Why ArcelorMittal succeeds where LTV failed: Heart of Steel (photos, video)
Posted October 16, 2016 in Selected Press
CLEVELAND, Ohio -- From Interstate-77, the gigantic flame rising from a stack at ArcelorMittal steel mill remains an icon of manufacturing in Northeast Ohio.
"When you see that flame, that means we're making steel in Cleveland," said Mark Granakis, a former United Steelworkers president at the plant.
The flame was extinguished in late 2001, after the plant's owner, LTV Steel Corp., went bankrupt, closing the plant in early 2002. Then the flame was revived, twice. Its survival is a tale of adaptation and perseverance by local workers and managers.
Survival required massive change, including investment, vast improvements in union-management relations, and new product lines. The story of ArcelorMittal's survival also offers insights about trade, technology and job loss, and the fate of manufacturing in America.
ArcelorMittal Cleveland now may be the world's most productive steel mill. It's almost twice as productive as the average American mill. And it is producing Advanced High Strength Steels, a rarer and more demanding metal critical to building today's higher-mileage cars.
Those changes allow Cleveland workers to compete against cheaper labor from elsewhere in the world, but they also mean that the plant needs far fewer employees. Its staff, at about 1,900, is roughly half its former size.
Steelworkers once joked that the job required a strong back and a weak mind. Now, many jobs require not just a high school education, but a two-year associate's degree.
ArcelorMittal's story is also one of painful loss and difficult but unavoidable adjustments.
"All parties knew that we couldn't function like we had done, or we would have crawled right back in the same hole we came out of," said Dan Boone, president of United Steelworkers Local 979. "We all had the desire to succeed."
Beginnings in Cleveland
ArcelorMittal Cleveland is among the area's oldest industrial landmarks. It began as Corrigan-McKinney Steel Co. in 1913 east of the Cuyahoga River in the Industrial Flats. The plant now occupies 950 acres straddling both sides of the river. Tremont sits to its west, Slavic Village to its east.
Manufacturing powered the economy of Cleveland and Ohio for decades. During the 1950s, manufacturing employed more than 40 percent of working Ohioans, according Michael Shields, a researcher at Policy Matters Ohio. And manufacturers dominated the list of top employers in Greater Cleveland during that time. The two companies that would later become part of LTV, Republic Steel Corp. and Jones & Laughlin Steel Corp., combined had nearly 14,000 employees and would have been considered the second largest employer, after General Motors Corp.
A nationwide four-month steel strike in 1959 would have an unintended consequence on labor forces, said historian Christopher Dawson, author of "Steel Remembered: Photos From the LTV Collection".
"The federal government intervened, and the workers did end up getting a raise and better benefits, but the strike also helped open the door to foreign imports, which had a huge impact years later," said Dawson, the former curator of urban and industrial history at the Western Reserve Historical Society.
By the 1970s, Ohio's manufacturing base was eroding. Plants were relocating, first to Southern states and then abroad. By the end of the decade, it was down to about 30 percent. Global competition, once flattened by war, had grown. Automation began replacing human labor. Cleveland's population, which peaked in 1950 when the city was the seventh largest city in the United States with more than 900,000 residents, began an accelerated decline.
The recession of 2001 swept away many more of the city's manufacturing jobs. Late that year, LTV announced that it was closing the plant and terminating about 4,000 workers.
But a core group of workers -- both union and management -- was determined to re-light the flame.
"We basically said, 'We are going to rise again here someday; and the sun is going to shine again on Cleveland,'" said Eric Hauge, ArcelorMittal Cleveland's vice president and general manager since 2011.
Plotting a comeback
Hauge managed the blast furnaces. He knew that closing a steel mill means more than shutting down machines and walking away. Equipment that is improperly idled can be ruined forever. This is especially true of the blast furnace, where the iron that will eventually become steel is made.
In December 2001, LTV officials wanted to protect the three blast furnaces by "banking" them -- filling them with coke, coal that has been converted to nearly pure carbon, to keep them warm. Hauge, however, thought the furnaces should be taken cold, or shut down. He wanted to restart them eventually, and believed shutting them down was the best way to protect them from a brutal Cleveland winter.
