The mill might make steel, but the people don’t: The path from John Henry to Wilbur Ross

2018-04-18T08:41:21+00:00 April 5th, 2018|

By Michael Broida

The trade war has begun: China announced up to $50 billion of tariffs on U.S. products yesterday — an unsurprising response to President Donald Trump’s March 22nd declaration that the U.S. would move to impose $60 billion of tariffs on Chinese steel and aluminum. You could say this was one of the many calamitous outcomes of a fluke election, but I’d argue that it was the culmination of a slower-moving calamity that started nearly two decades ago in a Youngstown bankruptcy court. And the first bad outcome was for the City of Cleveland.

During the final days of the year 2000, and into the following months, it was hard to imagine the lingering effects and repercussions of such a bankruptcy as it swept through Cleveland with a certain doom. The great, flaming smokestack — burning in the heart of the city and its river valley — sputtered to a thin wisp and threatened to vanish altogether. The steel mill’s bankruptcy echoed as a spiritual death knell for a city that had made this metal its lifeblood for nearly 90 years. All of the city’s mounting, Rust Belt woes seemed as if they had bubbled over when the federal court gave its decree: The mill would be kept hot for 60 days, for a potential buyer, before the whole thing would be scrapped and sold for parts.

If you’re driving into town from the south, it’s hard not to see it — an oddity to anyone passing through: A steel mill never shows up as a hot tourist suggestion. Two days after the steel mill declared bankruptcy, The Plain Dealer described its forbidding and almost heartbreaking presence on the skyline like Cleveland’s “faded ‘Hollywood’ sign set in the California hills, the gritty smokestacks rising from the city’s industrial valley are a testament to the city’s golden industrial years. They also serve as a symbol of how little it has come in attracting a more stable service sector to round out its manufacturing-dependent economy.”

As the news about the impending trade war has grown more certain, I’ve started thinking increasingly about the steel mill, the presidential election, and those terrible days when it appeared that Cleveland might lose its flame.

It was as if the movie industry had suddenly closed up shop in LA due to a series of blockbuster flops and Bollywood imports: What could Los Angeles be without Tinsel Town? What was Cleveland without steel? The doom-saying prognostications nearly wrote themselves, as in Bloomberg’s retrospective a few years after the bankruptcy, describing how the mill stood as “a rusting monument to America’s industrial past … These days, the sprawling site, which spans both banks of the Cuyahoga River, is largely still.”

As a boy during those confusing days, I thought of learning in school about the legends of American folklore: Paul Bunyan and Pecos Bill, Davy Crockett and the Ohioan Johnny Appleseed. But none sparked the same amazement for me as John Henry, the mythical freed slave and steel-driver on the nascent C&O rail lines along the Big Bend Tunnel in West Virginia. He was the quintessential giant among men, who, when faced with the loss of his job at the hands of a new steam drill, challenged the steam drill to a race through the mountain where the men were laying track. Man versus machine — they plunged into the tunnel, and, according to the folk ballad by Johnny Cash, when a great shudder went through the mountain, John Henry, flashing in the darkness, called out: “That ain’t nothing but my hammer sucking wind.”

Perhaps what captivated me was the allure of him being a man of steel, just like we were in Cleveland — if of a different sort — or the heroics of the working man, or the horrors and fascinations of the machine. The “steam drill” stood as a fabrication so bland and menacing that for many years I didn’t realize that it was never a real device at all, there was no steam drill that banished those men. As with most folk tales, it was more complicated, more gradual than that — and what had our steam drill been? What menace had suddenly, it seemed, robbed the city of its great flame? The shudder was going through the mountain then, and we all hoped it was just a hammer, sucking wind.

