Russian firm buys the Point
Severstal plans to run steel mill at capacity
Severstal, led by a Russian billionaire who is one of the world's wealthiest men, emerged as the successful bidder in the government-ordered sale, saying it will pay $810 million in cash for the Baltimore County plant. An agreement with an earlier buyer that would have paid Luxembourg-based ArcelorMittal $1.3 billion for the plant collapsed over a lack of financing.
But Gregory Mason, chief operating officer of Severstal, said that the company has no plans to cut employment, wages or benefits and that it hopes to keep the current management in place.
"We're not buying Sparrows to chop it up," Mason said.
Both labor and management at the 119-year-old plant expressed relief, saying Severstal has the finances and global reach the mill needs to maintain operations at peak capacity for years to come. Capable of producing 3.6 million tons, the plant turned out 2.5 million last year, Mason said - Severstal wants to see it operate at capacity.
By contrast, its current and previous two owners treated Sparrows Point as a "swing plant," meaning employment and production were curtailed whenever the steel market hit a rough patch.
"Under ArcelorMittal, we were a stepchild - that's how we were treated," said John Cirri, president of the United Steelworkers Local 9477, referring to the plant's current owner. "So we're going from being a swing plant to being the 'beast in the East,' and that's what we're going to be."
The plant has been buffeted by the change and uncertainty generated by a worldwide consolidation of the steel industry. This marks the fourth time the plant has been sold in five years. Once the world's largest steel mill, the plant is now down to less than a 10th of its peak work force.
For Sparrows Point workers, the wait for a new owner has been filled with a whirlwind of emotions: uncertainty with cautious optimism that the buyer would honor their labor agreement and invest in building up the plant. Union officials say worker protections in their current contract will remain.
Erin Kelly, 25, a cold mill crane operator from Baltimore who has worked at the plant for more than five years, said yesterday that she doesn't know too much about Severstal.
"As long as they know about our contracts ... and they could respect that and are agreeable with the stipulations we have and they're willing to work with you, that's all that matters," said Kelly, whose father is also an employee at Sparrows Point.
The USW contract says the union has the right to reject buyers it finds objectionable. Sparrows Point has had so many owners come and go during the past few years that some workers joke about seeing a Wal-Mart sign appearing next.
"We have always maintained that the union will not reach agreement with a successor unless it includes a long-term business and operational strategy that produces security for our members, their families and our retirees," said David McCall, chairman of the USW bargaining committee for ArcelorMittal in North America, in an e-mailed statement. "We now have that at Severstal."
The recent uncertainty is a sharp contrast to the stability that characterized Sparrows Point's run as an industrial icon of a lunch-pail city for most of its history. For 87 of those years - most of them prosperous - the plant was operated by Bethlehem Steel.
At peak employment in 1959, more than 30,000 worked at the plant - then the largest steel mill in the world. And during World War II, the adjacent Bethlehem shipyard, cranking out Liberty Ships for the war effort, employed more than 45,000. A company town grew up around the plant with schools, stores and workers' housing.
After years of decline, Bethlehem went bankrupt in 2001. In 2003, Ohio-based International Steel Group paid $1.5 billion to add Beth Steel to its growing portfolio of bankrupt steel companies. Almost overnight, it became the largest steel company in the United States.
ISG cut costs, won labor concessions, and pushed itself into the black. Then ISG, in turn, was snapped up by Mittal Steel Co. NV of the Netherlands for $4.5 billion in 2005.
Lakshmi N. Mittal was a leader in pushing steel from a series of national industries to a global one undergoing rapid consolidation. But Mittal's global ambitions forced Sparrows Point onto the market again. The Justice Department had antitrust concerns about Mittal's acquisition of Arcelor SA of Luxembourg, another large international steelmaker. To satisfy the regulators, Mittal agreed to sell off Sparrows Point, and completed the merger creating ArcelorMittal.