CORPORATE PROFILE
USX: A HEART OF STEEL By Holley Knaus & Nadav Savio THE UNITED STATES STEEL CORPORATION faded into history in the summer of 1986, leaving former employees and their families with little but bitter resentment and memories of past prosperity. That year, U.S. Steel executives changed the company's name to USX, displaying their indifference to the steel industry and the steelworkers who had built the empire which paid for the company's lucrative move into oil and gas. While the steel industry remained strong, the company and its workers thrived. But when competition and plant obsolescence forced an industry- wide collapse, it was the steelworkers who shouldered the burden, while U.S. Steel fled to the more profitable oil business, abandoning the communities that had made it rich for almost a century. The United States Steel Corporation was formed by J.P. Morgan in 1901 as a steel trust to protect the investments of Wall Street financiers who were concerned that price competition in the steel industry was reducing profits. Morgan bought Carnegie steel for $480 million, combined it with other firms and created the world's first $1 billion company, controlling 65 percent of the U.S. Steel industry. From its earliest days, U.S. Steel showed little concern for its workers. Steel industry wages were notoriously low, and at least half of U.S. Steel's employees worked a 12-hour day, six days a week. The company ousted the Amalgamated Association of Iron, Steel & Tin Workers from its plants in 1909 and U.S. Steel workers went unrepresented until the formation of the United Steelworkers of America (USWA) in 1942. The years after World War II brought prosperity to the U.S. steel industry, which faced almost no foreign competition. In the 1950s, U.S. Steel produced 25 million tons of steel a year, with back orders totalling over 6 million tons. Towns grew up around the mills along rivers in Western Pennsylvania and the Midwest, with the plants supporting four or five generations of steelworkers, as well as the small businesses that sprang up to service them. At its peak, U.S. Steel employed 201,000 workers. However, even in these prosperous times, U.S. Steel gave little back to its workers and their communities. Wages, which had jumped during World War II, plunged an average of $52 per month after the war, and the company refused demands for increases until the government lifted price controls on steel. The latter- day steel industry tradition of high wages was established only through a series of strikes during the 1940s and 1950s. Strikes were particularly painful for the families of steelworkers in the early days of the USWA, since the union was not yet paying out regular strike benefits to its members. The company did nothing to protect the environment in which its workers lived. In fact, U.S. Steel was a strong leader in pushing for special exemptions for the steel industry under the original Clean Air Act of 1970. Since then, the powerful steel lobby has been successful in pushing back deadlines for steel companies to have coke ovens, which spew out a variety of carcinogens, meet government-mandated standards. Chairman Edgar Speer, who headed U.S. Steel from 1973 to 1976, constantly battled the Environmental Protection Agency (EPA), repeatedly threatening to close plants or lay off workers if the company was required to meet environmental regulations. In a 1979 letter to the New York Times, Joseph Odorcich, then vice president of the USWA, condemned the corporation for engaging in "environmental blackmail" and enlisting workers' support "by frightening them about the possible closure of plants." But Speer's threats were not empty. In 1974, the EPA imposed a $2,300 a day fine on U.S. Steel for failing to comply with a 1965 agreement to gradually close down 53 open hearth furnaces and replace them with "bop-shops," a cleaner steelmaking method involving a basic oxygen process. The company had closed 43 of the furnaces and was required to phase out the remaining 10 by 1973. Rather than pay the fine or replace the furnaces, U.S. Steel closed down operations in the hearths completely, throwing 500 employees out of work. Walking away from steel By the time David Roderick became chairman of U.S. Steel in 1979, the company's strength had withered. U.S. Steel's share of the U.S. market had fallen to 23 percent and that year the company reported losses of $363 million. By 1983, the corporation was losing $154 per ton of steel shipped, $60 more than the industry average. In 1982 and 1983, U.S. Steel lost a total of $1.52 billion. The U.S. steel industry as a whole had grown "big and fat and stupid," in the words of a USWA spokesperson, having failed to anticipate or prepare for an onslaught of foreign competition. State-subsidized companies with modern plants in Japan, South Korea and Latin America were making better quality steel more cheaply. To protect the domestic industry, in 1978 the Treasury Department introduced a "trigger-price controls" system which imposed higher import duties on quantities of imported steel which fell below certain price levels. The system failed to stem the tide of imports. In 1984, the Reagan administration negotiated "voluntary" restraint agreements with 29 countries limiting imports of finished steel to the United States. By 1984, imports had captured 26.4 percent of the U.S. market. U.S. Steel in particular suffered from poor management, bloated employment ranks and antiquated steel mills. The company employed a huge executive and managerial bureaucracy that bred inefficiency. Plants were "vastly overmanned" as well, according to former New York Times labor reporter William Serrin. No major investment in modernization had been made in any of the plants since the 1940s. U.S. Steel had never been a "paragon of creative thinking and reinvestment and new kinds of processes and new technologies and R & D," says Serrin. "So suddenly everything hit the fan, and no one knew what to do about it." The company's devastating experience in the early 1980s made it clear