Pittsburgh Steel's Lessons For Detroit

A Times story, believe it or not suggests that the auto industry take a lesson from the Steel industry collapse of the eighties, whose vital restructuring and ultimate, at least partial revival came in part through the pain of bankruptcy.

"Yet steel’s savior was not the government bailouts it ardently sought but exactly what it so long tried to avoid: bankruptcy. Only when the companies failed were they successfully slimmed down and retooled into smaller but profitable ventures. As debate continues over what, if anything, should be done for G.M., Ford and Chrysler, the steel industry may offer a model.

The steel and auto industries are both capital-intensive enterprises that peaked a half-century ago and have been intermittently embattled ever since. Both secured peace with their unions by vastly expanding benefits, a bargain that eventually hobbled them. Both had entrenched layers of management that believed — despite all evidence — they could wish away change."

One should always remember to distinguish between the disease of bloat, legacy costs, toxic business culture and failure to satisfy customer demand is the problem and that as long as it lasts-- death is inevitable. My post about Homestead talked about the diseased culture that had grown in the mills and management by the 1960's and 70's. This was the problem as was the chain letter of unrealistic entitlements which sapped the companies of the capital. Most doctors don't tell patients who are obese, smoke or do heroine to keep it up cause the pain of withdrawal is to great. But this is what politicians do every day.

"The failures also allowed for the renegotiation of labor contracts, something Wilbur L. Ross Jr., a specialist in distressed assets, realized when he began looking at the moribund industry. The only bidder for the bankrupt LTV Steel, he proceeded to buy Bethlehem and other old-line companies, putting them together as International Steel Group. He cut more employees and revamped work rules, taking Bethlehem, for example, from eight layers of management to three."

Ross, today thinks the pain and impact of the free fall bankruptcies impact on the economy would be too great to bear and recommends that the government make near term loan guaranties and force a tough restructuring on them, something to my knowledge there is no record of the government ever doing.

Please feel free to argue with me but come to the table with more than a tale of how painful and devastating the death of these companies will be. Death is usually a drag.

Homestead: The Glory and Tragedy of an American Steel Town part 2

"The corporation was said Life in 1946, "the most fabulous giant yet produced by the industrial revolution." Steel was the basic metal on which the development of America, and the building and rebuilding of the post war world, depended. The steel making facilities in Germany and Japan had been destroyed in the war and those in Great Britain substantially damaged. since no other countries had had a sizable steel industry, the corporation and the rest of the American steel industry faced almost no competition. There were no steel imports to America and American companies dominated the export trade."

The result was astronomical profit and sleepy complacency. "In 1950, the corporation produced 31.4 million tons of steel, surpassing it's war time high of 30.8 million tons per year. It's workforce in 1950 reached 288,265, the highest level in it's history except for the war years. Profits were immense. In 1950, the corporation made 215 5 million (that was real money back then folks-- multiply by something like 20 to come up with what that equals today) three times 1946 earnings and the largest amount since 1917, during World War I, when earnings were 224 million."(Page 243)

In spite of a string of additional acquisitions, mostly of new plants built during the war and the clear intent to create a safe monopoly environment, U.S Steel's market share had dropped dramatically from the 65% it had at it's creation to 33% in 1950. The company's lazy nature breed competition from smaller American firms like Bethlehem and Republic and also soon from a few foreign competitors. The basic oxygen furnace was developed in Austria, but there was no need to worry and more than enough business to go around.

And, the workers and their union's shared the prosperity with substantial wage increases in the 1947 contracts as well as new efforts to study plant safety and provide worker health plans. The succeeding contracts grew ever more generous and the once militant union grew into a stagnant giant resembling the industry it operated in.

