Sale of mill sparks fears
Employees may have to wait weeks to get details on the new owner's wage and benefits package.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- Workers at North Star Steel's pipe mill are a little worried about how they'll be affected as a new owner takes over the plant, but a longtime manager said he's confident the Texas buyer will take good care of them.
Lone Star Technologies, a Dallas steel pipe and tube producer, plans to pay $430 million for North Star's Tubular Division, which includes the plant on Martin Luther King Boulevard here and a pipe processing mill in Houston.
"They're apprehensive. There are a lot of unknowns," said Jim Cowan, general manager of North Star's pipe mills here and Houston. "But I think Lone Star knows it has a world class work force here, and it knows it's going to have to continue paying good wages if it wants to keep them."
He said the average employee at the nonunion shop now earns about $60,000 a year, including profit sharing, overtime wages and performance bonuses.
"Because we're not a union shop, we re-evaluate our wages every year," Cowan said. "I think our people have had raises every year for seven or eight years in a row, and deservedly so." He noted that North Star hourly workers have rejected representation by the United Steel Workers of America five times since 1989, most recently in April 2000.
Lone Star has one union plant -- workers at its Lone Star Steel mill in Dallas are represented by USWA -- but its two other steel tube plants are not unionized.
Cowan said managers began meeting with employees Thursday evening, minutes after the acquisition became public, and meetings continued with each shift Friday.
Plans: Lone Star has said it plans no management or work force changes, so Cowan said he expects the plant's 425-employee work force to remain intact. The mill also provides employment for about 150 contract workers.
He said he's leaving North Star's parent company, Minneapolis-based Cargill Inc., to accept a management job with the new plant owner. Cowan is a 22-year Cargill veteran.
"Do I expect a lot of changes? No," he said. "I think there will be very, very little impact because what we do, they don't do. We have a different customer base."
Products: Lone Star, which produces welded steel tubes for the oil and electrical industries, does not have the capacity to produce the seamless tubes that are the Youngstown plant's specialty. Seamless pipes are stronger, Cowan explained, and are needed for deep underwater drilling.
Lone Star also needs North Star's marketing department, he said, which is based at the Houston plant. The company has said that it wants to buy the two North Star mills to expand its product range.
Cowan said managers probably won't learn for several weeks how Lone Star's salary and benefits packages will compare to what North Star employees now receive, and those changes won't take effect until the acquisition becomes final, probably in the fourth quarter.
The Youngstown tube mill had been idle for more than a year and a half when Cargill bought it from Hunt Energy Co. in 1985 for $22.5 million.
Since then Cargill has invested more than $200 million on the plant, Cowan said, including a $30 million expansion and modernization project completed last year.
Cargill is not selling six other steel mills in Michigan, Kentucky, Minnesota, Arizona and Iowa which are also a part of its North Star Division.
Those plants produce flat-rolled steel, steel rods and steel bars, and have been struggling like most other steel producers because of the slowing economy and competition from cheap steel imports.
Doing well: Cowan said North Star's Tubular Division and Lone Star are both doing well because they serve the booming gas and oil well industry.
Lone Star Technologies reported a third straight record-quarter in July, with profits of $16.3 million, up 22 percent from the previous quarter. The publicly held company's stock is traded on the New York Stock Exchange under the LSS symbol.
North Star's Tubular Division had profits of $45.3 million on sales of $328.6 million for the fiscal year ended May 31. Cargill is privately held and generally doesn't release details about division finances, but it released the tubular division figures in conjunction with announcing the sale.
Cowan said Lone Star is a little larger than Maverick Tube Co., a St. Louis company that was also bidding for the tubular division.
Lone Star has been looking for acquisitions and bought two other plants last year, Fintube Technologies in Tulsa, Okla., and Bellville Tube in Bellville, Texas. Cowan said the North Star acquisition will likely make Lone Star one of the 1,000 largest companies in the country.