that it was going to have to make some changes. What should be done to revive the ailing steelmaker was a point of great dispute. The steelworkers and the union were willing to experiment with several new measures designed to keep plants running. Union members were willing to accept wage and benefit concessions if the company invested to upgrade technology in mills. When it became apparent that U.S. Steel was going to close plants, communities proposed innovative strategies, including plans for employee ownership, to keep them operating at some level in order to salvage steel jobs. Wall Street analysts advised steel companies to take a different path, however, one that emphasized profits over all other considerations. Prudential-Bache researcher David Fleischer says, "The proper strategy for running a steel mill in this country was to invest nothing in it, to strip as much cash out of it as you could and just walk away from the goddamn thing." That this advice failed to take into account the thousands of steel industry employees who would lose their livelihoods did not deter U.S. Steel from following it to the letter. The corporation made its first move into its new industry of choice when it bought Marathon Oil for $6.4 billion in March 1982. This huge purchase, which infuriated steelworkers, was justified by company officials who argued that profits from Marathon would keep U.S. Steel solvent during the downturn in steel. However, soon after U.S. Steel concluded the Marathon deal, oil prices dropped precipitously, and, by 1983, the company had been forced to sell off $1 billion in assets, including coal mines and its corporate headquarters. The purchase of Marathon was a watershed event for U.S. Steel. It signalled complete corporate indifference to steel and the steelworkers who made money for U.S. Steel for 80 years. Roderick said in a 1982 interview, "Our primary objective is not to make steel but to make steel profitably." Those affected by the decision that stemmed from this principle understandably criticize it. Judy Ruszkowski of the Pittsburgh Tri-State Conference on Steel, a non-profit advocacy group that is working to reopen steel facilities with employee ownership, argues that concern with profits does not negate "a corporate responsibility to deal with the resources, basically the human resources, that enabled the company to reach a position where it could diversify." The concessions treadmill Setting the standard for its behavior for the rest of the decade, U.S. Steel demanded worker concessions even as it paid more than $6 billion for Marathon Oil in 1982. Since then, the company has incessantly threatened to close plants unless workers grant concessions, and then demanded further concessions, all the while refusing to invest in its aging facilities. During July 1982 negotiations, only a few months after the company had announced its purchase of Marathon Oil, U.S. Steel insisted that workers make concessions on wage and cost-of- living increases over the coming years to offset the losses the company had experienced and expected in the near future. Negotiations lasted for nearly a year, breaking down in November 1982, before the company finally accepted a concessionary proposal by union negotiators on February 28, 1983. While workers were willing to accept some wage lowering, it was U.S. Steel's lack of commitment to steel that made concessions so hard for workers to swallow. In fact, a union-conducted poll showed that workers would have accepted the company's November 1982 proposal with the sole addition of a company commitment to using the money saved to re-invest in domestic steel plants. The workers' mistrust, based on the company's past conduct, was soon borne out. In 1982, U.S. Steel agreed to invest in modernizing furnaces and building a mill to manufacture train rails at its Chicago-based South Works if it received union concessions and government tax breaks. The modernized facilities would produce one million tons of raw steel each year, much of which would be processed into rails at the new mill. By 1983, the company's conditions were met. The union ratified an agreement that called for fewer crew members than conventional rail mills and the Illinois legislature exempted the company from specific sales taxes on its products. But U.S. Steel wanted more. That same year, the company insisted that it be released from fines and requirements to clean up Lake Michigan that would cost a total of $33 million. The company had secretly negotiated with state officials as early as 1982 to be released from the fine, which was imposed by a 1977 court decree in response to the plant's inadequate water pollution control equipment and the subsequent fouling of Lake Michigan. Again the corporation's wishes were fulfilled, as the union convinced the legislature that shouldering the cleanup cost was the only way to save the 1,156 jobs that would be lost if the company did not invest in South Works and turn it into a profitable operation. But U.S. Steel was still not satisfied. Late in 1983, the company demanded further worker concessions, including $1.40 per hour in wage and benefit cuts. Company executives said they needed the money to go forward with the promised modernizations. They threatened to close the entire mill if their demands were not met. "Without the rail mill, South Works will cease to exist," said Vice Chairman Thomas Graham, who joined U.S. Steel in 1983 from J&L Steel with a reputation for imposing workforce reductions. The union refused to accept this second wave of concessions without a guarantee of the company's commitment to build the rail mill. On December 27, 1983, Roderick announced that U.S. Steel would close most of the steelmaking facilities at South Works. Citing inflated labor costs, Roderick insisted that "organized labor must recognize and adjust to this competitive reality to protect our other markets from a similar fate." Roderick's statement, in which he announced several other closings, resulting in a total of 15,430 workers laid off, implied