Here is a different perspective on GST Steel, the closure of the Kansas City plant and Bain Capital. First, I’ll share a brief history and the sequence of events that led to the closure of the Kansas City steel mill.
What was once a blacksmith shop in the pioneer years of Kansas City grew to become Kansas City Bolt and Nut Co. in 1888 and later Sheffield Steel Corp. in 1925. The company was billed as “the Department Store of the Steel Industry with a more diversified line of products than any mill in the country.”
The Sheffield complex was located near the confluence of the Missouri River and the Blue River in the Northeast Industrial District of Kansas City. During this same period, about 1918, Black Steel and Wire Co. was reorganized as Union Wire Rope Corp. and located on Manchester Road bordering the Blue River close to the Sheffield rod mill. Their close business relationship was further enhanced when Armco Steel purchased Sheffield Steel in 1930 at the beginning of the Great Depression.
Both Armco and Union Wire Rope survived the depression, expanding and growing during World War II and prospering during the early post-war years. Union purchased its rod requirements from Armco and produced wire and wire rope. It sold rope wire to Wire Rope Corp. in St. Joseph (since, in 1950, Wire Rope had moved to St. Joseph from New Haven, Conn., in order to be close to its primary wire supplier).
The steel industry emerged from World War II with overcapacity and with outdated and exhausted equipment in need of replacement and modernization. All the mills were scrambling for tonnage volume to survive. The post-war, pent-up demand carried most industries, including steel, well into the late 1960s and early 1970s. There were numerous mergers, acquisitions and consolidations — a general rationalization of the domestic steel industry.
In this highly competitive domestic manufacturing environment, the United States government entered into several significant general agreements on tariffs and trade, or GATT Agreements, with our so-called “trading partners.” In the subsequent years a domino effect took place in the steel industry.
The first to fall to imports were the West Coast manufacturers. Then low-carbon products like barbed wire, fencing and rebar. The new rebuilt, technically advanced mills in Europe and Japan came on line with the complete package of steel products. The Marshall Plan for recovery abroad after WWII was a brilliant political and economic success financed with our money. The enforcement of fair trade laws was a complete failure and a cruel joke for manufacturers.
Steel products were “dumped” in the U.S. market, sold below the price they would be sold in their home market, in order to get these products established in the U.S. market. Often foreign governments either directly or indirectly subsidized their steel manufacturers. Once established in the U.S. market, the volume of imports grew, enabling the maintenance of a ruinous competitive price advantage over American producers. The price levels often were at or below U.S. manufacturing cost. This unfair competition forced the further realignment of the U.S. domestic steel industry.
Over two decades the Armco Sheffield plant became a ghost of its former self. The “Department Store of the Steel Industry” that had employed 4,500 was reduced to a rod mill with fewer than 1,000 employees. Steel companies either sold their fabrication shops and manufacturing divisions or closed them, as was the case with Armco’s Sheffield plant. That included the sale of Union Wire Rope in 1988. Five years later with Armco under growing financial pressure, the announcement came that the rod mill would be closed if no buyer could be found.
Bain Capital became the “white knight.” In 1993 GS Technologies, a Bain steel investment, purchased the Sheffield plant from Armco. Bain Capital’s investors were private, pension funds, charitable foundations, and university endowments … and their investment was $170 million in upgrades to the Sheffield rod mill.
These improvements kept the rod mill open for the next eight years, but the domestic volume of rod sales under growing import competition could not support both the GS Technologies mill in Georgetown, S.C., and the mill in Kansas City. Bain Capital had tried with a massive investment and modernization of the Kansas City plant, but success simply was not possible. The Sheffield plant was closed in an effort to save the larger Georgetown plant. Kansas City no longer could boast of having “the Department Store of the Steel Industry” or any steel mill.
The realignment of the steel industry during the mid-1990s and into the 21st century continued with the closure of 31 other steel companies and numerous ancillary operations that both supported and depended on the steel industry. You may recall the pundits said the United States was moving from a manufacturing-based economy to a service economy. And how has that benefited America’s middle class? Those trade agreements without proper oversight resulted in the loss of thousands of good-paying, middle class, blue collar manufacturing jobs.
Now stop and think about it: Those jobs had many benefits. They paid for good housing, furnishings and appliances, but most important they paid for the education of our young people. Those jobs were primarily lifetime career jobs. They were the critical base revenue for many local and state governments. Just ask the people of Youngstown or Cleveland, Ohio, of Buffalo, N.Y., Pittsburgh, Pa., Trenton, N.J., or Fontana, Calif. I seriously doubt that the service jobs in America today can possibly match the plethora of direct and indirect benefits of those manufacturing jobs of the middle class that have been lost.
The sad news is that here we are, and here we will remain until we can regain those middle class, blue collar manufacturing jobs. They were the strength of America. Given fair trade as well as free trade, the level playing field, our middle class can be rebuilt. But we need a government that has the will to enforce fair trade laws and enlists the various industry representatives to assist in the negotiations of our trade agreements, which has been the successful practice of our “trading partners.”
John P. “Jack” Barclay Jr. of St. Joseph is the former president and chief executive officer of Wire Rope Corporation of America. Mr. Barclay retired in 2002.