tries to recover from recession.
But for Weirton and its 23,000 inhabitants, it’s a chance to make a fresh start. For George W. Bush, it’s an opportunity to make further inroads in a region that has long been allergic to Republicans.
“I’ll tell you what this is about. We finally have a president with the guts to enforce the law,” said Darrell Curtis, who went to work at the mill straight out of high school in 1972 and has been there ever since, except the year he was laid off in the early ‘80s.
Curtis, 48, remembers well that day in July 1992, when Arkansas Gov. Bill Clinton and running mate Al Gore showed up at the community center wearing flannel shirts and uttering solemn promises that if elected, they would protect local mill workers from cheap imported steel. Weirton upheld its end of the bargain at the ballot box. But Clinton, once in office, declined to initiate the kind of protective action that Bush has just approved, even after Asian manufacturers, beginning in 1997, inundated the U.S. market with surplus steel selling at rock-bottom prices.
“The Democrats flat out lied to us,” Curtis said. “I’ve never voted Republican in a presidential election before in my life, but I did this last time.”
So did the rest of West Virginia, for only the fourth time since the Great Depression. Many here say it’s a safe bet the same thing will happen in 2004.
In the U.S., only about a dozen big companies still are combining ore and coke in big blast furnaces to produce iron, the raw ingredient of steel. These “integrated steel” companies are aging behemoths with high fixed costs, in large part because of the generous pension and health benefits they are obligated to pay to thousands of retirees.
The integrateds have been hit by a series of shock waves. They lost business to foreign steelmakers who enjoyed low labor costs and extensive government support. Their home turf was invaded by newer, more efficient mini-mills that used electric-hearth furnaces to turn scrap metal into finished steel. The Asian financial crisis pushed prices to 20-year lows as foreign steelmakers flooded the U.S. with surpluses made even cheaper by collapsing currencies.
Company Employment a Family Tradition
Over the last four years, 31 American steel companies have entered bankruptcy proceedings, including seven integrateds: Bethlehem, Geneva, Gulf States, LTV, National, Republic Technologies, and Wheeling-Pittsburgh. Entire plants have been shuttered, and industry employment has fallen to fewer than 150,000 from a peak of 521,000 in the early ‘70s.
Weirton Steel was founded in 1909 by Ernest Weir, a young entrepreneur who situated his start-up in Holliday’s Cove, an Ohio River village wedged between Pennsylvania and Ohio in West Virginia’s narrow northern panhandle. The community returned the compliment, changing its name to Weirton.
For more than six decades, the city and the company thrived, their fates so intertwined that even those townsfolk who have other jobs say we and us when talking about the company.
Mark Glyptis graduated from Weirton High School in 1969. Of the 350 people in his class, at least 100 went straight to the mill, landing jobs that often paid better than the starting salaries received by college grads.
“You could walk downtown to the company employment office, fill out an application, go get a physical and start work the following week,” said Glyptis, who went to college and got a marketing degree instead. But he came back to Weirton and went to work in the steel plant, just like his father, and his father’s father before him. He started in the coke plant but migrated to the tin mill, where most of the plant’s ethnic Greeks were employed.
Today, Glyptis is president of the Independent Steelworkers Union, which represents workers at Weirton Steel and nowhere else. He has a seat on the board of directors, the result of a 1980s crisis resolved when workers used an employee stock ownership plan to buy the company and prevent it from being sold to someone else. About 25% of Weirton Steel’s stock still is held by past and present employees, and they have been allowed to participate in the decision-making process. In recent years, it hasn’t been much fun.
Weirton’s work force, which peaked in the early 1960s at 13,500, has withered away as the company cut back production, shut down some operations and introduced labor-saving processes and technologies. By the end of this year, only 3,500 union members will be receiving paychecks.
Glyptis helped CEO Walker draw up the company’s restructuring plan. He has had to sell his members on the need for more job cuts so Weirton Steel can hold its own against foreign steelmakers.
