Weirton Steel Corporation
Address:
400 Three Springs Drive
Weirton, West Virginia 26062-4989
U.S.A.
Telephone: (304) 797-2000
Fax: (304) 797-2171
http://www.weirton.com
Statistics:
Public Company
Incorporated: 1982
Employees: 4,873
Sales: $1.40 billion (1997)
Stock Exchanges: New York
Ticker Symbol: WS
SICs: 3312 Steel Works & Blast Furnaces; 3316 Cold Rolled Steel Sheet, Strip & Bars
Company Perspectives:
Weirton Steel is rich in tradition with a long history of solid performance in an always-competitive industry. Weirton Steel has matured through the decades and today is a modern, high-tech producer of quality steel. And while we are proud of past accomplishments, today we are focused on the future.
Company History:
The fortunes of Weirton, West Virginia, a quintessential company town, have fallen and risen with those of Weirton Steel Corporation. A huge steel plant founded there in 1909 became part of National Steel Corporation in 1929, but decades later, in the 1970s, when National Steel faced a declining economy and a declining steel industry, Weirton Steel's future looked grim. In 1983 Weirton Steel's employees saved their town and their company with an innovative employee-takeover plan. In 1984 Weirton Steel became the largest employee-owned company in the nation, enjoying initial success in the later 1980s before running into difficulties in the 1990s. In 1989 Weirton Steel sold about 23 percent of its stock to the public; employees retained the remaining stock. A second offering in 1994 reduced the employee stake to about 49 percent. Weirton is the nation's eighth largest integrated steel company and the largest producer of tin-coated steel. The company is a partner in several joint ventures: with U.K.-based Balli Group plc, it markets and sells Weirton steel products worldwide; with Dutch company Koninklijke Hoogovens NV, it operates a galvanizing plant in Indiana; and with ATAS International, it produces residential steel roofing.
The Creation of a Company Town
In 1905 Ernest Tener Weir, a Pittsburgh, Pennsylvania-area steel employee, enlisted a partner to buy the Phillips Sheet and Tin Plate Company, an ailing steel company in Clarksburg, West Virginia. The plant flourished under Weir's stewardship, and within four years he was looking for a new site to accommodate expansion. The site would have to have access to coal mines, water sources, river and rail transportation, and centers of industry.
Weir found his ideal industrial site in the northern finger of West Virginia that separates Ohio and Pennsylvania, about 39 miles from Pittsburgh. In 1909 Weir began building on 105 acres he purchased near the hamlet of Hollidays Cove. By the end of the year, Weir had ten steel mills operating, and mill workers had started to come in from as far away as Greece and Italy.
The boom continued throughout the decade. By 1920, more than 15,000 people lived in the area. As growth continued, Hollidays Cove expanded rapidly and new communities like Weirton, Weirton Heights, and Marland Heights sprang up nearby. In 1947 all these villages would be incorporated into the city of Weirton.
The vast majority of the town's residents worked in Weir's mills. In return, Ernest Weir met many of their needs. He built homes, supplied utilities, and provided police and fire protection during the town's early decades. Later, he would build churches, a library, and leisure facilities for the use of his employees.
The expansion of the city coincided with the expansion of Weir's mills. In 1910, ten more mills were added. In 1911, Weir acquired the 12-mill Pope Tin Plate Company in Steubenville, Ohio, and in 1915 and 1916, two more hot mills were constructed at Weir's strip steel plant. Weirton's facility thus became the flagship of Weir's enterprise, and in 1918 Weir named his concern Weirton Steel.
Formation of National Steel, 1929
The firm grew throughout the 1910s and 1920s, as expansion allowed the plant to verge toward vertical integration. In 1923, the Weirton coke plant went into operation. In the following years, new furnaces, hearths, and river docks were constructed. In 1925 Weir incorporated Weirton Steel Company. In 1929 Weirton Steel Company merged with Great Lakes Steel Corporation and Hanna Iron Ore Company to form National Steel Corporation, which immediately became one of the nation's largest steelmakers. Henceforth, Weirton Steel became a subsidiary of National Steel, although it retained its own administration and management, with Weir continuing as chairman and J.C. Williams as president.
Although Weirton Steel workers certainly benefited from Weir's largesse, relations between management and the workforce were often less than harmonious. During the 1920s, Weir successfully fended off the growing unions from his plants. In the 1930s, however, Weir was confronted with twin challenges: the bitter strikes that plagued mines and mills all through Appalachia, and New Deal legislation and institutions that were intended to protect laborers.
