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Wheeling-Pittsburgh Corp., among the top ten steel companies in America, is a major producer and supplier of flat rolled and fabricated steel products. The company was reorganized in 1991 as the result of a bankruptcy ruling, making Wheeling-Pittsburgh Corp. the holding company for Wheeling-Pittsburgh Steel. Wheeling-Pittsburgh Steel had been in Chapter 11 for more than four-and-a-half years after accumulating serious debts and undergoing well-publicized labor problems--including a controversial strike in 1985--in the first half of the 1980s. In many ways, the history of the company reflects the dramatically changing fortunes of the American steelmaking industry.
The roots of Wheeling-Pitt go back to the middle of the last century when Wheeling, West Virginia, which lies on the banks of the Ohio River, was the center of a flourishing nail manufacturing industry. In 1851 LaBelle Iron Works was established and soon became a leading nail factory. By the end of the Civil War, the nail market had begun a serious decline, and LaBelle began searching for new products to manufacture, eventually entering into the creation of steel sheets, tin plates, and galvanized roofing. This expansion was propelled by LaBelle's purchase of a three-year-old nail factory in Steubenville, Ohio and their installation of two blast furnaces at the plant. Eventually, the Steubenville plant became the site for open-hearth steelwork, plate mills, sheet mills, and tube works.
In the meantime, Alexander Glass founded the Wheeling Corrugated Company in 1901. Glass, a key figure in the early development of Wheeling-Pittsburgh, began his career at the age of 14 packing nails in a Wheeling plant. He founded Wheeling Corrugated with a capital investment of $10,000, including $4,000 of his own money. The company began by manufacturing corrugated or "wrinkled" roofing and siding which was used to replace aging wooden structures in factories, farm buildings, and homes. The company soon diversified into the making of conductor pipes, trimmings, and ornamental steel plates, among other products. Glass turned Wheeling Corrugated into a subsidiary of the newly-formed Wheeling Steel and Iron Company in 1902. The next year saw the opening of a second Wheeling plant in nearby Martins Ferry, Ohio.
World War I was a boom period for the entire steel industry because all kinds of steel was demanded by munitions industries both at home and abroad. All over the country steel companies were rehabilitating obsolete units and buildings and installing new equipment. Wheeling Steel and Iron added six hot mills in the early days of the war and in 1918 brought six more into production. In 1917 the company would boast a record profit of $4,637,365.
On June 21, 1920, the Wheeling Steel Corporation was created, bringing together three independent companies from the area--LaBelle Iron Works, Whitaker-Glessner Company, and Wheeling Steel & Iron Company. Originally organized in 1875, Whitaker-Glessner owned a sheet-bar mill in Portsmouth as well as sheet and tin mills in Wheeling and sheet mills in Martins Ferry. Alexander Glass was appointed chairman and I.M. Scott was named president of the newly-formed Wheeling Steel Corporation, which was capitalized at $100 million.
The merger made good business sense. Whitaker-Glessner shared with Wheeling Steel and Iron the handicap of having to go outside their own processing facilities for raw material. On the other hand, LaBelle Iron Works had in abundance what the other two companies lacked: important raw material resources in the area of coal and ore properties, along with its own blast furnaces, open-hearth furnace, and modern coke byproduct facilities.
The merger came at a time when the steel industry was still riding the crest of the war years. Just prior to the merger, the three companies had declared comfortable dividends. But the boom came to an abrupt halt. The next year, 1921, saw demand dramatically fall and, at 19,224,084 tons, industry-wide steel production was less than half the previous year's output.
There was another industry-wide problem that the new company had to face: the tug-of-war between labor and management. The steel workers union was demanding that "all mills or none" in the new company be unionized immediately. Wheeling's position was that they were willing to sign scale contracts for 1921-1922 covering those of its plants that had been unionized in the past, but balked at honoring union demands at those mills that had been customarily run on an open-shop basis. Facing an intransigent management, workers at several of the mills walked off their jobs. Wheeling's immediate response was to leave the plants cold, since business was languishing anyway. Eventually non-union workers were brought in to staff the struck mills.
Weathering uncertain market conditions and the Depression, Wheeling established a foothold as number ten among the major steel manufacturers. It continued acquiring new properties, modernizing its facilities, and steadily expanded its production of flat rolled steel products. A major push was undertaken to update and streamline the physical plant since the technology was changing and competition was fierce among the top steelmakers.
One of the first major undertakings at Wheeling Steel was the installation at Steubenville of new blooming mills and a continuous sheet-bar mill which enabled the finishing mill to be independent of purchased raw material. The Portsmouth plant was also considerably upgraded; this mill had been among the first of the sheet mills to specialize in the production of high-finish sheet metal for the automotive industry. At the same time, Wheeling was acquiring new properties to add to their infrastructure. In 1927, it acquired the Riverside steel mills from the National Tube Company; this was the first time that United States Steel Corporation had disposed of a plant to a competitor.