that the sole responsibility for making the plants competitive lay with workers. But the company's demands had become impossible for the steelworkers to meet, and the steelworkers had come to believe the company never intended to build the rail mill. The union sued U.S. Steel for breaking its commitment but eventually dropped the suit as part of its 1987 contract concessions. They cycle of concessionary demands and broken promises was repeated in the next round of contract negotiations. U.S. Steel (now called USX) demanded $3.50 an hour wage concessions and sought to protect its right to hire non-union, low-cost subcontractors. The union refused the wage concessions and attempted to negotiate the same sort of limits on contracting out that it had reached with several of USX's competitors, but the company held firm. On July 31, 1986, after a month and a half of bargaining, the union offered to work under the 1983-86 contract. USX rejected the offer and locked out its workers, beginning what was to be the longest work stoppage in company history. Six months later, in January 1987, the two sides finally reached an agreement. The new contract contained yet another set of union concessions, again designed to save union jobs. The hope that employment levels might be stabilized was quickly dashed when David Roderick announced, three days after the contract was signed, that 3,700 additional workers would be laid off. Roderick displayed little sympathy for the company's former employees. "Now the economic hammer has dropped," he declared. "And it's unfortunate, but that's the way it is." Overall, the company slashed the number of USWA members it employed from 108,000 in 1978 to 28,300 in 1987. The white collar workforce also declined, from more than 20,000 in 1980 to less than 8,000 in 1987. These statistics do not begin to convey the degree of despair and suffering that the closings brought to mill towns. In his book on the decline of the U.S. steel industry, And the Wolf Finally Came, labor reporter John Hoerr describes the effect the closings had on the Monongahela Valley, an area southeast of Pittsburgh where many U.S. Steel mills were located: "A vibrant forty-six-mile stretch of river valley, providing primary jobs for over thirty-five thousand steel employees, and subsidiary jobs for nearly three times as many people, would be devastated and expunged from economic memory in less than five years....The degree of suffering caused by lost jobs, mortgage foreclosures, suicides, broken marriages, and alcoholism was beyond calculation." Worker and union attempts to save some of these communities were ignored by the company. In 1980, for example, a group of workers in Youngstown, Ohio formed the Community Steel Corporation which attempted to use federal loans to buy the shuttered McDonald steel mill whose closing resulted in the loss of 3,500 jobs. U.S. Steel refused to deal with the group. Contempt for workers, contempt for the environment The USX plants that stayed opened continued to pollute the environment and endanger workers. In the last decade, the company has racked up enormous fines and penalties for environmental and occupational safety and health abuses. Safety standards at USX reached abysmally low levels, as the company cut back on programs to protect workers. In 1989, the Occupational Safety and Health Administration (OSHA) fined the company a record $7.3 million for wilful health and safety violations at two Pennsylvania plants. In issuing the penalty, Labor Secretary Elizabeth Dole commented, "the magnitude of these penalties and citations is matched only by the magnitude of the hazards to workers which resulted from corporate indifference to worker safety and health, including severe cutbacks in the maintenance and repair programs needed to remove those hazards." The company has also maintained its ruinous environmental record. In 1985, U.S. Steel was required to pay the city of Cincinnati $77,000 in damages for a benzene spill from the company's Clairton, Pennsylvania plant. Benzene, which can cause cancer, had leaked into the Monongahela River and flowed down the Ohio River, eventually reaching Cincinnati. More recently, in a July 1990 consent decree filed in U.S. District Court in Hammond, Indiana, USX agreed to a $34.1 million cleanup program for its Gary, Indiana steel mill and the adjacent Grand Calumet River. The EPA had charged that the plant illegally bypassed wastewater treatment systems and directed its discharge into the river and Lake Michigan, failed to submit reports on discharges and spills and violated pretreatment standards. USX has continued to lobby Congress to grant the steel industry special consideration under the Clean Air Act, according to Deborah Sheiman of the Natural Resources Defense Council. Under the air toxics section of the 1990 reauthorization of the Act, steel companies were given another 30 years to meet maximum achievable technological control (MATC) standards for coke ovens. The story continues Since David Roderick stepped down in 1989, the ruthless management of USX's steel assets has continued under its new chairman and chief executive officer, Charles Corry. Corry has moved the company further away from steel, dividing its stock, and therefore assets and debts, into separate steel and energy categories. Though it remains the largest U.S. steel producer, USX is widely expected to soon leave the industry altogether. The USWA has been reduced to attempting to secure the futures of the company's current steelworkers. A USWA spokesperson says the union was pleased that its 1991 contract offers "protections for members in just about any eventuality," including guarantees of employee pensions in the event that USX sells its steel subsidiary. A way of life has passed for workers and their communities, but not for the executives of the company once known as "Big Steel." They still run a mighty corporation, searching for profits without regard to the social or environmental effects of their operations. NAMES IN THE NEWS (omitted here; unscannable)