"We were a good plant. It was well maintained," he said. "We had good people who wanted their jobs back. I was confident that we could find a buyer."
At first, union leaders hesitated because they had always heard that restarting a blast furnace was nearly impossible. But they decided to back their manager, and LTV agreed. It was a breakthrough based on trust, said Granakis, then a union president.
Boone, the current union president, said the trust wasn't blind. Hauge serves on a global group of blast-furnace experts. "This is one of the best blast furnace guys in the world," he said.
No buyer had emerged, but the self-appointed management-union team persisted. They knew the restarted plant would have to run far leaner than it ever had before.
Part of the inefficiency stemmed from local history. In 1984, LTV had bought Republic Steel and J&L. The plants had once competed. In some ways, their union locals still did. And there were five of them.
Granakis said the international union had long wanted them to combine, but the "chiefdoms" resisted merging. Facing the prospect of squandering the plant's second chance, they came together, with Granakis as their new leader. Merging unions, though onerous, proved to be the easy part. Seeing so many workers laid off would be exponentially more difficult. Granakis compared it to a death in the family.
"If I had four kids in a burning house, and I could only save two, I look at it that I saved two. I don't look at it that I lost two," Granakis said.
During the union-management meetings before the plant was sold, Hauge was seeing new possibilities. The only thing that quelled the distress of a plant with fewer workers was the prospect of survival through re-creation.
"It was an exciting period," he said. "We sat down saying, 'We have a blank sheet of paper, now how are we going to do this?' "
A new buyer for the plant
In 2002, the mill became part of International Steel Group, or ISG. In 2005, ISG sold to Mittal Steel. In 2006, a merger created ArcelorMittal. Based in Luxembourg, it is the world's largest steel and mining company with operations in more than 60 countries.
More importantly, workers and managers say, the culture was changing within the plant. Same plant. Same machinery, albeit slightly refurbished. But totally different attitudes.
Granakis, president of the new Local 979, said that, under LTV, "Management had a totalitarian view, 'I'm the boss and that's it... If you don't like it, file a grievance.'"
When LTV went under, it left behind 4,000 unresolved grievances, over everything from outside contracting to scheduling.
Workers were classified under 32 job functions. By the time the plant reopened in 2002, that had fallen to five. Now, each worker could do more, on his or her own initiative. In fact, for the plant to run well, each worker had to do more. Their pay increased to reflect it. The average hourly ArcelorMittal employee in the U.S. makes $98,000 in wages and benefits.
This added responsibility aided productivity by workers cross training to do a variety of jobs. For example, a worker no longer could just be a pipefitter; he or she would also need to be a welder or know how to read blueprints. Workers were now expected to think for themselves instead of doing only what the boss told them to do, and teamwork was rewarded through paid bonuses for departments, not by job classification.
Steel mills had always had a mix of skilled and unskilled workers. Many of the laid-off workers lacked even high school diplomas. As the plant reopened, using only two of its three blast furnaces, the unskilled jobs were disappearing, and not coming back.
Eventually, ArcelorMittal partnered with area community colleges to create an associate degree program to meet the demand for steelworkers with electrical and mechanical skills.
Fewer people were doing more, in an environment that increasingly demanded higher skill. That was becoming the story of industry throughout Ohio. By 2015, only about 12.7 percent of Ohioans worked in manufacturing. When LTV closed in 2002, more than 26,000 Ohioans worked in the steel industry. That number declined to under 16,000 in 2015.
Culture change and product change
With the new skills came new expectations. Workers were encouraged to share their ideas about efficiency and new ways the plant could make money.
A few years after ISG took over, Granakis pitched converting an existing production line into a Hot Dip Galvanizing Line, which produces corrosion-resistant steel by adding a layer of zinc. It was a specialized product that was growing in popularity among manufacturers, and would open more markets to the plant's output. Besides, Granakis told them, LTV had done an engineering study showing the line could be converted.
The company said yes, and the conversion was done. Things were looking up.
Not that life was easy.
