Labor-Management Case Study
Mittal
Steel USA - Cleve
land
and
the
Written by the
Northeast
Ohio Center for Labor Management Cooperation
at
Work
in Northeast Ohio Council
(WINOC)
for 
with support from the
Ohio Labor-Management Cooperation Program
of the
Case
Study
on
Background
The Mittal Steel USA – Cleveland facility was once the home base for Republic Steel Co., employing over 7,000 workers, and a major facility of Jones & Laughlin Steel Co. These two merged in 1984 to form LTV Steel Co. In December, 2001, it was shut down due to LTV’s bankruptcy. While there was little hope at the time that the Cleveland facility would ever start up again, the workers took pride and extra care in the facility shutdown because they were hopeful a new owner could be found.
LTV was a traditionally run manufacturing company of that era with internal challenges that affected quality, productivity and profitability. Labor relations were very formal and followed the extensive and complex labor contract. The culture was autocratic and lacked employee involvement in decision making. There was little trust between management and labor.
In spring of 2002, International Steel Group Inc. (ISG) was formed by Wilbur Ross (an investor and bankruptcy expert) and Rodney Mott (an ex-Nucor Steel and U.S. Steel executive). Mott had experience with a high-level, self-directed work environment and wanted ISG to be a low-cost, high-productivity producer. The Cleveland facility was ISG’s first acquisition.
Today, Mittal Steel USA – Cleveland is one of the most productive steel mills in the United States with the workforce of 1,500 producing 3.6 million tons of product per year.
Mott was determined to create a new corporate culture at ISG that focused on trust and respect of employees; and in-turn, produced more accountability. He established good relations with the United Steelworkers of America (USWA) international union and worked closely with the local union leadership, headed by president Mark Granakis. The new labor agreement was brief and to the point. It encouraged employee involvement and flexibility. It reduced job classifications from more than 30 to just five. Most importantly, it gave workers a stake in their company with profit sharing and productivity bonuses and empowered them with a share in the decision making of how the facility should be operated.
Employees were brought back from the LTV lay-off list, but they were informed that a totally new culture was being formed by ISG. Some did not like the changes and volunteered not to stay.
The first department to be reactivated was the Hot Strip Mill under Bill Brake (and later Joe Palmer). Since it had an inventory of cast slabs from LTV, it could roll product that was immediately saleable. The generation of revenue enabled the new ISG company to help fund the start up of steel production.
The Hot Strip Mill (HSM) was therefore the pilot group for the new self-directed way of operating. More on this will be provided later in this case study.
In December 2004, Ispat International merged with LNM Holdings to form Mittal Steel Company N.V., a Rotterdam-based company. In April 2005, ISG merged with Mittal Steel to form the world’s largest steel company. In its three years of operation, ISG had grown beyond the LTV purchase by also acquiring Bethlehem Steel Co., Acme Steel Company, Georgetown Steel Company and Weirton Steel Co.
The Mittal Steel USA – Cleveland facility produces 3.6 million tons per year of flat-rolled steel for the automotive, service center, converter and plate markets. In 2004, Mittal Steel USA – Cleveland shipped 3.62 million tons of steel on $1.8 billion total sales. Mittal Steel USA – Cleveland is the industry leader in person-hours per shipped ton at 1.05. The plant has a total work force of 1,536 people, 279 management and 1,257 United Steelworkers from Local 979.
Company Culture/Mission
The
changes made at Mittal Steel USA – Cleveland are reflected in its
mission statement.
“Mittal
USA – Cleveland will provide quality products and services that excite
our customers and exceed their expectations.
Our objective is to be the preferred supplier to all customers.
We are committed to continually improve our quality systems,
process and product capabilities, and create customer delight through the
efforts of all employees working as a team.
Our name will signify reliability and quality to all customers who
use our products.”
The
company has an open and cooperative culture built on trust and respect. Issues are brought out in the open, discussed and mutually
resolved. “Cultural
Forums” are held to coach employees on the changes.
Global Challenges
Now that Mittal Steel USA – Cleveland is part of an international company, it faces new challenges from developing countries such as China and Poland. While labor costs in these developing countries are significantly lower than those in the United States, their technology and productivity are lagging.
The key challenges facing Mittal Steel USA – Cleveland are the price and availability of raw materials, the threat of low-cost imports from China, both as raw steel and finished goods, and rising energy costs.
The Cleveland plant is the most productive in the United States, with its 1,500 employees operating with a very flat organization. Salaried employees are now busy solving problems rather than just supervising. Hourly employees are empowered to make many decisions themselves.
Labor and management teams exist throughout the steel mill, handling many issues previously done only by supervision.
Knowledge Transfer
Mittal Steel Co. is noted for its ability to transfer technology throughout its companies. Cleveland workers are participating on Knowledge Management Practices (KMP) Teams and are benchmarking best practices throughout Mittal Steel worldwide. In addition to visiting other plants, team members communicate weekly through e-mails and conference calls. Site general managers throughout Mittal Steel communicate every Tuesday in an extensive conference call.