***

As the news about the impending trade war has grown more certain, I’ve started thinking increasingly about the steel mill, the presidential election, and those terrible days when it appeared that Cleveland might lose its flame. It’s hard to escape how interconnected they’ve all become. After all, when Ohio went red during the last presidential election for the first time in 12 years, it signaled its bellwether victory for Donald Trump. Cleveland and its inner suburbs, situated in the heart of Cuyahoga County, have long been the core of the state’s Democratic party. The self-ascribed adage is that when Cuyahoga County turns out, Ohio runs blue. In a Rust Belt city, every four years this becomes a point of pride — that the whims of a few little ramshackle neighborhoods could help sway the fate of the nation. Cuyahoga County is Ohio’s most diverse county, only 59 percent of the population being white, and it offered roughly 450,000 reliable Democratic votes in the three presidential elections preceding 2016. Our one county amounts to about 15 percent of the votes needed to win the state and, thus, the most powerful office on the planet. (For Bush/Kerry, you’ll recall, Ohio was the 2004 version of 2000 Florida.) Yet, in 2016, Hillary Clinton only won 398,000 votes in Cuyahoga County, while Trump registered the lowest vote total for a Republican since Bob Dole in the three-way race of 1996. For months after the election, I was baffled — where had those 52,000 Democratic votes gone? Given the low vote totals for Trump, too, it did not seem as though they had been seduced at the ballot box by his populist message and his pledges to protect steel workers. So, why had Cuyahoga County not done its share, why had so many of us stayed home or wandered away?

Cuyahoga County amounts to about 15 percent of the votes needed to win Ohio and, thus, the most powerful office on the planet.

My parents first moved to Cleveland in 1987, settling in Slavic Village, the working-class neighborhood where I grew up, just east of the steel mill. The year before, Ling-Temco-Vought, known eventually as LTV Steel, declared bankruptcy for the first time, suffering under a sluggish economy and large pension payments. The result was a messy, seven-year-long court battle — the longest corporate bankruptcy in US history at the time — until the company emerged debt-free in 1993. Growing up, I knew LTV with the sort of disdain one has for a bad — if indispensable — uncle. They were routinely ranked as one of the most poorly managed companies in the country. They were bloated, corrupt, and nearly at a pitched battle with the labor union. The company had amassed seven layers of management with some 500 executives. Yet the steel mill, with its brilliant flame, was still like the city’s nightlight, as if knowing that it was still over our rooftops as a beacon of fresh-forged steel made us all sleep easier at night. After emerging from bankruptcy, despite being forced to consolidate to only its steel business, LTV still made a series of risky and poorly vetted downstream acquisitions, including a manufacturer of metal warehouses, the Welded Tube Co. of America, as well as Copperweld Corp. The aggressive expansion required $950 million in capital and forced the company to take on additional debt that could not have been timed more poorly: A glut of foreign imports caused the price of and demand for steel to plummet to 20-year lows that decimated American steelmaking. Between 1997 and 2001, two dozen steel companies declared bankruptcy, including LTV Steel.

Shortly after the Second World War, before LTV had come to own it, the steel mill had employed 30,000 people in Cleveland, and the city had boasted a population close to 1 million, earning itself the title of “The Sixth City.” Cleveland clocked in behind New York, Los Angeles, Chicago, Philadelphia, and Detroit in sheer size, a moniker that eventually stuck, only to turn into nothing short of a cruel joke. By the 2000 Census, the city had fallen to 33rd, nestled right between Las Vegas and Long Beach. Like the steel mill, the city itself felt squeezed between the unflinching invisible hands of demographics and globalization and automation, and where had its wealth gone? The steam drill had seemingly come in the night without anyone noticing, taking everything. It was as if we were all waking up some 40-odd years later to find the cupboards desolate and bare.