“We’re not going to stop globalization, I think we’re going to have to concede that,” Glyptis said. “As it becomes more difficult to compete because of global economics, we’re going to have to become even more efficient. Machines, computers will ultimately take the place of people. If we can maintain the number of employees that we have now, I believe we will have been highly successful.”
The company’s recent restructuring has been orchestrated by Walker, 44, who became Weirton Steel’s president, CEO and chief operating officer two years ago. The company had not had a profitable year since 1995 and was selling steel at prices below the cost of production.
Faced with the same bleak circumstances, other integrated companies entered Chapter 11 bankruptcy. Walker chose a less conventional strategy: He asked Weirton Steel’s workers, suppliers and creditors to accept job cuts and debt markdowns that would help the company stay out of court and get back on its feet much faster. Most of them have signed off already.
An industry shakeout clearly is coming, and Walker aims to be one of the survivors. That’s where the tin cans come in.
Of all the integrated producers, Weirton Steel is the most heavily concentrated in high-end “tin mill” products, the thin-gauge, plated sheet metal used to make food cans. Tin plate sells at higher prices, around $650 a ton, and under long-term contracts is less vulnerable to price fluctuations. Analysts say Weirton probably can turn a profit on tin plate at current prices, something that the integrated companies can’t do with commodity products such as hot-rolled steel, which is selling for about $230 a ton.
Under Bush’s plan, all of Weirton’s product lines will be protected by the biggest tariff: 30% the first year, 24% the second and 18% the third. After three years, the levy would disappear. The government will collect the tariff as steel enters the country; the effect on prices depends on how much of the import tax foreign steelmakers are willing to absorb and how much is passed on to buyers.
Walker, like others here, gets a little prickly when people accuse the steel industry of using its political clout to get help from the government at everyone else’s expense. Even his 14-year-old daughter, Jenna, demanded to know why her dad wanted to boost the price of cars and refrigerators and possibly cause people in steel-consuming industries to lose their jobs.
He asked her if she would want to buy a car at half the normal price if she found out the reason it was cheap was that it had been stolen. That, he said, is what has been going on in the steel market, and Bush’s remedies will help right that wrong.
Walker has some justification for his claim. Two years ago, the U.S. International Trade Commission ruled that Japanese steelmakers were selling tin plate in the United States at illegal, below-market prices. It was one of several successful cases brought by Weirton to fight dumping.
A Future Based on More Than Tin Cans
Phil DiMatteis, the 25-year-old blast-furnace electrician, said he’s not sure what effect the tariff will have on prices, but he hopes it will buy him a little security. In 1998, he was one of about 1,000 employees laid off by Weirton Steel. He was called back within a year, but his lack of seniority means he’ll be among the first casualties if further cuts become necessary.
“I think the help from the president is hopefully enough of a crutch that the industry, at least Weirton anyway, can get some financial stability,” said DiMatteis, whose father, Tony, retired in 1999 after 33 years.
“I’d like to hope that this mill could be here for another 30 years to be able to provide for my family,” DiMatteis said. “But it doesn’t have a history of being very stable.”
John Bodonski, who retired from Weirton only a few months ago at the age of 54, said he knows he will be paying a few pennies more for the canned goods he buys at the grocery store. But if it restores even a fraction of the region’s old prosperity, it would be money well spent, he said.
“When I was growing up, everybody bought brand-new cars every three years,” Bodonski said. “We made money. We kept the economy going. Weirton Steel and Wheeling Steel, they kept everything moving around here. When we were doing good, everything was doing good.”
Dewey Guida remembers those days too. The owner of Dee Jay’s BBQ Ribs in downtown Weirton, Guida, 58, has watched as the entire region shared the fate of its principal employer. In recent years, he has become heavily involved in efforts to diversify the economic base of the Upper Ohio Valley.
The tariff, he said, “just gives us a little bit of lifeblood,” a chance to build a future based on more than just tin cans.
“Will it save us? No. We’ll save ourselves,” Guida said. “This is our day of reckoning now.”
