Lockout at AK Steel puts town on the outs
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MIDDLETOWN, Ohio -- The lockout at AK Steel's Middletown Works, which entered its eighth month Sunday, isn't just a battle between a company and its union workers.
The effects of the lockout, which already has resulted in the loss of hundreds of jobs, are spreading across the community, home to steelmaking for more than a century.
Small businesses are feeling the hurt, and the city government faces cutbacks in police and firefighters.
Like other industrial towns that have been hurt by plant reductions or closings in recent years, Middletown has been struggling financially and voters are being asked next month to approve an increase in the city income tax.
"Overall, revenue is down about $500,000 compared with the same time last year," City Manager Bill Becker said. "That's not all because of AK; we lost a major construction business last year. We've been losing revenue for several years."
Mr. Becker knows the tax increase -- from 1.5 percent to 2.25 percent -- will be a hard sell with people already feeling the ripple effect of the lockout.
It was necessary before the lockout, and even more vital now, he said.
"We've made cuts across the board," he said.
"We don't pick up people's leaves anymore, and we haven't opened our swimming pools in two years. A lot of these decisions aren't popular, but they have kept the city solvent."
The city remains optimistic in the future as it remakes its economy, but the AK standoff hangs over it. Hopes for a settlement rose when union workers took a vote on a company contract proposal about a week ago. But they rejected it.
AK Steel locked out more than 2,500 hourly production and maintenance workers when their contract expired at midnight, Feb. 28. It has continued to run the mill with about 1,800 replacement workers and salaried personnel. Retirements and resignations have brought the number of union workers down to about 1,900.
AK Steel also has six other plants, including one in Butler that has 1,400 production and maintenance workers represented by the United Auto Workers.
The company says it needs a contract that wipes out a $40-a-ton competitive disadvantage it attributes to legacy costs. It has been adamant that it must eliminate work force guarantees, increase flexibility in assigning jobs, pass on some of its health-care insurance costs, and convert its pension plan to a 401(k) type.
Middletown, a city of about 53,000 about 30 miles north of Cincinnati, once was indisputably a company town, where the American Rolling Mill Co. -- later Armco and then AK Steel -- was founded in 1900 and generations of workers took coveted jobs right out of high school and spent their entire working lives in the mill.
Now AK Steel is fighting to survive as a small player in an increasingly global steel industry, and its union work force gave up its independence in July to affiliate with the Machinists.
Mr. Becker has seen AK Steel's impact on the community since he became a police officer in the 1970s, when a larger corporate office and facilities that no longer exist had swelled employment at the company to about 7,500.
"Even now, you can't talk to anybody in Middletown that isn't impacted by the lockout," he said.
Most locked-out workers say they have pared back substantially on optional spending, such as eating out, and some small restaurants say their business is off by 50 percent or more. Unemployment benefits ended after six months.
Union members say some have lost cars, homes and even marriages because of the lockout's financial pressure.
A veteran of the local real estate market says it's holding up.
"It's not been as bad as one might think," said John Sawyer, the third generation to run Sawyer Realtors. Values are holding well, but houses tend to be on the market longer, he said.
Bob Smith, owner of Score Chrysler, Dodge and Jeep in Middletown, said car sales reflect economic conditions nationwide.
"To say my sales may be affected because of AK would be unfair," he said. "I think the public in general is overextended."
The United States produced just 9 percent of the world's steel last year, compared with 12 percent in 1996, while China's share has jumped from 13 percent to 33 percent, according to the International Iron and Steel Institute. AK Steel, with revenues of about $6 billion a year, does not rank among the top 30 producers.
But analysts say if AK can overcome its labor issues, it can thrive because it makes high-quality coated and stainless steels that are being consumed faster than other types. The steels are used in cars and appliances.
Middletown's leaders say the city will recover from the lockout's effects by remaking its image as an old-line manufacturing city of paper and steel mills.
A planned $200 million medical complex will be the city's biggest employer in a few years, Mr. Becker said. That and Middletown's location on Interstate 75, about midway between Cincinnati and Dayton, give the city good growth potential.
"It's all going to be one big city soon," Mr. Becker said. "The future is bright for Middletown."
First Published October 4, 2006 12:00 am