Sep 17, 2009
Layoffs to begin at Sparrows Point; one-third of workforce may be let go
By MARK REUTTER
About 125 supervisors and salaried employees will be terminated at the Sparrows Point steel mill at the end of this month, according to sources and documents obtained by the Brew. The layoffs are the first element of a restructuring plan that may claim 500-600 more jobs by the end of the year.
The restructuring is part of an effort by Severstal, the Russian owner, to turn around its troubled North American steel division – or make it more attractive for sale.
Negotiations are expected to get underway soon with Local 9477 of the United Steelworkers Union to eliminate hourly jobs, according to these sources.
One document obtained by the Brew refers to the elimination of 580 positions, about one-third of the Point’s unionized workforce. Employees will be encouraged to retire early and may also receive cash buyouts.
Sergei Kuznetsov, who became chief executive of Severstal’s North American division this summer, initiated the restructuring. Kuznetsov is the division’s third CEO this year. He reports to Alexei Mordashov, the Russian oligarch who has seen his personal fortune, tied to Severstal stock, drop from $22 billion to $6 billion in the last 16 months.
Many of the company’s financial problems stem from Mordashov’s purchase – at the top of the market – of steel facilities in the Ohio River Valley. These mills were forced to close this spring. Sparrows Point had been supplying the mills with steel slabs, and their closure reduced the Point’s iron production, resulting in operating losses.
Ironically, the Point’s core products of tinplate and cold-rolled steel have seen relatively high demand during the economic downturn, but the price for these products has not been enough to offset losses on the steelmaking side of the plant.
Over the last five months, Severstal’s Moscow headquarters has threatened to close the Point’s “L” blast furnace and import steel slabs from Russia or other overseas sources. Such drastic action was never taken by the division’s previous CEO, Gregory Mason, and the furnace was kept running at reduced capacity.
The business press has repeatedly reported that Mordashov is trying to sell his North American plants. Last month, Severstal issued a news release saying it plans to stay in the North American market.
One potential buyer of Sparrows Point, if Severstal decides to sell, is Mittal Steel.
Mittal gained control of Sparrows Point in 2005 when it purchased International Steel Group (ISG), but was forced to sell the mill last year in a settlement with the U.S. Department of Justice’s anti-trust division.
DOJ argued that Mittal’s ownership of Sparrows Point would give it a potential lock hold on tinplate production and pricing in the U.S. Tinplate is used to make metal cans and other consumer packaging.
If Mittal Steel did seek to purchase Sparrows Point (making it the fifth owner of the Point in the last seven years), it would doubtless argue that the recession has caused material changes to the steel industry.
A former Baltimore Sun reporter, Reutter wrote “Making Steel: Sparrows Point” (2004) and keeps tabs on the steel industry at makingsteel.com . He can be reached at reuttermark@yahoo.com .
You are to much!!!!!! Remember when you write this stuff you are damaging not only the workers but the customer base and share holders too. If you really care about Sparrows Point and the community that is supported by the Plant you would consider your actions before you make them. We are down here trying to survive and everytime we move forward you knock us back with some negative press form somebody playing politics with your paper.
“I see nothing wrong with your article. Maybe, a line or two about running the orders for the idled Severstal mills (Warren and Wheeling) would be nice. Which is hard to do for example the New Cold Mill running tin orders. The Truth is we are running, but in a bad position.” Mark Reutter received this comment from ANONYMOUS, SPARROWS POINT, a Severstal employee who requested anonymity.
Severstal is looking for the door and the only way to move the US assets is to get them back in the black. The Dearborn unit has already reduced 337 hourly employees and is looking for over a 100 more the first week of October. Severstal is looking to reduce this plant from 1675 to 1100+/-union hourly employees. The only way this will even work is to give them majority of the work to contractors/vendors. This is the typical business plan most American Manufacturing is switching to and this will be the end of the middle class and a means to earn a decent living.