Review in Hamilton Spectator

STELCO MANAGERS UNDER FIRE IN NEW BOOK

A look at Hamilton’s steel past and future through a new academic book by two profs and Warren Smith, former 1005 chair.

new study of Stelco's long and painful decline blames part of the problem on managements' failure to hire new workers

Manufacturing Meltdown: Reshaping Steel Work, to be released next week by Fernwood Publishing, the authors say the company suffered serious competitive disadvantages because managers went almost 20 years with no meaningful hiring.

That action, couples with repeated layoffs of its youngest employees, left the company facing a wave of coming retirements that would wipe out almost its entire body of knowledge about how the giant steel mill actually works.

“We could see the problem developing in 1998, and things have only gotten worse since then,” said Warren Smith, co-author of the study and a former president of the United Steel Workers Local 1005. “The company just wasn’t seeing what was coming at them.”

“Now that company is facing this wall of retirements, and it’s all because of really bad planning at the management level,” he added.

Smith co-authored a study with retired University of Toronto sociologists David Livingstone and Dorothy Smith.

They trace Stelco’s problems back to the early 1980s, when Canada started to feel the effects of the world’s ability to produce about 20 percent more steel than it needed. Until then, companies such as Stelco and Dofasco had been efficient and profitable enterprises. But as foreign companies doubled their share of the Canadian market to 30 percent and prices fell, Canada’s companies were caught in a vise.

Managers responded in business school textbook fashion, slashing hundreds of jobs and preaching a gospel of productivity. Around the world it meant a loss of 1.5 million steel mill jobs by 2000, about two-thirds of 1975’s workforce. In Canada, total steel mill employment fell by half between 1980 and 1992, from 60,000 to 30,000 jobs.

At Stelco, that translated into almost 16,000 lost jobs between 1981 and 2003, cutting the labour force to about 9,000 from 26,000. Today in Hamilton, the production workforce is less than 900.

“That drive to slash employment was coupled by a desperate management effort to restructure the way work was done in the plant,” Smith said. The new mantra became flexibility, and managers started a campaign to compress more than 1,000 job descriptions into as few as possible.

“Having that many job descriptions really limits what you can use an individual for. Now, as for as the company is concerned, all those job classes are gone.”

In place of specialization, Stelco moved to blended jobs, such as maintenance-operator.

“The idea was that when the machine went down, the operator could fix it, but that never worked, “Smith said. The company didn’t have to put people through seven years of apprenticeship, then give him some control over his work. He ends up with less overall skill, but you can work him all day because he never runs out of things to do.”

Serious layoffs at Stelco started after the 1981 strike. Under the rule of seniority it was the last-hired who were the first to go, amputating the youngest part of the workforce first, resulting in a steadily aging staff inching ever closer to possible retirement.

In 1981, the average Stelco worker was 37 and 13 years on the job. More than 40 percent were under 35 and fewer than 40 percent were over 45.

By 1989, under the effects of mass layoffs of younger workers and the first wave of early retirements, the average age was 45 and the average seniority was 21 years.

With virtually no hiring and more retiring, the workforce aged rapidly, to an average age of 50 and seniority of 28 years by 2003. By then, only around 10 percent of workers left were under 45.

After the mass layoffs of 1984, there were very few workers under age 25, and by 1996 virtually no one under 30. Bay late 2009 there were fewer than 1,000 workers and of those, 200 were eligible to retire.

Despite repeated warnings by union leaders about a looming labour shortage, management only started to respond in 1999 when 300 new workers, dubbed the “Millennium Kids,” were finally brought in.

“They just kept letting the workforce get smaller and smaller, and wouldn’t acknowledge they were facing this wall of retirements, “Smith said. “They didn’t understand that you can’t keep behaviour like piranhas and hope something good will happen.”

He said, “The company has really suffered from the failure to listen to their workers. That legacy has been quite persistent and has just worsened the previous conditions. The knowledge of its workforce is critical to the competitiveness of the company. It’s a basic reason whey U.S. Steel and Stelco continued to suffer.”

The only way the company’s strategy makes sense, the book says, is that U.S. Steel sees the future of the former Stelco as noting more than a supplier of raw materials to its U.S. mills, where value-added work will be performed and the finished steel sold back to Canadian customers.

That doesn’t have to be the ed. Livingstone cites Lakeside Steel’s efforts for intervenor status in a suit against U.S. Steel by Ottawa over broken job and production promises. Lakeside wants a forced sale of former Stelco assets.

While he doesn’t think Lakeside would be a good purchaser - he thinks the venture funds that would finance such a deal would want a quick flip of the company - he notes “there’s any number of companies just salivating at the chance to break into the North American market and they’re looking at Canadian companies”

“There are real alternatives available, but they are slipping away from us,” Smith concludes.

  • Steve Arnold, The Hamilton Spectator, 12 February 2011

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