Grim Tradition

More U.S. Steel layoffs

The Christmas season is turning into the firing season in the American steel industry. Bethlehem Steel used the period between Christmas and New Year's in 1982 to announce the closing of its 83-year-old steelmaking plant in Lackawanna, N.Y., near Buffalo, and the elimination of 7,300 jobs. Last week U.S. Steel, the largest American steelmaker, carried on the grim yuletide tradition. The company announced that it will close all or parts of 73 operations in 13 states, thereby cutting its steelmaking capacity 17% and reducing companywide employment by 15,436, to 66,000.

U.S. Steel Chairman David M. Roderick called the company's action a "facility rationalization." In fact, its action was a meticulous paring of U.S. Steel's capacity to make, forge and finish steel. Mills, foundries and blast furnaces in such famed Big Steel locations as Gary, Ind., Fairless and Homestead, Pa., and the South Works in Chicago will be shut down. Plans for a rail mill in Chicago were dropped, despite union work-rule concessions and tax breaks from the Illinois state government. Mining and chemical operations will be pruned, along with fabricating facilities in some eastern states.

U.S. Steel also dropped plans to start a steelmaking and fabricating venture with British Steel. The United Steelworkers of America had vigorously opposed the idea, charging that it was robbing laid-off union members of jobs. Roderick explained simply that "terms that were mutually beneficial to both companies could not be concluded."

Not all the closings announced last week involved operating plants. Some of the facilities had not been functioning for several years and had no employees or only skeleton crews. Said Don Stazak, president of Steelworkers Local 65 in Chicago, of the doomed South Works: "In the '50s, '60s and early '70s, this place was a city within a city. There was traffic in and around the plant 24 hours a day. Workers and jobs were everywhere. Today you can walk down the inside of the plant for more than a mile and see nothing. It's a ghost town now, just desolate and depressing."

Last week's surgery was by far the most drastic by a single steel company in an industry battered mercilessly during the past decade by rapidly changing economic forces. Steel has been the hardest hit of America's once proud smokestack industries, and mill business has picked up only slightly with the economic recovery.

American steel has been pounded by cheaper imports from Japan, South Korea and Brazil, crippled by high wages and inefficient plants, and stunted by management that sometimes seems to have just given up on the industry. Employment has plunged from a postwar high of 620,000 in 1953 to about 250,000 last year; half of that loss has come since 1970. Use of American steelmaking capacity has shrunk from 90% in 1979 to 50% in 1983.

U.S. Steel's action should save the company about $200 million a year and help the firm reach its goal of drastically cutting steelmaking costs, which are the industry's highest. The closings will reduce steelmaking capacity from 31.3 million tons to 26 million tons annually and allow the company to make a profit on steel while running at only 50% of capacity.

The closings will also permit a pretax write-off against earnings of $1.2 billion, the largest ever in the steel industry. That translates into a $650 million aftertax charge-off against profits for the fourth quarter of 1983. Roderick said that the company would invest $290 million in two new facilities in Indiana and Alabama. He claimed that these would make U.S. Steel the world leader by 1986 in continuous casting, the technology that allows the making of semifinished products without the intervening ingot stage.

But the company whose origins go back to Andrew Carnegie and that furnished the steel that helped build America for decades has drifted far from its hearths. In recent years it has invested in energy, chemicals and real estate. In the process, steel has become almost a sideline for U.S. Steel. In FORTUNE'S new survey of the most-and least-admired American companies, U.S. Steel ranked 241 out of 250. Moreover, FORTUNE classified U.S. Steel as a "petroleum refining" company in view of its ownership of Marathon Oil. Last year steel accounted for only about 30% of U.S. Steel's revenues; oil and gas were 50%.