The Great Depression wrought havoc in the steel industry; demand for steel declined steadily, causing industry retrenchment. As New Deal measures helped bring about a recovery, labor problems, and not production records, put Weirton Steel in the news in 1933. In the midst of a strike, nearly 1,000 workers were repulsed by tear-gas bombs when they tried to stop cars carrying workers from Weirton Steel's Steubenville plant.
Weir had refused at first to submit to arbitration, but the National Labor Board, led by Senator Robert Wagner, gave the Weirton Steel workers a public hearing, and helped obtain an agreement that allowed the workers to return to their jobs and elect representatives. Striking workers also ended a long strike without explicit recognition of their union. Weir found a way around the established unions by forming the Weirton Independent Union. For many years, Weirton Steel paid the salaries of that union's officials.
In 1936 T.E. Millsop, who had been with Weirton Steel since 1926, was named president upon Williams's death, continuing a tradition of promoting from within. In fact, throughout the many decades that National Steel controlled Weirton Steel, Weirton Steel employees were generally chosen to lead the company.
In 1938 Weirton turned over its idle Clarksburg plant to the local chamber of commerce. Weir's original tin-plate plant had become obsolete because of increased freight charges, outdated machinery, and expansion of the Weirton and Steubenville plants. That same year, in an attempt to modernize further, Weirton Steel built a quality-control laboratory opposite the company's main office.
During World War II, the steel industry adapted to help the nation's war effort. In 1942 the War Production Board appealed to the steel industry to devise plans to increase and tailor output for army use. In March of that year, Weirton Steel became the first member of the steel industry to respond, establishing a special plant committee, and soliciting suggestions from employees. When the War Production Board ordered a reduction in tin-plate operations, Weir, now chairman of National Steel Corporation, shut down Weirton Steel's Steubenville plant in October 1942. Partly because of the rush to meet the war effort, Weirton Steel made new records in 1942, twice establishing world records for steel ingot production, and producing an average of 5,080 net tons of ingot steel a day. In 1945 Weirton was fined after the company pleaded no contest to a charge of obtaining critical materials in order to build an emergency hospital but instead using the items for air conditioning at a company-owned country club.
The economy and the steel industry shifted gears after World War II. President Harry S. Truman called on the steel industry to expand its capacity, produce more steel, and lower prices, but industry officials resisted. Still, the 1950s and 1960s brought almost continuous growth and expansion for Weirton Steel. New blast furnaces, products, and production methods were developed. In 1960 Weirton continued its commitment to research by beginning construction on a steel research center. Concerns about pollution inspired new measures, such as the institution of open hearth smoke controls in 1963 and studies on the environmental effects of steel production.
Declining Fortunes for the Steel Industry
By the time Ernest Weir died in 1957, there were signs of bad times ahead for the steel industry. Throughout the 1950s, for example, total U.S. steel exports remained static, and the nation's share of the world steel trade dropped from 53.6 percent in 1947 to 6.9 percent in 1960. Most of this decline was the result of postwar reconstruction in Japan and Europe and these countries' reintegration into the world economy, and not to a decline in steel use. Instead of relying on domestic steel producers, U.S. industrial firms imported increasing quantities of steel from abroad. In fact, between 1950 and 1965, total U.S. imports of steel grew from 1,077 tons to 10,383 tons.
The rise in imports, coupled with mounting labor costs, crippled the U.S. steel industry. Debates raged between the industry and the government over the imposition of price controls and the enactment of protectionist measures. In 1969 the federal government finally imposed import quotas for foreign steel.
Throughout the 1960s, Weirton Steel developed new products and production methods. In 1967 the company began making basic oxygen steel. In 1968, Weirton Steel inaugurated its continuous casting process, which represented a fundamental change in production technique. A new four-strand slab caster boosted production, efficiency, and quality at the main plant. In 1973 a coke plant, which provided coke for the Weirton plants, went into operation.
National and Weirton's Diverging Interests
During the 1970s the interests of Weirton Steel and its parent company, National Steel, increasingly diverged. Throughout the 1960s and 1970s, National Steel, then America's third largest steelmaker, used its earnings to diversify--buying interests in savings and loans, and investing in the production of aluminum--rather than investing in its current facilities. Eventually, National Steel began to plan for a future that did not include Weirton and its 13,000 employees.
