Pygmy Among Giants

One of the surprises of the recession was the steel industry's ability to operate at less than half capacity and still turn a profit. The chief reason for steel's sturdiness was a widespread modernization program, which cut industry costs and made production more efficient. Few firms benefited more handsomely from that policy than the nation's 17th-largest steel producer, a perky little maverick named Granite City Steel Co., located in Illinois just across the Mississippi River from St. Louis. While the industry is back to about 75% of capacity, Granite City Steel this week is humming along at close to 100% of capacity, hopes to keep or better the pace for the rest of the year.

Granite City is fortunate in its location and its customers. Chiefly a producer of flat-rolled steel products for everything from cans to cars, it is the biggest steelmaker in the St. Louis area, enjoys favorable barge and rail rates to the booming South and Southwest. Furthermore, it has no single customer who takes as much as 10% of its output. Granite City owes its prosperity even more to a forward-looking $33 million expansion program that has already hiked its capacity 47% and slashed the per-ton cost of annual ingot capacity. Now producing at an annual rate of 1,320,000 tons, Granite City will have upped its output by 217% from 1947 when it reaches peak efficiency next year (v. a 61% hike for the rest of the industry).

The program was started by autocratic Board Chairman John N. Marshall, who died last April at 59. It is being carried on by a hard-driving management team, led by President and Board Chairman Nicholas P. Veeder, 48, that is out to prove that the little fellow can still compete successfully with the giants. By stepping up the productivity of existing facilities, the company has managed to hold down the cost of expansion to $67 a ton, v. up to $150 for other steel companies that had similar programs. While other firms laid off workers during the recession. Granite City Steel increased its labor forces from 4,943 a year ago to a record 5,050 today. During the first half of 1958. when the industry was down to 54% of capacity, Granite City ran at 86%. After rolling up the highest earnings as a percent of sales among the first 17 steelmakers in 1955, and the second-highest in 1956 and 1957, Granite City Steel's earnings dropped 38% in 1958's first half, partly because of the cost of its modernization program. But its earnings picture is once again favorable: third-quarter net per common share was $1.08, v. 75-c- a year ago, with sales of $88.7 million so far this year running about 6% under 1957. When its modernization program is finished, the company sees an even brighter earnings picture that may again restore its first rank.

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