Cutbacks jolt British steel prospects

"It's a traumatic time. Faces are disappearing. Corridors are getting quieter." From his office overlooking an almost-empty parking lot at the vast British Steel Corporation (BSC) plant here, spokesman Vincent Thomas describes the effect of what may be the corporation's last mighty effort at belttightening.

Like its sister nationalized industries -- shipbuilding, automaking, the railroads, and the coal industry -- BSC is British industry writ large. Like lumbering giants, these firms mirror the Laocoon struggles facing most manufacturing industries here.

They are being brought to their knees by an ever-stronger squeeze of strictly imposed government cash limits, inflation, high costs, and an unfavorable exchange rate.

Gone are the "big is beautiful" days. Gone, too, are the days of thriving home industry and a steel-hungry international economy.

And gone forever, some analysts say, will be the days of steelmaking in Britain -- unless BSC can bootstrap itself back into profitability reasonably soon.

British Steel's response has been its "slimline" proposals. The goal: Trim steelmaking throughout the country from 21.5 million tons per annum to 15 million tons, lopping off 66,000 jobs to reach a core employment of 100,000.

Here in Port Talbot, a deepwater harbor where steel has been king since the early 1950s, the plant is to endure a quick rundown from 12,500 to 7,501 employees -- a devastating blow to the local economy, which only a year ago looked brightly to the future.

Worse may come: BSC's new chairman, Ian MacGregor (whose high-priced extraction from an American firm last spring caused ret-hot controversy) has hinted darkly that the plant may close altogether -- despite several hundred million pounds (nearly half a billion dollars) of recent investment.

And Port Talbot is only one name among many: Consett, Shotton, Corby, Scunthorpe, Hallside, and nearby Llanwern -- some of the great steel towns of the nation that spawned the Industrial Revolution -- have all felt the ax in the past year.

Why is it happening?

Like steelmakers in Europe and the United States, BSC is suffering from a worldwide industrial slump. But critics of the sprawling, nationalized company point to more specific problems:

* From his factory in rural mid-Wales, the branch manager of a Spanish-based firm, Ontzi-Ola, detailed to the Monitor his difficulties in dealing with BSC. After arriving in 1971, the kitchen enamelware manufacturer wanted to buy British, but found BSC too busy. After three years on a waiting list, BSC agreed to take them on -- only to delay the first delivery by three months, then swamp the small plant with two deliveries at once.

To make matters worse, says the manager, Francisco Garcia, "The steel wasn't the quality we were paying for" and had to be sent back -- but only after BSC had sent numerous delegations of trouble-shooters to the factory ("maybe 18 or 20 different people," recalls Mr. Garcia), all of whom had to be told anew of the problem. Ontzi-Ola gave up; their steel now comes from the continent.

Unfortunately, too many customers recognize themselves in Mr. Garcia's tale. With BSC prices 15 percent above average European Community levels and with dwindling customer confidence, the former chairman, Sir Charles Villiers, banged away at the "service to customers" theme during his four years in office. Individual plants now are allowed to brand their steel (Port Talbot's symbol is the Welsh dragon), and customers now are allowed to state a preference for particular plants, but many fear the change has come too late.

* From his union's headquarters in Swansea, Stan Biddiscombe, secretary of the West Wales division of the Iron and Steel Trades Confederation (ISTC), points the finger at top management.

"I believe [Sir Charles] Villiers was a nonentity," he says. The real power, he asserts, lies with what he calls "the Yorkshire Mafia" -- a group of 14 top-level BSC executives all associated with the United Steel Corporation of Yorkshire before nationalization in 1967. Handpicked by chief executive Robert Scholey ("Black Bob the hatchet man," as he is known in union circles), these managers owe their allegiance, says Mr. Biddiscombe, not to the chairman but to Mr. Scholey. The result, he feels, is a narrow and inbred management with little to challenge its policies.

* BSC, for its part, accuses the unions of failing to come to grips with new realities. Overmanning, high wage claims, and low productivity, says BSC, conspire with unfair competition (because highly subsidized) from abroad, and with pressures from inflation, a strong pound, and a declining British motor industry.

The corporation, which lost $:545 million ($1.3 billion) in 1979, stands to save some $:230 million ($550 million) a year by its slimming operation -- although the ISTC calculates that the rundown will cost the government $:542 million ($1.3 billion) in additional welfare payments and in tax foregone.

Sir Charles, in a recent annual report, noted a "new sense of reality" in the unions which, after a nationwide three-month strike over pay last winter, accepted the Port Talbot slimline plan last May with surprising alacrity. But unless such a trend continues, he said flatly, "There is no future for bulk steelmaking in Britain."

Wherever the fault lies, the result is clearly a crunch for regions like Wales. Welsh unemployment already runs 3 percent above the United Kingdom average. Terry Thomas, local development officer for the Port Talbot area, unhesitatingly calls it "the greatest industrial problem the borough has ever faced."

He fears the ripple effect of job losses in supporting industries and local shops. And he adds that a shrinking BSC, which now supplies $:5.6 million ($13. 4 million), or 40 percent, of the borough's property tax, hits local government just when its services are most in demand.

Yet the temperament in this community is oddly subdued -- a function, apparently, of the hefty redundancy payments (severance pay) handed out by BSC. With lump-sum payments averaging $:8,500 ($20,400) and running up to $:17,500 ($ 42,000) -- in addition to pension and a topping-up plan from the European Community, which helps maintain ex-employees' wages at their previous level for 18 months -- the steelmen are hard pressed to choose between staying on and voluntarily leaving.

Vincent Thomas estimates that redundancy payments have put in circulation an extra $:50 million ($120 million) in the area -- evident from the influx of banks and building societies, which have set up branches in portable cabins around town, and in the reported increase in travel bookings.

Nor has BSC's latest measure -- a short-time working plan that shuts down the entire plant here one week out of four -- dampened spirits. "People are looking forward to it, I can tell you," says Vincent Thomas. The reason: Government welfare payments make up 75 percent of wages lost in that week. The week thus becomes an extra holiday, or (for the more enterprising) a chance to work harder at moonlighting jobs as carpenters, bricklayers, or electricians.

There is plenty of talk here about the 1930s among those resigned to a new depression. So far, however, South Wales appears to be afloat on a bubble of redundancy money. But many agree with Terry Thomas that "The next 18 months aren't a problem. It's at the end of a year and a half that our troubles are going to start."

Whether the economy will have righted itself by then -- and whether the ISTC's prediction will come true that steel demand will climb in the mid-80s -- remains to be seen.If not, the brewing nationalist ferment in Wales, fired by unemployment and near-poverty, could boil over.

It is a prospect which the Conservative government, increasingly unpopular in this blue-collar area, watches with apprehension.

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