Enhanced
Labor Relations
The company’s relationship with the USWA is highly participative and communicative. There is a feeling of trust and candor in every decision. The plant has no time clocks, employees self-report their time. There is limited supervision, especially on “off” shifts, and the steelworkers truly are responsible for the operation. The steelworkers participate in every business decision. Trust is the biggest part of how they do business. Safety and production issues are addressed daily as well as a constantly forward-looking view of the business picture to see how to run the plant better.
Mittal Steel USA – Cleveland has only one local USWA union, rather than four as in the LTV days. A high level of trust and respect exists between the union and company leadership.
The site leadership from both management and the USWA Local 979 are in constant communication, dealing with concerns at the initial stages. The union leadership understands business conditions, and Terry Fedor, the site general manager, came up through the ranks and has a good reputation among employees. There are several labor and management teams that address planning, improvements, and employee development. Team members share responsibility. Employees in general like coming to work.
The
grievance level is almost non-existent with only four formal grievances
having been filed within the past two years compared to hundreds and
sometimes thousands filed under the old regimes.
Employee
Development
There are numerous relationship-building forums and classes, communicating skill classes, and most recently the technique of Appreciative Inquiry where one-on-one interviews are conducted with every employee, both hourly and salaried.
Lorain County Community College (LCCC) was contacted by the Cleveland facility in summer of 2004 to help it implement self-directed work teams at the Hot Strip Mill (HSM) in Cleveland. The project goal was to transform the HSM maintenance process to optimize human capital. Everyone involved in the process needed to be productive. The use of self-directed work teams (SDWT) helps break down common organizational barriers such as communication. As they progress in this project, the maintenance organization and management teams realize they need to incorporate the operations people into the process to make it truly cross-functional. They are in the initial stages of making the HSM a cross-functional unit, as well as driving ownership of the process to the front lines.
When LCCC entered the project, Mittal Steel USA had already formed a Development Team from the maintenance organization. This team included union members and leadership, and management people. This team was responsible for setting up the process, identifying a vision and operating philosophies, which were all tied to the corporate goals of Mittal Steel USA. LCCC has helped develop a transitional plan for the teams, moving them from a traditional “directive” role of management to a self-direction by training and coaching the individual teams through our process. Each SDWT has developed goals to accomplish with metrics attached to each goal. Since early April, they have expanded this process into the operations side of the HSM.
A critical piece of this project was to transition the reliability engineers from a traditional supervisory role to a coaching role for the teams. They are working with a team and are developing tasks, which are being delegated to the individuals on the team. Each reliability engineer will then become responsible for the strategic goals of the maintenance organization continually pushing for improvement in the maintaining of the equipment. LCCC is also assisting Mittal Steel USA with the creation of new systems for data collection, identifying critical failures in the equipment and creating new systems, which will allow the maintenance schedule of the equipment to be optimized.
Many benefits have resulted from this change. Improved communication among all areas of the mill tops the list. Front-line people are communicating cross functionally with other front-line people to make improvements. Union and management have continued their positive interactions and problem solving. They have had each team generate ideas for projects which will help Mittal Steel USA accomplish its goals. The teams develop action plans, do the research, and implement solutions for these projects. As they continue, they expect to see a new climate of working together, decision-making, and improved operations due to this self-directed work team process at the HSM of Mittal Steel USA.
Initial
Results
They are currently converting their idled Continuous Annealing Facility to a Hot-Dipped Galvanizing line capable of making exposed automotive-quality steel. They have completed a profile, shape and gage upgrade for the 84-inch Hot Strip Mill, and are developing an inventory tracking process for their steel shop. They are currently in the process of rebuilding two blast furnaces to prolong lining life for a total investment of about $75 million.
The HSM Self-directed Work Teams continue to show progress. While the mill is already very productive, they are working on continual improvement.
Delay rates have been reduced significantly, and in turn costs have gone down. Profit sharing bonuses are being realized. Profits for Cleveland are second only to Burns Harbor Indiana (a larger and more modern operation).
Overall
improved morale, for both salary and hourly workers is evident.
Increased cooperation, a partnership between all to work together
toward common goals of safety, productivity, and an all-around improved
quality of work-life exists.
Lessons
Learned
-
Union leadership is more knowledgeable and can answer employee questions.
-
A high level of communication to the workforce keeps good and bad news in perspective.
-
A self-directed workforce has flexibility in work assignments.
-
Supervision must go through a transition in leadership style for a self-directed plant.
-
They try to make most decisions at the shop floor.
-
Improved employee-working conditions (i.e. parking in-close) are realized.
(330) 725-4885
Fax (330) 721-2933
For more information please contact us.
© 2006 WINOC - All Rights Reserved