October 5, 1977

Who Killed Youngstown Sheet & Tube?

There is a lot of finger-pointing going on in the Youngstown area steel mills, but it is a useless exercise.  There is enough blame for everybody involved.

More than 5,000 workers have been let go from the Youngstown Sheet and Tube plants, wiping out the tax bases of Campbell and Struthers, and denting the assessed value of Youngstown 16 percent.

This is a disaster of the first magnitude.  It is doubtful that the affected communities ever will recover.

The argument over who killed Cock Robin makes about as much sense as a nursery rhyme.  It was not a single arrow that brought down the steel industry in Mahoning Valley.  Rather it was a volley from a host of beneficiaries who ought to have known better.

Geography was the controlling factor.  In the old days of cheap labor, cheap transportation and cheap energy it was possible to operate inland along rail lines.  The railroad rates were artificially low by government decree and unions had not forced up labor costs.  The enormous amounts of raw materials needed for steel manufacture could be shipped in, processed and shipped out again at competitive prices.

But times changed, and the mills didn't.

Not that up-to-the-minute modernization would have made much difference in the long run.

It was inevitable that coastal communities with access to cheap ship haulage would dominate heavy industry.  Nothing moves great volume and great weight as efficiently as a ship.  It is significant that the Lykes Corporation, owner of YS&T, is increasing its operations at the Lake Michigan port of Gary, Indiana.

There was an unseemly apathy about the fate of the Youngstown mills.  The suddenness of the collapse, and the attendant hardship of the workers, can not be dismissed off handedly.

Though the nursery rhyme analogy is not appropriate to the Youngstown situation, that of a Greek tragedy is.  It was obvious to the participants they were doomed, but they were unable to avoid disaster because of the flaws in their natures.

The seeds of doom were sown immediately after World War II when the United States poured billions of dollars into the economies of our defeated enemies.  The aim was compassionate - rebuild the nations we had destroyed so they would not harbor resentment leading to new wars.

It is interesting to note that the very first industries rebuilt in Japan and Germany with U.S. tax dollars were steel mills.  Building from scratch, our former enemies bought the very latest in U.S. equipment, and we sent over our very best experts to show them how to operate it.

While financing our future competitors with public tax funds, the U.S. government then undertook to block investment in domestic steel mills by private funds.  Presidents "jaw boned" price increases, and Congress increased the taxes on profits.  Potential investors took their savings out of steel mills and bought stock instead in such things as International Business Machines, McDonald's Hamburgers, and Aetna Insurance.

The United Steel Workers, caught in the inflationary spiral, sought to get well the easy way with big annual wage increases.  Inasmuch as steel is a basic commodity, the union was able to impose its will on mill management and government planners with equal ease.  It was so easy, in fact, that the workers started to coast - working less while demanding more.  As a result of the collusion between management, union and government to pass along increased costs to consumers and tax payers, U. S. steel companies priced themselves out of the market.

Japanese steel workers, with the help of modern equipment, produce 400 tons of metal per worker each year.  This compares to 250 tons per worker in the United States.

Profits that should have gone into capital investment - new plants, new machinery, new processes - went instead into wages, taxes, environment, and higher cost material.  Now the plants and machinery are worn out.

Investors thumb their noses at the steel companies.  The union pension funds are invested in "safe" high-profit securities - certainly not in their own industry.

Management cries for "import protection", but Lykes is buying rolling equipment for its new Indiana plant from Japan.  "It's cheaper," says the president of Lykes.

State and federal officials rush to Youngstown to sympathize with the displaced workers.  Unemployment benefits will be extended, and relocation loans granted.  But there is no talk of increasing investment credits, or wiping out the machinery tax.

Union leaders greet prospective Japanese buyers of the outdated Youngstown open-hearth plant with a warning "buyers will have to meet the standard union contract."  No one is surprised when the Japanese pack up and go back home.

There is a big world out there beyond the Mahoning Valley that delights in strikes, slow downs, meager profits, high prices and special taxes - in the United States.

The electronic, shipping and clothing industries of America have been killed by harder working Asians and Africans whose governments subsidize, rather than tax, job-producing factories.

These examples have not registered as a lesson for U.S. management, unions or government.

Unless they do, the finger of blame will trace another epitaph in the sands of time.

Author: Lindsey Williams