The Steel Trap

LTV is a casualty of an embattled industry. It has no future unless it can emerge from its past.

Halo and Justin Long Funky Buddha, 1360 West Ninth Street 9 p.m., Thursday, March 15

$10 before 11 p.m. and $12 after 11 p.m.


Across from a handwritten sign that reads "Bang head here," Danielle Tobias argues with a fellow steelworker about priorities. Focus on the petition first, she says. The thank-you notes can wait.

Tobias's stance is authoritative as she leans over the cluttered table in the Local 1098 union office. But her tone is diplomatic. On the journey to respect in this male-dominated profession, every little battle counts.

With long blond hair and French-manicured nails, Tobias shatters the steelworker stereotype. Around the union hall at 1700 Denison, she usually gets mistaken for a secretary. But not only can Tobias operate a jackhammer as well as any guy in a hard hat; she's also the force behind the Cleveland union effort to save LTV.

Tobias hasn't actually worked in the mill since November 10 -- the day she turned 28, walked into the locker room, and saw the words "laid off" next to her name on the schedule. Until then, steelworking wasn't much more than a job -- something to do for $13.74 an hour, while she saved enough money to go back to college.

It's since become her calling.

For the past four months, Tobias and 31-year-old steelworker Jack Sabolich have turned the office into activist central. In addition to taking a crash course in labor economics, they spend their days doing media interviews and speaking engagements, and collecting signatures. At present, they're waiting to hear whether Drew Carey will agree to wear a "Save Our Steel" shirt on his show.

"I never saw myself getting into it," she says. "I had a three-year plan to work there. It's turned into something else since I've gotten involved in this campaign . . . I'm more inclined to stay."

The industry would love for Tobias to become the new face of the American steelworker. The third-generation worker and union activist is smart, young, and capable. She's also passionate about preserving American steel jobs. But ask her steelworker father, Dan, whether he wants her to become a lifer in the mill, and he hesitates. Three decades working around LTV's blast furnace has forged an opinion stronger than any public-relations campaign.

"I'd like to see her use this experience to move forward," he says. "There's not a big future in these mills. It's going to become an industrial wasteland, like in Youngstown."

Predictions of Cleveland becoming the new Youngstown may be premature. Yet there's little question that life at the Cleveland Works is about to change. Though illegal dumping of foreign steel has made for a convenient villain, LTV's situation is far more complex -- and dire -- than that. A conspiracy of history, debt, and bad management brought the company to this juncture. And the only way it can rise again is through radical change.

For now, Cleveland still makes steel, and steel still makes Cleveland. The synergistic relationship that began soon after the Civil War continues 24 hours a day, seven days a week in noisy, labyrinthine complexes that could accommodate the giants in Gulliver's Travels. In a world ruled by the microchip, there is something almost sacred about what goes on at the Cleveland Works. Three-thousand-degree molten iron melts scrap metal in a furnace that looks like the mouth of hell. Sparks fly. Sirens scream. Gargantuan hooks and ladles ramble along the rafters. Newer mills do without the fiery spectacle, making the old steelmaking process under way here seem all the more primordial.

The glory days of such mills are commemorated at the Youngstown Historical Center of Industry and Labor, where images of weary, soot-faced workers hark back to a time when U.S. steel reigned supreme. Workers at the turn of the century toiled 12 hours a day, six days a week, filling blast furnaces by hand. Every day, they breathed poisonous gases and dodged rapidly moving machinery. In onsite infirmaries, medical personnel treated workers with serious burns and lost limbs. When someone fell into the molten steel, nothing remained of him to bury.

By the 1920s, the U.S. economy was booming. For the first time, common workers held the economic firepower to buy household goods that had once been the sole province of the upper classes. Steel provided the raw materials to create them. But as demand increased, so did cries for better working conditions. Attempts to obtain them proved ugly, even bloody by the 1930s. It was not until the 1950s and '60s that the United Steelworkers of America succeeded in significantly improving pay, safety, and job security of its members. By then, U.S. dominance in the industry seemed ensured.