When National Steel began to consider closing the Weirton plant for three weeks in 1977, it was an ominous foreshadowing of events to come. The slipping economy aggravated Weirton Steel's situation. With the inflation of the late 1970s, and the recession of the 1980s, Weirton's fortunes took a turn for the worse. Between 1978 and 1982, net sales decreased from $1.09 billion to $904 million, while operating expenses soared from $79 million to $103 million. Pretax earnings plunged from $16 million in 1978 to a loss of $104 million in 1982.
At the same time, shipment of products declined from 2.94 million tons in 1978 to 1.68 million tons in 1982. At this point, tin-plate accounted for about half of Weirton's shipments, with galvanized steel accounting for about one-fifth, and cold-roll steel and hot rolled bands representing about one tenth of shipments each.
The slowdowns took their toll. In 1981, Weirton Steel experienced the first major layoffs in its history. By the end of the year, more than 3,000 workers had lost their jobs. As the town's economy ground to a halt, workers were forced onto public aid, peripheral businesses began to decline, and Weirton's young began to leave in increasing numbers. The company's coke plant closed in 1982, and 275 more workers were laid off.
In 1982 National Steel further shocked Weirton's 24,000 residents by announcing that the aging mill complex would be largely shut down, but National Steel offered an alternative. Employees could buy the plant with borrowed money and try to run it on their own.
Employee Takeover
In November 1982 Weirton Steel Corporation was organized to acquire the assets of National Steel's Weirton Steel division. An agreement for the corporation was reached in April 1983. Under the terms of the agreement, employee-owned Weirton Steel Corporation bought the Weirton Steel division from National Steel for $194.2 million in cash and debt. The workers accepted a 20 percent pay cut and a six-year wage freeze in exchange for a stake in the factories. Under this employee stock ownership plan (ESOP) the company would henceforth be owned by the employees and directed by seven outside directors. The same year, Robert L. Loughhead, previously president of Copperweld Steel Company, joined the firm as president. Also in 1983, National Steel Corporation reorganized, and changed its name to National Intergroup, Inc.
Weirton Steel instantly became the nation's largest employee-owned company. It would soon become the nation's most successful. While many steelmakers were losing money, Weirton posted earnings of $48.3 million on sales of $845.5 million in the first nine months of 1984. That year, however, Weirton Steel was forced to lay off 250 more workers.
In 1985 sales increased by 9.1 percent over 1984, as income rose about 1.5 percent. The following year, an increase in orders led Weirton Steel to start a third blast furnace, and the company recalled about 60 laid-off workers. The same year, Weirton Steel exercised its option to buy the Steubenville mill plant, which had been closed since 1981, from National Intergroup.
Weirton Steel enjoyed 16 consecutive profitable quarters after the transition, which proved a boon to employees. Under the terms of the ESOP, employees would receive a share of corporate profits. In 1987 alone, some 8,400 Weirton Steel workers received average profit-sharing checks of $4,500, the highest of any steel firm. This payout came after profits in 1987 of $80 million, a dramatic increase from the 1986 figure of $30 million. Sales increased to $1.3 billion in 1987 from $1.17 billion in 1986, and production rose from 2.8 million tons in 1986 to 3.3 million tons in 1987, placing Weirton Steel seventh among U.S. steel producers.
Weirton Steel displayed a new commitment to improving its facilities. In 1984, for example, Weirton hired the Mellon Institute, a division of Carnegie-Mellon University, to conduct metallurgical studies on surface quality. In 1986 the Department of Energy (DOE) provided $65 million for the construction of the first Kohle-reduction iron process plant in the United States, to be built in Weirton. The plant was to be part of a DOE program to implement environmentally clean coal technology but was aborted when Weirton decided to invest elsewhere.
In 1987 Loughhead stepped down, and director Herbert Elish was appointed to the post of chairman, president, and chief executive officer. Under Elish, Weirton Steel had suffered some setbacks, although the company also moved forward with large-scale modernization, most notably the construction of a state-of-the-art continuous caster and rebuilt hot mill. Between 1987 and 1989 production actually declined from 3.2 million tons to 2.9 million tons. Between 1988 and 1989 sales decreased only slightly but shipments were down by about 8.4 percent, and the profit-sharing provision dropped from $75 million in 1988 to $21.9 million in 1989. This figure reflected both a decline in income and a decrease in the percentage of profits paid to employees, from 50 percent to 33 percent.
The decline in profit-sharing was due to another Weirton financing innovation. In search of the means to avoid an ESOP stock repurchase liability and to permit a five-year, $500 million investment in modernization, Weirton decided to go public in 1989. It offered four million shares&mdashout 23 percent of its stock--at $14.50 per share on the New York Stock Exchange.