During the war, Wheeling produced steel planking for portable airplane landing strips and fins for various bombs produced by the Allies. In 1948, as the construction industry began to shift from wood-based to steel-based structures, Wheeling began manufacturing products for the non-residential construction market.
A $200 million expansion program undertaken in 1962 and completed in 1966 modernized Wheeling's plant capabilities--but not without a painful price. In 1966 the overextended company found itself with an operating loss of $15,763,000, despite all-time record sales of $293,182,000 on recorded shipments of 1,665,000 tons. Wheeling faced a financial crisis in cash and liquidity. Commitments for further capital expenditures, without the resources to pay for them, threatened to critically undermine the entire company.
Facing this financial impasse, Wheeling looked to pull itself out of the crisis by merging with Pittsburgh Steel Company on December 5, 1968. Pittsburgh Steel, then the 16th largest steel producer, was interested in combining forces with a larger company. Founded in 1901 with facilities along the Monongahela River some 30 miles southeast of Pittsburgh, Pittsburgh Steel was at that point a small independent steelmaker with a limited product mix. During 1966 and 1967 it had produced about 2.1 million tons of raw steel a year and shipped a little less than 1.6 million tons of finished steel products. Combining forces with Wheeling would create a new company, representing the ninth largest steelmaker, with a finished capacity of more than three million tons. Meanwhile, Pittsburgh Steel had finished 1967 with a profit of $2.2 million, but had finished the previous year with a loss of close to $2.0 million.
The merger made Wheeling a stronger competitor with upgraded facilities and a more balanced product line. Wheeling's product mix was heavily based on flat-rolled products while Pittsburgh leaned towards metal-coated sheet specialty items. There were many obvious advantages to the partnership. Still, industry analysts realistically noted that both parties brought shaky economic prospects to this corporate union.
The new company began on an upbeat note. Sales volume for the two companies doubled from $505 million in 1968 to $1,037 million in 1974. However, capital expenditures continued to rise as Wheeling-Pittsburgh undertook a massive program to maintain and modernize existing facilities from raw materials through coke ovens, iron, and steel making, to production of finished products. And there was a new added expense: the increasingly formidable cost of installing new technology for environmental quality control. In 1974 and 1975, capital expenditures reached $115 million, more than double the outlay during the previous five year period.
In 1978 Dennis J. Carney, regarded as one of the most aggressive and controversial executives in U.S. steel history, became chairman of Wheeling-Pittsburgh and the company entered a dramatic new era. The company had fallen prey to erratic earnings; after the strong showing in 1974, sales volume declined to $827 million in the recession of 1975, and the following years were hardly more encouraging. Despite the marshalling of their resources, the combined efforts of both Wheeling and Pittsburgh still lay claim to an unimpressive three percent market share. And, despite prior efforts at upgrading and modernizing equipment, Wheeling-Pittsburgh continued to lag behind many of the other major steel producers in its technology.
But once again the problems faced by Wheeling-Pittsburgh were not unique to the company. The golden age of American steelmaking was over. All of the giant steel companies were feeling the pinch as supply continued to exceed demand and high labor costs and growing competition from abroad further undermined profit margins. Foreign producers were starting to land steel in the U.S. at prices lower than steel turned out in American mills; by 1984 they had captured one-quarter of all steel sold in the U.S. During that year President Reagan instituted voluntary restraint agreements, holding imports down to 20 percent of U.S. consumption. The daunting cost of modernizing steel plants was another challenge faced by most of the U.S. steel makers, who were still operating with outmoded equipment. The 1980s proved a particularly grim decade. More than 400 mills closed, an estimated 200,000 steel workers lost their jobs, and numerous steel companies bailed out into bankruptcy as the industry limped through the decade.
Carney's solution to the problems faced by Wheeling-Pittsburgh was to embark on an ambitious renovation program, financed through the company's largest capital-spending program ever. Unfortunately, the rate of long term debt far outpaced revenues as the industry entered the doldrums of the 1980s. In 1981, its net sales were $1.1 million while long-term debt stood at more than $300,000; the list of corporate creditors, an impressive roster of leading banks and insurance companies, was becoming voluminous. From 1979 to 1984 the company spent over $563 million on improvements. However, Wheeling-Pitt's losses during 1982, 1983, and 1984 alone totalled more than $172 million. At the same time, Carney was able to aggressively cut overhead and personnel costs. But his cost-cutting soon put him on a collision course with the United Steel Workers Union (USW).
During this difficult period, Carney had twice managed to persuade the USW representatives at Wheeling-Pitt to help the company by granting wage concessions in excess of $150 million. Late in 1984 Carney approached the union again but this time they balked, claiming that it was the creditors' turn to help the company. Wheeling-Pittsburgh's creditors were unwilling to shoulder the burden of bailing out the company, unless the USW agreed to cooperate.
