Big Steel's Winter of Woes

A strike threat has the companies groping for a wage deal by spring

Like mausoleums of a passing age, they stand shuttered and empty. They are the padlocked steel mills of what has come to be known grimly as the American Rust Bowl, and from the rail sidings of East Chicago to the icy waterways of western New York State, they offer mute testimony to the industrial damage that has been done by the longest economic decline in half a century.

Though signs are beginning to mount that the 18-month-old slump is at last starting to draw to a close, no sector of the economy can yet be sure of a sustained recovery; in the case of steel, the outlook is bleakest of all. More than almost any other part of Smokestack America, steelmaking finds itself struggling to survive not just the current downturn but a whole host of other, longer-lasting problems. These range from the lofty, uncompetitive wages of the unionized employees, to the antiquated state of many of the mills and fabricating plants, to the relentless pressure of foreign competitors who are themselves burdened with bulging capacity and weak domestic markets.

With unemployment hovering at 50% of the industry's 450,000-strong labor force, and industrywide production sputtering along at a mere 29% of capacity, the plight of the nation's steelmakers is truly ghastly. During 1982, losses for the industry as a whole reached a record $2.5 billion, and though no major steel producer currently faces imminent bankruptcy, some analysts give the weakest of them, including such venerable giants as National Steel (1981 sales: $4.0 billion), and Republic Steel (1981 sales: $4.3 billion) as few as six to eight calendar quarters before they run out of money.

For 1983 the sales outlook is cloudy at best. Though the U.S. Commerce Department forecasts a 25% rise in shipments during the year, to 80 million tons, that is still less than 75% of current capacity and little more than half the peak production of 150.8 million tons in 1973. More worrisome still, signs are emerging that the beleaguered and struggling industry could succumb to labor strife and perhaps even a crippling midsummer strike by the United Steelworkers of America, when the union's current three-year contract expires in August.

Such a nationwide walkout would be the first by the U.S.W. in 24 years and would come just as economic recovery is expected to begin boosting steel orders from such big-ticket industry customers as automakers and capital-goods manufacturers. Roger Smith, chairman of General Motors, which alone buys 7% of the steel industry's output, has already warned Lloyd McBride, president of the United Steelworkers of America, that unless wage talks between the companies and the U.S.W. are settled by March, GM will not hesitate to turn to Japanese and European suppliers for its steel. Other big users of steel would doubtless choose the same route to ensure supplies, in the process cutting off the steel companies from the orders they so desperately need but cannot fill.