Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, February 3, 1991 TAG: 9101310512
SECTION: BUSINESS PAGE: D-1 EDITION: METRO
SOURCE: By SHARON COHEN/ ASSOCIATED PRESS
DATELINE: NEW CARLISLE, IND. LENGTH: Long
Either way, it's accurate. Inland Steel Co. and Nippon SteelCorp. have formed a $1 billion partnership in the Indiana corn fields, building a 10-story, 21st century mill that symbolizes the changing look of the industry.
Big steel in the 1990s means big partnerships. The United States and Japan, old rivals, have become new allies, each looking to profit as they breathe life into an industry flat on its back for much of the last decade.
"The Japanese are helping rebuild our steel industry and we should not be upset by that," said Richard Florida, a management and public policy professor at Carnegie Mellon University. "The Japanese get access to the American markets. Americans get the technology and good jobs. It's a win-win-win situation."
It's a marriage for money, however, not love.
The Japanese have poured about $7 billion into single or joint steel ventures, almost all in the late 1980s, Florida said. Kawasaki, Sumitomo, Kobe and Nippon - the world's largest steelmaker - are putting down roots on the industrial landscape, welcomed by such American stalwarts as Armco, LTV, USX and Inland.
Inland-Nippon's I-N Tek, the world's most modern cold-rolling steel mill, and I-N Kote, a galvanizing facility that coats steel, together have a $1 billion price tag.
The partnerships seem an odd twist, considering that imports - along with the strong dollar and recession - contributed to America's steel decline in the 1980s. Japan was the No. 1 foreign supplier through the decade. American companies bitterly complained about Japanese dumping.
"There's a big irony to it," said John Jacobson, of AUS Consultants in suburban Philadelphia. LAST OF A SERIES "Many of the U.S. companies have just had to grin and bear it. They've really had to change their perception of the world."
"Have we given up control? Certainly," he said. "U.S. management does not control its destiny like it used to. But its destiny wasn't all that good. Their prospects have improved with their investment. It's better to have half of something good than all of something bad."
Steel, indeed, was in crisis in the early to mid-'80s. Mills closed, towns died, the work force shrank by hundreds of thousands. The industry lost $12 billion from 1982 to 1986, though it since has rebounded.
"It was a fat, overweight industry that ran into a wall and ended up in the hospital for a few years," Jacobson said. "Now it seems to be back on a better diet, slimmed down, a little more competitive."
The Japanese interest is largely spurred by the desire to sell steel to the growing number of Japanese auto companies in this country. I-N Tek, for example, sells to four: Honda, Toyota, Chrysler-Mitsubishi, Suburu-Isuzu.
These partnerships are just part of a nationwide Japanese investment explosion. Some 1,100 manufacturing plants with a Japanese majority interest were established or under construction in the United States by the end of 1988, the Japan Economic Institute reported last year.
Japanese companies have invested more than $25 billion in rubber, autos, auto suppliers and steel, Florida said.
That way, the Japanese avoid the expense of building new mills alone and reduce political risks "by `buying off' U.S. producers who receive both up-front cash and a share of ongoing profits," said a study co-written by Florida this year.
These investments, Florida noted, also provide a solution to trade barriers that limit the amount of steel that can be imported; the current level is 19.5 percent of the U.S. market.
Still, some bemoan the trend.
The Japanese "look far out into the future," said Tom Jones, a staff representative for the United Steelworkers of America. "My concern is American management is so devoted to immediate returns to stockholders or the short-term bottom line that unless we're very careful, the Japanese will simply one day wake up and have them all for breakfast."
Inland needed help after a disastrous string of years, starting with 1982's loss of $119 million, the first full-year loss since the Depression. Three more bad years followed, with losses totaling $336 million.
By the mid-'80s, about 30 percent of Inland's facilities were obsolete and the steelmaker was hearing it couldn't match the quality of imports, said Frank Luerssen, chairman and chief executive of Inland Steel Industries Inc., the parent company.
Times were so terrible that Inland sold its Chicago headquarters.
But there was hope. Nippon's chairman already had expressed interest in a joint project, and as a potential mate, the Japanese company had an attractive dowry: lots of money and sophisticated technology.
After Luerssen saw Nippon's continuous cold-rolling mill turn out steel coils faster and smoother than ever during a Japan visit in 1984, he decided Inland needed one to be competitive.
Initially, the steelmaker planned to buy the technology and equipment and own the mill. But it was clear it couldn't do that financially.
Workers knew it, too.
"We saw the business go away. We saw the number of employees continue to shrink," said Paul Rausch, president of Local 9231 at I-N Tek, who formerly worked at Inland's steel-making plant, Indiana Harbor Works. The labor force at Indiana Harbor dropped from 24,500 to 14,500 during the last decade.
In 1987, after protracted negotiations, the Inland-Nippon partnership was announced. Inland has 60 percent of the partnership, Nippon 40 percent. Japanese lenders provided the bulk of the money to build the plant, which started production this spring.
I-N Tek, the nation's only continuous cold-rolling mill, uses a process that slashes production time from 12 days to less than an hour with a third of the workers.
"This is the 21st century mill. We just built it early," said George Landsly, manager of administration.
It is a high-tech marvel: computer rooms resemble air traffic control towers, human hands rarely touch steel, backbreaking chores are performed by machines that look like props from "The Terminator."
And the product is premium-quality steel, made from coils an [ of a inch thick and 65 inches wide that are cleaned, compressed, softened, flattened and finished, then inspected to meet orders for cars, appliances and office furniture.
"You get a uniform product over and over again," Landsly said. "It's almost like making cookies one at a time or making a batch together, where they all taste the same."
Nippon's "technical competency is about equivalent to the total technical effort in the U.S. steel industry," Luerssen said. "It's a substantial leverage for us to have a close association."
The companies also are 50-50 partners in I-N Kote, two galvanizing lines that coat steel to prevent corrosion. It will be completed in 1991. Both ventures will employ about 450 workers, operating with Japanese work methods and team concepts.
The partnership has not been without cultural tensions. There were angry calls when Japan's flag was raised at the Harbor Works during a visit by Nippon executives. And there were fears by some Inland workers, Rausch said, that "our Japanese partner would come in here and it would resemble an old World War II movie."
Instead, he said, they've been a good model.
"We might traditionally nip at each other's heels being union and management," Rausch said. "The Japanese think things through and look at it from all different angles and they brainstorm on how to resolve an issue. That tends to rub off.
"I feel very lucky to be here," he said. "It's new technology. It should give me a stable income. When I come to work, I have something to give. You can't put a price on that feeling."
by CNB