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The Long Winter of Kaiser Steel : The industrial empire it once anchored is gone, and the firm struggles to survive, beset by an internal battle for control and a hostile economy.

February 09, 1987|NANCY RIVERA BROOKS | Times Staff Writer

For the war-weary populace of Southern California, the dedication of Kaiser Steel's Fontana blast furnace a few days after the Christmas of 1942 was a patriotic extravaganza, even making the front page of the Los Angeles Times.

College students sang. A young radio reporter named Chet Huntley acted as master of ceremonies. And storied industrialist Henry J. Kaiser watched as his bountiful wife Bess, sporting a large orchid, threw the switch to fire up the blast furnace that Kaiser named after her in a sentimental moment.

With that, the first complete steel mill west of the Rockies roared to life.

"It was a glorious event," recalled Martie Hubble Bernhart, a Burbank resident who attended the dedication with the Pomona College Glee Clubs.

"Bess came in like a gunboat--with that big bosom and those huge flowers," she said. "And Henry J. with his big scowl, and he made a speech. With that big scowl, he looked so tycoonish."

Those were the glory days of Kaiser Steel, founded by Henry J. Kaiser to provide steel for his wartime shipbuilding efforts. Historian Mark S. Foster called Kaiser Steel the "linchpin" of the powerful Kaiser industrial empire that included businesses in aluminum, cement, electronics, automobile manufacturing and health care.

The empire is gone now, although many fragments survive. Henry J.'s massive Fontana steel mill was sold in 1984. And for Kaiser Steel itself, survival has seldom been easy, and in the past few years has become even tougher.

In recent months, Kaiser Steel's shaky financial health deteriorated further, and the firm became embroiled in a battle for control brought on by the company's money problems. In the end, Kaiser chairman Monty H. Rial was out, and Minneapolis investor Bruce Hendry had taken his job.

But the battle continues, fueled partly by interest in Kaiser Steel's remaining assets and partly by the egos of the combatants, observers say.

In the latest developments, cash-strapped Kaiser Steel announced last month that it can no longer afford the health benefits plans for 5,000 retirees, many of whom live in Southern California. Two company directors recently resigned, including former Kaiser Steel Chairman Stephen A. Girard.

Kaiser Steel has put its coal operations and a small power subsidiary up for sale to raise cash and restructure the company. And Hendry is considering selling Kaiser's steel-fabricating operations--the company's last link to the steel industry.

If all those assets are sold, Kaiser Steel would be a real estate company with a waste-treatment plant in Fontana, which it has tried to make the centerpiece of a proposed industrial park. At its peak in the early 1970s, Kaiser employed more than 13,000. The payroll has since shrunk to nearly 1,000 workers.

For his part, Rial contends that he has a financial backer willing to put up $30 million so that the company can restructure. He has offered to put his Kaiser holdings into a trust for the retirees. And he vehemently opposes the sale of any assets while the company's markets are so depressed.

From the beginning, Kaiser Steel was plagued by limitations. When Henry J. wanted to build a West Coast steel mill in 1940, he was opposed by the Eastern steel giants and their supporters in Washington, said Foster, a history professor at the University of Colorado at Denver who is writing a biography of Kaiser.

Authorization and government financing for the steel mill finally came, but not until three months after Pearl Harbor was attacked. And rather than allowing the steelworks to be built on the coast as Kaiser wished, Washington insisted that the plant be constructed 55 miles inland to protect it from Japanese attack. That resulted in higher transportations costs.

Japanese Competition

After the war, Kaiser faced continued opposition from established steel companies as it tried to expand to serve the postwar consumer economy. Still, the company prospered in the 1950s and '60s.

But the 1970s was a rocky decade as Japanese steelmakers attacked. The Western steel industry was particularly vulnerable to the flood of low-cost steel from overseas.

By the time Kaiser closed its Fontana steelworks in late 1983, it had become the ninth-largest steelmaker in the nation but was widely considered to be one of the weakest companies in the shell-shocked industry.

"There were a lot of mistakes made," said Elliot Schneider, director of perspective research for Gruntal & Co., a New York investment firm.

"The unions wanted too much. . . . The management gave in too easily," said Schneider, who began following Kaiser Steel in the 1960s. "It was a question of being fat, dumb and happy."

The late 1970s also saw the dismantling of the Kaiser empire, which lost some of its spark after Henry J. retired in the 1950s and the second generation took over.

Kaiser Steel was essentially for sale for most of the early 1980s. It attracted a suitor in 1982, but that bid by San Francisco investor Stanley Hiller Jr. fell through.

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