In 2007, the Steelyard Commons shopping center opened on part of what had been the less profitable west side of the plant. Walmart is one of the anchor stores. Some saw that as a perfect metaphor: low-wage retail jobs replacing good paying blue-collar ones.
Many of the laid off LTV workers struggled to find jobs with salaries similar to the ones they lost. Dave Wigenfeld was among them. He worked a low-wage retail job for a few years before landing a decent-paying job in a municipal service department.
"It took me a long time to get over that I couldn't earn a good living to support my family," he said.
Equally poignant: Part of the plant that stood on the site of Steelyard Commons had been disassembled and sold to China. The Chinese steel industry burgeoned to meet the demands of its growing economy. When the country produced more steel than it needed, the surplus was often sold in the U.S. for less than it cost to make.
Then the Great Recession hit. The lifeblood of the plant -- its iron and steelmaking operations -- went cold by November 2008. By spring 2009, all operations had stopped.
Margaret Krolikowski, now a division manager of quality, noticed that other ArcelorMittal plants in the U.S. hadn't gone cold. Cleveland, she realized, needed a market niche.
The plant restarted in the fall of 2009, as the economy began to improve and the demand for steel began to come back. Krolikowski and her colleagues wanted to produce something special. They settled on the emerging market for Advanced High Strength Steel.
West Side story
By 2011, orders were picking up as the economy improved. Locals called for restarting the still-dormant No. 2 Steel Producing on the west side.
In 2012, the company said Cleveland could open that facility. That meant 150 new jobs. How would they find that many people and train them in a matter of months?
As it turned out, some hires were recent high school graduates; others, 50 years old. Several had college degrees. Eighty percent of the newest workforce was new to steelmaking. To train them, the staff members innovated again.
Much of the training was hands-on. Some retirees temporarily returned; some workers delayed retirement so that they could stand alongside the new employees, showing them how to operate the equipment.
"The recipe for success was having a handful of people who were good coaches, could relate with people with no experience and understood the operation," said Michael Madar, division manager of steel producing. "There are a lot of potential hazards in this type of operation -- big heavy equipment that is completely unforgiving."
As the plant came online, demand for AHSS was rising. Automakers were gearing up to reach new federal fuel-efficiency standards. The new material allowed cars to be stronger and lighter, more fuel-efficient and safer in case of a crash.
The equipment at the west side operation was better suited for making higher-grade steel. The Hot Dip Galvanizing Line also played a crucial role in making such steel because it was specially formatted for that role.
Today about 60 percent of what comes off the line is AHSS made mostly on the west side, up from less than 5 percent in 2011.
That gives Cleveland's plant a competitive advantage. High-strength steel is harder to make than its more generic counterparts because of more complex recipes, often with an intricate mix of alloys.
For years, the west side facility had a history of opening when times were good and closing when demand fell. Kuona Smith, a fourth-generation plant worker, knew this, and hesitated before transferring from the east side. She is glad she decided to move.
"Being in AHSS, we can do something that others can't do," she said.
In 2013, the Cleveland plant beat out operations from around the world to receive a prestigious ArcelorMittal award honoring the plant's 1.1 ton per worker hour productivity and the success of the west side operation. Later that year, it drew a visit from President Barack Obama.
ArcelorMittal succeeded despite international competition, because it changed everything from its technology to its workplace culture to its product mix.
Since 2013, the company has invested more than $100 million in the plant, including $57 million on a blast furnace reline.
"When you do a blast furnace reline, it's big," Hauge said. "It sends a commitment to Cleveland, that they're looking out many years.
It's a survivor's tale, but not everyone survived. When LTV closed, Ohio held seven working blast furnaces. Now there are three. Two of them are at ArcelorMittal.
During Obama's visit to ArcelorMittal in 2013, he praised the workers at the mill.
"We bet on American ingenuity and American workers," the president said during his speech. "And assembly lines started humming again, and automakers started to make cars again. And just a few months after this plant shut down, your plant manager got the call: Fire those furnaces back up, get those workers back on the job.
"One of the most productive plants in the world," he said. "Best workers in the world."
Original Article: http://www.cleveland.com/business/index.ssf/2016/1...