At the time of LTV’s second bankruptcy in the final days of 2000, it had shrunk to fourth largest steelmaker in the country and was bleeding at least a million dollars a day. After a year of bankruptcy proceedings, any restructuring appeared futile and the company sent nearly all 3,200 of its Cleveland employees home, save for a skeleton crew that could bank the blast furnaces, stoking them like a dying campfire. Blast furnaces and steelmaking machines have to maintain a minimum temperature — a steel mill that runs completely cold and dormant could become damaged beyond any possible restart. As The Plain Dealer noted near the end of 2001, “Until Dec. 19, the company can continue to seek loans that might keep it alive. Then the idling may continue for months while a buyer is sought. After that, the company has said, it will sell its equipment piecemeal.” As the newspaper reported a week later, LTV wanted to shut down as soon as possible, chopping up the city’s seven blast forges for what would only amount to scrap in a cruel, torturous process: “LTV was going to stop making steel within six days. First down would be the blast furnaces that combine ore and raw ingredients to form molten iron. After that would be the basic oxygen furnace, where the iron is combined with scrap to form molten steel. Last to go would be the caster, where molten steel is shaped into red-hot slabs, and the hot mill, where slabs are rolled into thin sheets. Idling the plant completely would eliminate 2,900 jobs and another 285 at LTV’s headquarters.”

Unspoken in all this was the flame, dimming without any ceremony, the smokestacks and the blast furnaces sitting lonesome and idle on the skyline, already seeming like a monument to failure and purposelessness. Eventually, the court decreed to a 60-day countdown before the ritual sundering.

***

Of course, the pain for the city during the LTV bankruptcy was much more than symbolic: In 2000, before declaring Chapter 11, the company was generating $13 million a year in taxes just for Cuyahoga County, with over half of that money going to Cleveland schools, like the one I was attending. When the company declared bankruptcy, it became delinquent on its taxes, too. At the time, The Plain Dealer reported that, given such a difficult market for domestic steel, no buyer would magically emerge to resurrect the stalled plant.

When Wilbur Ross emerged, riding in over the hills in a sort of real-world version of Deus Ex Machina, the citywide joy led us to overlook the capitalist superhero who couldn’t have been less of a corollary to John Henry.

It was nearly impossible to predict, then, how, that next November, the paper would run an article with the headline “Steel Savior.” When one did suddenly emerge, riding in over the hills in a sort of real-world version of Deus Ex Machina, the citywide joy led us to overlook the capitalist superhero who couldn’t have been less of a corollary to John Henry. In 2001, as the finality of LTV was sinking into The Sixth City, financier Wilbur Ross was still little known outside of the New York banking world. In those circles, he was considered “the king of bankruptcy,” known for buying up troubled companies and assets, and then sticking around long enough to work them into viable enterprises before reselling them. In some circles, investors like Ross are called “vulture capitalists” for the morose way they swoop in on a dying corporate animal, buy it for a fraction of its worth, and carve up any remaining valuable resources, making a profit as a glorified liquidator. In 2000, Ross founded WL Ross & Co. as a firm dedicated to just this purpose and, by February of 2002, he had LTV in his sights as the former steel giant was descending into oblivion. It was unknowable then, but it would be 16 years later when Ross, as Secretary of Commerce, would again and again push the Trump administration to protect the flagging US steel industry with a battery of foreign tariffs.

In the fall of 2002, during a secretive bidding process, Ross outstripped other carrion firms that were salivating over different parts of the LTV carcass. Ross wanted the whole mill for himself. He had hired Rodney Mott, a veteran steel executive from US Steel and Nucor Corp, to lead the effort. In an interview with Businessweek, several months after taking the reins of the Cleveland mill, in the fall of 2002, Ross attempted to spin the common conception of his vulture-like investment: “If we were a bird, it would be the phoenix, which rises from its own ashes. Because that’s what we try to do: add value and rejuvenate an otherwise hopeless situation.” The new firm, headquartered in Cleveland, would be called International Steel Group and, despite starting with neither steelworkers nor customers nor a plant that had operated in the past four months, by May of 2003, Cleveland was making steel again.  