Negotiations between the USW, Wheeling-Pittsburgh's creditors, and Carney and other top management officials eventually broke down. On April 16, 1985, Wheeling-Pittsburgh filed for Chapter 11 bankruptcy. At that point, the company was saddled with $44 million in debt against negative equity of $99 million and was unable to meet even its minimum pension funding obligations.
At the same time, the company petitioned the bankruptcy court for permission to cancel existing labor agreements and unilaterally lower wages. Several major companies, most notably Texas Air and Wilson Foods, had gone into bankruptcy proceedings in the 1980s while asking the court's permission to overturn existing contract agreements. In the case of Wheeling-Pitt, the court ruled in favor of the steelmaker.
Top management went back to the union proposing a wage and benefit rate of $17.50 per hour, down from the existing $21.40 rate. The union held their position that they would not go any lower than $18.50; furthermore, Wheeling-Pittsburgh declared that they would not be able to make a $5 million pension fund payment due at the end of July. It was at this point, with the company in bankruptcy court and a very real possibility of liquidation looming in the near future, that 8,500 steelworkers at Wheeling-Pittsburgh went on strike. The date of the walkout was July 21, 1985, and the strike received wide attention--and not only in the business community--since it was the first major strike in the steel industry in 26 years.
The strike also threw into bold relief the problems surrounding the industry. The walkout was a crucial test of the power of angry steel workers to maintain minimum wage standards in an industry that was desperate to cut costs. The bankruptcy and strike also spotlighted the controversial power of bankruptcy courts to void union contracts. Finally, the strike was anxiously monitored by steel company executives who feared that it could be the harbinger of a wave of strikes in this increasingly unstable industry.
To the distress of Wheeling-Pittsburgh's creditors and executives, the strike dragged on for almost three months. It was finally settled on October 15, 1985. Under an unusual arrangement, mill workers received a new contract with an hourly wage of $18, but they would actually continue to receive $20.33 an hour in wages and benefits. The discrepancy arose from the termination of the company's pension plans. The responsibility of meeting pension obligations was transferred from the company to the Pension Benefit Guaranty Corporation (PBGC), a federal agency that insures retirement plans. The union agreed to eliminate six hundred jobs, but won a significant voice in managing the company. The union now had the right to nominate a candidate for the board of directors and could also set up an eight-person Joint Strategic Decision Board, composed of union and management representatives, to discuss issues relating to the workers and business operation of the company.
Finally, the union helped put an abrupt end to the autocratic reign of Dennis Carney. Shortly before the settlement, Carney was asked to resign; it had become painfully obvious to company executives that the USW would not settle as long as he stayed in charge. Carney was asked to resign by Allen E. Paulson, chairman of Gulfstream Aerospace, the owner of 34 percent of Wheeling-Pitt common stock, and a principal player in the drama that was playing itself out.
While Carney left behind a controversial legacy, he did help create an important joint venture between Wheeling-Pittsburgh and Nisshin Steel Corporation. Launched in February of 1984, the Japanese firm of Nisshin Steel gained a ten percent interest in Wheeling-Pittsburgh, while Wheeling-Pittsburgh invested approximately $10 million in the Japanese steelmaker's stock. As a result of the agreement, a $40 million production line pro-ducing rust-resistant galvanized steel for the auto industry was constructed at one of Wheeling-Pittsburgh's existing plants.
The second part of the 1980s were spent under the shadow of bankruptcy as creditors and the courts worked out a reorganization plan agreeable to all parties. Under bankruptcy law protection, Wheeling-Pittsburgh was not required to pay interest on most of its debt and no longer had to worry about fulfilling pension obligations. Meanwhile, the company saw steady growth in its net sales during this period, with 1989 distinguishing itself as the second most profitable year since the two companies merged in 1968. Net sales that year were more than $1.14 million, while operating costs increased 8.7 percent, due in part to higher prices for raw materials. On January 3, 1991, five years and eight months after filing for bankruptcy, Wheeling-Pittsburgh emerged out of the court's hands.
Under the reorganization plan, the pre-Chapter 11 balance sheet of some $1.1 billion in liabilities was wiped clean. The newly-reorganized company was limited to no more than $340 million in new borrowings. The majority of its debt was reconstituted in the form of a seven year $445 million secured note. Wheeling-Pittsburgh Steel was now a subsidiary of a holding company, Wheeling-Pittsburgh Corporation. Despite the hobbling influence of the serious recession affecting the steel industry, Wheeling-Pitt emerged in its first year out of Chapter 11 as the only American integrated steel producer to record a profit ($4.7 million).
Principal Subsidiaries: Consumers Mining Co.; Mingo Oxygen Co.; Monessen Southwestern Ry Co.; Pittsburgh-Canfield Corp.; Wheeling-Empire Co.; Fort Duquesne Coal Co.; Wheeling-Pittsburgh Steel Corp.; WPC Land Co.; Pittsburgh Steel Products Co.
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