It seemed like the problems of production had been "solved" once and for all. The plants were looked at as giant money trees that could never die or fail and perhaps could bear fruit with little water or fertilizer. The big issue was sitting down and sharing all the fruit. Investment and invention were a dangerous, disruptive hassle, best left to somebody else. New foreign mills adopted continuous casting technologies and new management methods based on continuous improvement. In fact, most USS plants were running on obsolete equipment, but that wasn't seen as an important issue like providing higher and higher salaries and increasingly large health and pension benefits for which to little was set aside. The patient was fat, happy and terminally ill. The union and management wanted one thing--- stability and a nice even lifestyle free of change or strikes.

A new sick culture had developed in the mills. " The notion of "getting it at the mill"was now a way of life---pencils:toilet paper; hammers, wrenches, pliers and screwdrivers; nickel, brass and other metals which could be sold to scrap dealers--- almost anything people wanted, they took, blue collar and white collar workers alike." Some workers slept on the job and golf became the universal path to success among management.

"The 1963 contract contained a new item-- an extended vacation plan that gave every worker with more than five years of service a thirteen week vacation with pay every five years. The plan was extremely costly and no other American industry had anything like it. But it was, for the most part, not questioned and highly praised." One worker called the situation in the early 1970's as " harvest mode". " Take everything out you can get and abandon the rest. And when you just take out and don't put anything back in, well pretty soon your holding pieces together with baling wire." The truth is that the company was eating it's seed corn leaving future workers to starve. The union's new goal was "total job security"; the only path to anything close to that meant producing the best possible products at at the lowest possible price and it looked like that hadn't been a priority in years.

A few years later when the reckoning came, both labour and management bent over backwards to act shocked at the company's condition and to shift the blame. Kind of looks like America today, doesn't it? We were in harvest mode for too long, most of our seed corn is gone and if we don't wake up we will starve.

Naming Rights

The ideas presented here are loosely organized, to say the least. Consider them reference points to ideas about place names and their connection to history, regional trauma, and Pittsburgh's public identity.



UPMC became the largest employer in the greater Pittsburgh region. With such a large economic footprint comes the right to buy naming rights, and UPMC went for the tower that historically represents economic power in Pittsburgh: the former US Steel Building.

Steel's symbology, steel's branding of the region. So common & familiar, we tune them out, these symbols, place-names, and people connected to a lost industry. I wonder, are they just names to the college kids streaming to CMU and Pitt from out of state this fall?

The Carnegie Library system. Fricke Park. Place-names resonant with the past direct traffic all over the city. The Hot Metal Bridge was once part of the steelmaking process itself.

Do I really need to reiterate this obviousness?

Those familiar place names may be integrated into our inner maps of Pittsburgh, but there is a necessary silence between past and present.

There's long slow loss of the steel industry, there's the population's attrition. The silence a friend of mine refers to as 'the puffy silence', the holding patterns she sees amongst men and women in their 40's and older on the bus, at her job.

The community-endured pain of family after family split by economic opportunity elsewhere, of grandparents stuck in devalued houses while the grandkids grow up in Oregon or Chicago.

Under those place names I see the long slow bruising that the region walked through during the ongoing 'layoff & rehire' patterns engaged in by US Steel and other companies. Millworkers waiting for rehire phone calls that never came.

Men and women in their fifties and sixties have whispered to me what they think needs to be said: the details of exactly how the steel industry beat the shit out of this town as it left. They say, "Nobody will come out and say it."

This industry so totally cleaved to in public symbols, in cult of personality, in cult of masculinity. It was an industry built on the bodies of the workers -- and now, UPMC makes its money "caring for" those bodies, the eldest of that generation of workers in this, one of the oldest communities in America.

People think that hospitals are a place to go to get well. They forget that it is also the place to go when one is preparing for death. Why do you think UPMC is so successful? We are an old, old county. And the eldest among us, many of them worked for US Steel. Now they go to the hospital for the last leg of their journey, and say goodbye to their (visiting) families from UPMC hospital beds.

Their bodies built the old industry, the one we lost. Their bodies build the new industry. It is oddly appropriate, isn't it, that we have the UPMC Tower.

Disconnect. Reconnect. What else won't be talked about?