Steelmaker and union in survival countdown
Threatened with a loss of credit, McLouth Steel Products Corporation is warning its workers that they must increase their daily production or the company will go out of business. And in an unusual move, union officials apparently agree that is needed.Skip to next paragraph
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McLouth's two Detroit-area steel mills employ 2,300 workers and produce about a million tons of steel a year, primarily flat-rolled steel used by automakers. That is about 1.5 percent of America's steel output, making McLouth the nation's ninth-largest steel producer.
Since 1980, the company has been beset by financial woes, including a decline in automotive demand and an increase in foreign competition. This has resulted in $85 million in losses over the past 17 months, according to Cyrus Tang, a Chicago industrialist who owns 60 percent of McLouth stock.
Meanwhile, owing to a variety of problems, production at the company's plants has fallen in recent months to between 2,000 and 3,100 tons a day.
In a letter mailed to McLouth workers late last week, Mr. Tang warned that unless output is increased to at least 3,500 tons by today, the company will close down.
That deadline is being blamed on McLouth's three major suppliers -- Cleveland-Cliffs Inc., Detroit Edison, and Elk River Resources Inc. -- which have threatened to withhold further credit unless the company begins producing enough steel to turn a profit.
In his letter Tang said, ``I'm not sure that those of you who are interested in McLouth can bring about the needed change fast enough to save your jobs. I can only hope that there is still enough time, and I can only ask each of you to consider where we are at and do your best.''
The shutdown threat is being taken seriously by local representatives of the United Steelworkers Union. Although they place much of the blame for the production shortfall on recent cuts in manpower, faulty equipment, and low morale, union leaders sent two separate letters to McLouth workers this week urging them to accede to company demands.
``In short order we [may] all be out of a job,'' noted a letter signed by acting local president Frank Baker, vice-president Jim Hindman, and grievance chairman Marc Bruce. The letter was distributed to employees as they entered the McLouth plants Monday.
``The membership is very willing to cooperate,'' Mr. Baker says. ``Even if we don't meet the 3,500-ton demand, but we show an indication of rising production, I'm sure the creditors will stick with us.''
A McLouth official cautiously agreed, saying ``I'm very optimistic'' that workers will be able to keep the plant open.
The work force is also motivated by its ownership of 15 percent of McLouth's stock, which guarantees it 15 percent of any pretax profits the company might earn. The union gained that stake as a reward for efforts to shore up the business five years ago.
But as a result of the automotive production slump that followed the last oil crisis and recession, McLouth declared Chapter 11 in 1981 and was taken over the next year by Tang.