The Russians are coming!

WCI Steel has foreign owner

By LARRY RINGLER Tribune Chronicle
WARREN -- WCI Steel Inc., the little steel mill that refuses to die, is poised for yet another life, this time with a foreign owner.

Russia-based OAO Severstal said Friday it has reached a binding agreement to buy WCI for $370 million, adding the company to a growing family that includes some of Americaás legendary steelmaking names.

Severstal said the deal has the "full support" of the United Steelworkers, which represents 1,100 workers at the last remaining integrated steel mill in the former Steel Valley of Trumbull and Mahoning counties and smallest such mill in the nation.

Gregory Mason, chief executive officer of Severstal International and chief operating officer of OAO Severstal, said in a statement the addition of WCI will "enhance our custom product capabilities and create opportunities to increase profitability in both the short- and long-term."

Workers should be optimistic about the future, although with a keen focus on the bottom line, WCIás president and chief executive officer said.

"It creates opportunities for employees," Leonard M. Anthony said, "but at the end of the day it has to be profitable and it has to be successful. That's the only way to attract capital."

USW Local 1375 President Ed Machingo said in a statement that heás optimistic Severstal will "move this company forward and attempt to work through some of the issues where we as a membership have met with resistance."

Targeted for completion in the July-September quarter, the deal positions WCI for $100 million-plus in capital improvement over five years to help maintain and grow production, spokesmen said.

Machingo added he thinks the company will have to hire to handle the growth

"If they expand our output, I donát see how we do it with existing people. Weáll have to (hire.) Thatás a good problem to have," he said.

Severstal spokesman Michael Henson confirmed the new owners have plans to put money into major improvements ä the iron-making blast furnace is due for a reline in 2011 ä and to boost output, but said he couldnát speak to any hiring.

WCI's ability to fill a wide variety of small, custom steel orders is expected to fit well with Severstalás range of flat-rolled steel products, while Severstalás long-term contracts with iron ore, coke and other raw material suppliers will help support WCI operations, leaders said.

Machingo said WCI is probably the narrowest mill of the group, referring to WCI's ability to roll flat steel up to 56 inches wide. He said Rouge Steel in Dearborn can go into the 60-inch wide range, while Sparrow Point may go 70 inches to 80 inches wide.

Different widths are used in different markets, such as automotive, appliances and pipe.

"When you put the three mills together, it really diversifies what they can do," he said.

WCI has been hurt by surging prices for coke, iron ore and other raw materials needed to produce iron and steel. Severstal has long-term contracts for those ingredients, Henson said.

The acquisition would put WCI into a historic group that includes Rouge Steel, the Dearborn, Mich., mill that automotive giant Henry Ford built in 1928 to make steel for his fledgling car company.

Severstal on May 7 bought Sparrow's Point Works in Baltimore, which American steel giant Bethlehem Steel opened in 1890 and which grew into the world's largest steel works in the 1950s with 31,000 workers. Bethlehem disappeared in bankruptcy in 2003.

Russia's largest steelmaker also in recent years launched a new minimill, Severcorr, in Mississippi.

Machingo said he was glad WCI -- a survivor of former owner LTV Corp.ás bankruptcy in 1986 and its own bankruptcy in 2003 -- is shedding its independent status and becoming part of a group.

"We've been a standalone company since 1987 and I donát know how we made it this long. Standalone is unheard of," he said.

WCI has suffered a string of accidents at the mill in the past year, the most serious being a fire Nov. 9 that shut its blast furnace for three weeks.

The company, which is owned by investment fund Harbinger Capital Partners Master Fund I Ltd., lost $16.8 million in the first half of 2007 but hasn't reported its financials since June 30.

Machingo said Severstalás chief executive officer is scheduled to visit the union hall on North Park Avenue Wednesday, he said.