NEW CARLISLE, Ind. — While U.S. Steel's ancient, massive South Works in Chicago nears the end of its trail this winter, a very different sort of steel plant is getting under way 100 miles to the east in a cornfield here.
The South Works, opened 112 years ago when Rutherford B. Hayes was President, looks like a sooty, oversized Erector set that nobody plays with anymore. The huge complex once employed 20,000 people, but it is to close for good in April and deposit its 700 remaining workers on the street.
By comparison, the new, $1-billion plant in northwest Indiana calls to mind a neat assemblage of white Lego blocks. The sprawling affair could pass for an office building and accomplishes in an hour what used to take 12 days. A joint venture of Chicago's Inland Steel and Japan's Nippon Steel, it employs 500 altogether, only 120 of whom actually operate the 24-hour-a-day, seven-day-a-week plant.
The contrast between the two facilities says much about today's steel industry. And their respective fates--out with the old, in with the new--help take the edge off the huge losses reported by the nation's biggest steel firms in recent days.
Most of the roughly $2 billion of red ink and thousands more job cuts reported by steelmakers for 1991 reflect the final stages of a painful decade that saw wholesale shutdowns, the elimination of 260,000 jobs, and $20 billion worth of modernization and new plants. During the decade, the industry lost $8 billion.
The result, by consensus, has been a return to world competitiveness for the U.S. industry, reaching full flower in a three-year steel boom that ended as the 1990s began. The industry now makes as much steel as it did a decade ago, but with half the workers.
Since then, a stronger U.S. dollar, recession and other factors--especially plummeting prices--have worked against steel. The industry is maneuvering now to bolster prices and to challenge what it calls wholesale dumping of foreign steel in the U.S. market.
But the restructuring goes on.
For example, the $767-million loss posted for 1991 by Bethlehem Steel Co., the No. 2 U.S. steelmaker, resulted almost entirely from two causes--its abandonment of a segment of the steel business that will now be claimed by other, more efficient U.S. specialty producers, and interruption of production at some other Bethlehem facilities by a $140-million renovation.
At U.S. Steel, a division of USX Corp., the last remaining mill at Chicago's South Works makes structural steel--a product whose price has tumbled 30% in two years because newer mills can make money at such prices and undercut U.S. Steel. South Works is probably the last shutdown for USX, says Chairman Charles Corry. "We have honed our operations down pretty well," he said. "I don't at this time see any further shutdowns on the horizon."
Meanwhile, in another example of the industry's reshuffling, U.S. Steel's new joint venture with Kobe Steel in Loraine, Ohio, stands to pick up some of the bar-and-rod business being abandoned by Bethlehem.
"Most of this is good news. They've finally bitten the bullet on the last of their bad plants," says Charles Bradford, a steel analyst at UBS Securities Inc. in New York, investment arm of the United Bank of Switzerland.
Of course, in the restructuring game, one man's good news is somebody else's pink slip. The steel bosses are still hacking away at jobs and seeking a new dose of economic relief from an already battered United Steelworkers Union. Inland Steel wants to cut another $400 million--20%--out of its operating costs, and is targeting the work force for a third of it.
The joint venture of Inland and Nippon in Indiana is the very embodiment of such strategies: The massive plant can be run by 30 people at a time, most of them sitting in front of computer screens.
"I can't believe people are still sitting around saying it's good news that they wiped out half the jobs in the steel industry," says Jack Parton, director of the United Steelworkers district covering Chicago and northwestern Indiana, the heart of what remains of the U.S. industry.
And the steelmakers remain deeply troubled on other fronts. Robert Darnall, president of Inland, the No. 5 U.S. producer, says: "I was probably more optimistic a year ago than I am today. That's because I was naive a year ago."
In addition to an upturn in labor costs after a decade of decline, prices have tumbled to 30% below 1981 levels when adjusted for inflation. The recession has crippled the all-important automotive, appliance and construction industries, markets in Europe and Japan are now weakening, and foreign producers are reportedly dumping their steel here--selling it for less than it costs to make.
Now a group of big steel companies is preparing to file a barrage of dumping lawsuits April 1 with the Federal Trade Commission and to try to impose a hefty 6% price increase, timed for their 1993-model contract negotiations with auto producers.