1990s Difficulties
The economic downturn of the early 1990s, increased competition, and delays in the modernization program all led Weirton Steel to post its first losses as an employee-owned company. In 1992 the company lost $32 million on sales of $1.07 billion. Reflecting increasingly acrimonious relations with management, in August of that year a group of workers filed a shareholder suit accusing officers and directors of mismanagement in relation to renovation cost overruns. The directors responded by gaining approval--with only 51 percent shareholder support--of a new bylaw protecting the board from such charges.
Workers were further angered by Elish's announcement in July 1992 of a plan to cut the company's workforce by 25 percent over a three- to five-year period. At the same time, the modernization program had increased the company's long-term debt to an unwieldy $495 million by 1993, leading the board to propose a public offering of an additional 60 million Weirton shares. Workers balked at a move that would severely dilute their voting power. They eventually agreed to a revised plan, calling for a 20 million share offering, with five million shares reserved for employee purchases. The offering took place in October 1994, leaving workers in control of about 49 percent of the common stock.
In early 1996, upon Elish's retirement, Richard K. Riederer was named president and CEO of Weirton Steel, while Richard R. Burt was named chairman. The company had operated in the black during 1994 and 1995, but Weirton posted a loss of $49.9 million during the new management team's first year in charge. In order to contain costs, Weirton reduced its workforce by 500 in 1996, including the elimination of 200 of its 1,000 management workers. The company also restructured about $100 million in debt during 1996, giving itself more time to pay the debt off and more financial flexibility. Weirton Steel began to see the benefits of these moves in 1997, when it cut its losses to $17.7 million for the year.
With the company seemingly on the rebound as the eighth largest integrated steel producer in the United States, Riederer and Burt began seeking out joint ventures for international expansion and in pursuit of higher-value steel product production. In September 1997 Weirton Steel announced the formation of a venture with Balli Group plc, known as WeBco International LLC, whose purpose was to market and sell Weirton steel products overseas. The following month the company joined with Koninklijke Hoogovens NV of the Netherlands to form GALVSTAR, L.P., which would construct a 300,000-ton-per-year steel galvanizing mill in Jeffersonville, Indiana, that was to be operational in the summer of 1999. Weirton and ATAS International of Allentown, Pennsylvania, formed W&A Manufacturing Co., LLC in April 1998, with the aim of producing residential steel roofing shingles with a 40-year lifespan. Finally, after finding success selling its products via the company web site, Weirton Steel joined with LTV Steel and Steel Dynamics, Inc. to create an independent company called MetalExchange offering a secure web-based marketplace for the online purchase of metal products from various suppliers.
Principal Subsidiaries: Weirton Receivables, Inc.; Weirton Venture Holdings Corp.
Further Reading:
Angrist, Stanley W., "Class Consciousness Raising," Forbes, November 30, 1987, p. 77.
Baker, Stephen, and Keith L. Alexander, "The Owners Vs. the Boss at Weirton Steel," Business Week, November 15, 1993, p. 38.
"A Bicentennial Year Look at Weirton and Its Heritage of Steel," Weirton Employee Bulletin, 1976.
Cotter, Wes, "Weirton's Stock Hurt by Earnings, Rolling Mill Glitch," Pittsburgh Business Times, July 29, 1991, p. 1.
Kelton, Peter, "Weirton's Passion: Making Better Steel," American Metal Market, September 13, 1995, p. 13A.
Lieber, James B., Friendly Takeover: How an Employee Buyout Saved a Steel Town, New York: Viking, 1995.
"Making Money--and History--at Weirton," Business Week, November 12, 1984.
Mallory, Maria, "'How Can We Be Laid Off If We Own the Company?'," Business Week, September 9, 1991, p. 66.
McManus, George J., "Weirton Steel Begins to Pick Itself Up," Chilton's Iron Age, November 7, 1983.
Milbank, Dana, "Weirton Steel's Managers Face Possible Fight," Wall Street Journal, November 24, 1992, p. A4.
Rose, Robert L., and Erle Norton, "UAL Worker-Owners May Face Bumpy Ride If the Past Is a Guide," Wall Street Journal, December 23, 1993, pp. A1, A6.
"Town Bids to Save Itself," Fortune, April 18, 1983.
Source: International Directory of Company Histories, Vol. 26. St. James Press, 1999.