Unfortunately, gains for workers coincided with -- and contributed to -- the industry's decline. In 1959, steelworkers nationwide launched a four-month strike. The lost production was filled by foreign competitors. For the first time in the 20th century, the U.S. became a net importer of steel -- overtaken by the very mills America helped build in Europe and Japan following World War II.

Yet U.S. companies continued to cave in to union demands for higher wages and lifetime benefits in exchange for staving off strikes. This strategy may have preserved the industry's present, but it imperiled its future.

Like automakers of the time, Big Steel also failed to recognize the dawning of a truly global economy. American mills were large, inefficient, and slow to modernize. By the 1970s, foreign steel held a competitive advantage in the U.S. market. And that was only exacerbated when a recession hit, auto sales slowed, and Big Steel was forced to consolidate and shut down mills, pushing thousands of workers into early retirement. The industry had all but collapsed. It's been playing catch-up ever since.

As mills continued to close, those that remained took advantage of government assistance, investing $50 billion in new technology. Productivity increased by 300 percent. The workforce decreased by 60 percent. But domestic integrated producers -- traditional steelmakers who process steel from iron ore and other raw materials in blast furnaces -- are still being crushed in the world marketplace.

Analysts say it's because they just can't compete with foreign producers and new, more efficient mini-mills.

The integrated mills are reluctant to blame themselves. They point to a more nefarious culprit: unfairly traded imports.

The blame-the-foreigners thesis has been a familiar complaint over the past four decades, periodically recurring like a bout of chronic illness. This time, however, the flare-up is said to be the worst case ever. The industry finds itself in its second full-scale crisis since 1998. Sixteen domestic producers have declared bankruptcy, including LTV.

Warns industry consultant Donald Barnett: "It's getting to the point where there is nowhere the integrated mills can escape to."

The industry's latest trouble began in mid-1997 with the crash of Thailand's economy. Financial turmoil quickly spread throughout Asia, then to Russia and Brazil by mid-1998. Currencies weakened. Steel demand dropped. Because Asian, Russian, and Brazilian producers couldn't sell steel in their own markets, they sent more to the United States, where the economy was humming.

The worldwide glut meant trouble for American producers. In the last six months of 1998, prices fell far below profitable levels. According to the U.S. Department of Commerce, imports of finished steel products surged to the highest level ever, overtaking 35 percent of the market. As a result, thousands of steelworkers lost their jobs.

As if on cue, U.S. producers complained that unfair trading practices were the underlying problem. To some extent, the Commerce Department agreed.

Throughout the world, steel generally enjoys protections not afforded other industries. After all, a healthy domestic steel industry has long been the benchmark of a truly industrialized nation. Without the materials to build tanks and cars, buildings and bridges, a country finds itself at the mercy of others, or so the logic goes.

Hence, in some nations, nonviable plants are kept open and new ones are built, whether or not they're needed, if only for the comfort of having steel stockpiles on hand and the ready ability to produce more. Russian mills, for example, don't pay taxes and barter with workers and suppliers in lieu of wages and cash. Yet, as long as they keep people employed, the government is loath to shut them down. And much of what they produce will eventually find its way to foreign markets.

There is, however, no shortage of hypocrisy to American firms' wailing about the subsidies enjoyed by foreign counterparts. Since the 1970s, the U.S. steel industry has received $23 billion in local, state, and federal aid, according to the American Institute for International Steel, an association that advocates free trade. And over the past 30 years, times were few in which U.S. companies didn't enjoy the luxury of quotas, surcharges, or other import restrictions that protected their businesses.

As a result of so much protectionism here and abroad, world steelmaking capacity is far greater than natural demand. "Imports just sort of slop around the world," explains analyst Barnett. "Whenever the American dollar is strong and U.S. prices are high and the U.S. market is available, suddenly that's where it is."

There's so much steel flooding the market, in fact, that some countries are willing to sell it in the United States for less than it costs to make it, or for less than they would sell it in their own countries. It's called dumping, and according to U.S. trade law, it's illegal.

During the 1998 Asian crisis, integrated producers took their dumping complaints to the International Trade Commission, which determined that unfairly traded imports from Japan, Korea, Brazil, and Russia indeed were hurting the U.S. industry. Import duties were imposed, and by early 2000, the industry looked as if it would recover. Those appearances proved fleeting.

