Hope comes in small steps in Youngstown, whose industrial backbone was crippled by the closing of most of its aged steel works over the past four years.
One of those small steps was taken 11 days ago, when a rolling mill reopened in the U.S. Steel Corp.'s McDonald works, turning out shaped steel pieces that will become the flooring of a bridge in Toledo. The mill had been closed for 16 months, part of a wave of closings that put 11,000 steelworkers out of work and left the Youngstown area with chronically high unemployment.
The mill is no longer run by U.S. Steel, however. The country's largest steelmaker has turned the mill over to its former superintendent and his financial backers from Youngstown, who have formed a new company called McDonald Steel Corp. The company has a long-term lease from U.S. Steel to operate the mill, with an option to buy it outright.
The opening of a new mill is news enough in the steel-making valleys between Pittsburgh and Cleveland, but there is also something else unique about the McDonald Steel venture. Some 75 members of the United Steelworkers of America have signed on for nonunion jobs at the new mill, accepting compensation worth about half of the typical $20 an hour in wages and benefits under the steelworkers union contract.
Youngstown provides an example of the trade-off that organized labor has accepted reluctantly in depressed industries such as steel--wage and work-rule concessions are being traded for jobs.
"I'm not a slave driver," said David S. Houck, 52, the president of McDonald Steel and the former superintendent of the McDonald Works when U.S. Steel ran it. "As we get profitable, we will have a bonus plan that could bring them back in line with the steelworkers."
First, the company has to become profitable, Houck said.
It will not get there on good looks. McDonald Steel Corp. occupies one of the 14 rolling mills in the steel plant, a dirty, cavernous building with two glowing furnaces at one end. Red-hot bars of steel shoot out of the furnaces and are squeezed, clanking and hissing, through rollers to create special shapes used in building bridges, tire rims and other steel products. Designs for the shapes are stored--not on computers--but on wooden drawing boards of the kind high school shop students once made a generation ago.
But the plant's age is its virtue, says Houck. There was a large backlog of orders when U.S. Steel closed the mill 16 months ago, and many of these customers have had trouble finding replacement products. Houck said the company will survive if it can maintain the loyalty of the old customers, because the business is too specialized to attract modern competitors, who would have to invest many millions of dollars in tooling to duplicate what McDonald has on hand in dingy storage areas.
"There is very little competition," Houck said. "It's not a market someone can readily steal from us."
But it can't survive with steelworkers' wages and rigid work rules, he said.
"Attitude is everything for a company like ours," said Houck. Prospective employes were interviewed before hiring to see whether they were willing to accept Houck's philosophy, which stresses the employes' responsibility for the company's success. "We were looking for personalities who would fit in with the team," he said.
There are no time cards; employes are expected to show up on time. Houck has created half as many job classifications as in a typical steel plant, so that while there are fewer rungs on the ladder, the pay boost for each step is larger--creating a greater incentive for advancement, in Houck's view. And regardless of job classification, all employes are expected to solve problems at the plant.
"We've got to return to the work ethic that built America," added Houck. "I think it's gone to pot, and I'm not throwing stones at the union. Management and government have to share the blame.
"We're saying if you can't do anything else, you can at least hold the flashlight for someone else," said Houck, who operates as personnel manager, chief salesman, and advertising director as well as president. "The hell with 'the way we used to do it'."
In an area with thousands of unemployed steelworkers, Houck has been able to pick and choose. Many of McDonald's first employes were veterans from the U.S. Steel operation who have qualified for pensions under the steelworker contract and jumped at the chance to make McDonald Steel a success against the odds. "This is an answer to a dream," said Joseph Graf, the former machine shop chief at U.S. Steel's Ohio Works in Youngstown--which also has been shut down.
There will be no immediate challenge from the United Steelworkers, said Robert Vasquez, a union official who was president of the Ohio Works local. "We're looking at that as a start-up company. We realize what has happened up there and what they're trying to do. The union isn't in the business of making unreasonable demands. We have as much community concern as anyone else.
"At such time as we feel a union might be needed, we'll take whatever action is warranted," he added.
For a time, union members held hopes of reopening the entire McDonald and Ohio works themselves, with financial backing from the federal government and worker-community control over management. Staughton Lynd, a Youngstown lawyer who was involved in the steelworkers' proposal, said that there never was enough money behind the venture to make it credible. "We needed more than $100 million in loan guarantees and that's all they the Carter administration were willing to give."
Houck took a much different approach, proposing to open only a small part of the McDonald works at first, thus limiting his initial financing requirements to about $3 million. An attempt to raise funds through a public sale of stock collapsed when a New York City brokerage firm concluded it was too great a risk, said David Tod, a Youngstown financier who helped launch the new steel company. He and other organizers persuaded several dozen Youngstown investors to finance the new company. "There is lots of money in this area," but it hadn't been channeled into new businesses, said Tod,
Houck's venture also got a helping hand from U.S. Steel, he explained, including nearly $3 million in renovations to the mill and a favorable lease with a fixed basic rent and a variable additional amount based on profits by the new venture. Beyond that, McDonald Steel has an option to buy the plant, also at a favorable price, Houck said.
"It was a sweetheart deal entered into to keep us out of the arena," said Lynd, whose group finally dropped a court challenge to Houck's venture. He concedes now, with hindsight, that Houck's strategy of starting small was the right one. "We were insensitive to how a new business actually happens," he said. Given the impact of the plant closings, economically and politically, U.S. Steel was all too eager to have even a small operation going at McDonald, he added.
It is a small step. Eight hundred steelworkers were employed at the McDonald Works when it closed 16 months ago. There are 75 at work now, and a visitor gets the impression that the plant couldn't keep going if a few of the key old hands got the flu at the same time.
"I'm sure some people have doubts about this. There are a lot of doubting people in the valley," said Houck. But there also are financial backers and skilled steelworkers and a protective attitude within the community.