By midsummer, domestic steel was once again in a free fall. Complaints of dumping echoed across the Rust Belt. But they obscured a fuller, truer picture. Though imports were clearly a factor, to say that they alone caused the present steel crisis "is not a fair assessment," says Mark Parr, an analyst with McDonald Investments. During the 1999 recovery, inventories grew. Prices plummeted. Automobile sales dropped. Natural gas prices skyrocketed. All of these things exposed fundamental weaknesses in an industry that, like a weary boxer, required but a quick series of jabs to put it down for the count.

Says Dan Ikenson, a trade analyst with public-policy research group the Cato Institute: "To me, it's an indication there's something deep-seated in the problems in the industry, if one bad quarter or two bad quarters is enough to practically blow the industry off its feet."

There are several reasons why the steel industry is so vulnerable, not the least of which is its inability to shed the burdens of its once-great past.

The industry that used to employ more than a half-million workers now pays pension and health-care benefits to a retiree population twice the size of its workforce. Steel's awe-inspiring infrastructure comes with an environmental price tag of $50 to $70 per ton. And though the industry enjoys some of the best commercial welfare benefits America has to offer, it's still at a disadvantage to foreign producers, who receive even greater aid and face far fewer labor and environmental costs.

At this point, U.S. steelmakers feel they have no choice but to ask the government for import quotas and other subsidies. Again.

"You have to decide: Does society expect us to honor our commitments to our employees, our retirees, the environment? If that's what's expected of us, we have to have a level playing field," LTV spokesman Mark Tomasch says.

Ohio producers have already won a three-year $110 million commitment from the governor. The money will help the state's ailing producers pay for capital investments, pollution controls, and worker training. The next stop is Washington, D.C., where Congressman Dennis Kucinich is fighting to save Big Steel, with the same righteous fervor he used to save St. Michael Hospital last year.

"You had a situation where [St. Michael was] just going to be taken over and closed, so somebody else could get market share," Kucinich says. "There's a direct parallel here. It all goes back to unfair competition."

Tomasch says a best-case scenario would include a commitment by the federal government to temporarily restrict imports and strictly enforce trade laws. He also wants the government to pursue dumping cases, instead of leaving it up to steel companies to bring them. Kucinich, Stephanie Tubbs Jones, and other members of the House Steel Caucus introduced legislation earlier this month that would, among other things, institute quotas on foreign steel.

The legislation resembles a bill passed by the House in 1999 that was later rejected by the Senate. While Cleveland legislators are hopeful, pessimism abounds elsewhere. Although U.S. Trade Representative Robert Zoellick recently announced that the Bush Administration is considering limiting imports, the President has already said he wants to phase out federal loan guarantees for steelmakers -- a sign that he isn't resolutely in Big Steel's corner.

"It seems that the politics of trying to do this are getting weaker and weaker and weaker all the time," says Robert Crandall, an analyst with the Brookings Institution. "Mr. Kucinich probably ought to go back to trying to socialize the Cleveland electric utility. That might be a more fruitful cause these days."

Even the industry's harshest critics, however, hesitate to predict the end. Steel is a resilient industry that's already survived one near-extinction in the 1980s. Despite its diminished place in the U.S. economy, it still wields political clout disproportionate to its size. Politicians like to protect the industry for many reasons, chief among them being steelworkers like Danielle Tobias and the thousands like her employed in their districts. Tobias's predecessors may have raised their fists against the corporate bosses, but today her union is linking arms with them instead. In tandem, big business and well-organized unions make for a powerful lobbying group.

For now, union and management in Cleveland want the same thing: continued work for 5,200 LTV employees in Cuyahoga County and sustained pension benefits for more than 15,000 retirees. Yet there are few if any signs that the company can go forth the way it always has. Even LTV spokesman Tomasch says the company needs "to significantly change the fundamental economics of the steel company and the steel business."

Perhaps LTV is beginning to understand what analysts and economists already know. If the company is to live, the local steel industry as we know it must die.

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