The city was rapturous, with the local newspaper and nationally syndicated business magazines running hagiographic profiles of Ross and the efforts at ISG in the industrial valley. The industrial historian at Cleveland’s Western Reserve Historical Society said that, with Ross and Mott “the steel industry has a new set of cover boys, empire builders as closely identified with their company as a corporate logo.” It was as if they were the second coming of Andrew Carnegie. Soon after Ross initially closed his deal on the mill, an op-ed from The Plain Dealer noted the 3,000 jobs and the symbolic value of the mill was lost on no one, writing that “flames from the Cleveland Works may light the night sky yet again.” The deal, though, was not without consequence: For only $90 million in cash and $235 million in liabilities, Ross gained a steel mill valued at over $2.5 billion. By purchasing just the mill, and not LTV Steel itself, Ross was able to dump the weighty pension commitments that had helped to drag down LTV, shifting them instead to the government-run Pension Benefit Guaranty Corp., essentially a steep tax-payer subsidy for Ross’s sweet deal. With Ross now holding the keys to the kingdom, the United Steelworkers were nearly overjoyed to be held over a barrel by ISG — contracts were reworked with greater flexibility and a much leaner staff, hiring about 3,000 workers, less than half of the 7,500 LTV had previously employed during its own peak. Still, the threat of the dormant mill and our fear of its extinguished flame hung in all our minds. As poor and misguided as LTV’s mid-’90s buying spree had been, Ross’s timing couldn’t have been better: Soon after ISG incorporated, the George W. Bush administration tacked a 30 percent temporary tariff onto steel imports. In hindsight, Bush’s tariffs would be seen as futile and misguided: According to one study, the Bush-era steel tariffs caused American companies that use steel products to shed 200,000 jobs, more than exists in the entire steel industry. Soon, ISG’s Cleveland operation outpaced industry standards: where it once took 2.5 man-hours to make one ton of steel, ISG was able to do it at 1.5, a benchmark that was unheard of for that time.

According to lore, at the end of John Henry’s race against the steam drill, he emerged from the mountain victorious, hammer smoking with the effort, while the steam drill collapsed in destructive defeat. Yet the effort caused John Henry’s heart to fail, and he, too, collapsed, dying at the foot of the mountain he had just cleaved through. His sacrifice, as Christ-like and sacred as any, saved his family and his fellow workers, but I could never stop myself from wondering: Who really won the race? The railroad could build another steam drill, but there would never be another John Henry. How safe were they really, in the end? Had his efforts been in vain?

I could never stop myself from wondering: Who really won the race? The railroad could build another steam drill, but there would never be another John Henry.

The prestige, wealth, and self-worth of these steel-driving men seemed to evaporate before their very eyes, the sleeker, the faster, and the smarter the steam drill became. What race could there be now — what winner, besides the pummeling economic forces that drive the price of steel? Ohioans have had earned incomes, per-capita, below the national average for nearly 40 years. Maybe your car is a bit cheaper, maybe your refrigerator, too. Perhaps your produce is shipped on a lighter, more fuel-efficient truck built with Cleveland steel, the cumulative sacrifice of 30,000 jobs and good wages that once existed in our industrial river valley.

In 2005, Wilbur Ross sold his stake in ISG to Mittal Steel for $4.5 billion, making a profit over 12.5 times more than his initial investment, a handsome reward for the man who saved what was left of the manufacturing industry in Cleveland, the man who would become part of Donald Trump’s cabinet of billionaires as the Secretary of Commerce and help to launch a trade war.

***

By the time that Ross was confirmed as Commerce Secretary, much of the saint-like glow in the national media had morphed into an anti-capitalist ire. In 2017, a few days after Trump’s inauguration, Bloomberg described Ross as “the Simpsons moneybags C. Montgomery Burns. He has a taut, bald dome; squinting eyes behind rimless spectacles; and thin lips that, in conversation, can curl downward, as if he’s slightly displeased. It’s the mug of someone who’s been very sharp for a very long time.” On May 23 of that year, The Nation ran an article titled “Wilbur Ross Is a Disgrace to Himself and His Country.” David Dayen had already written for the magazine about Ross’s role in the foreclosure crisis: “He’s a private-equity baron who scoops up failing companies … squeezes every last nickel out of them by firing workers and shipping business lines offshore, and manages to profit in the exchange, usually by navigating the companies through bankruptcy.” Ross served as an executive for Ocwen, a residential mortgage provider deep in the illegal weeds of the 2008 Foreclosure Crisis, which exacerbated Cleveland’s own urban decay, especially in the old steel neighborhoods like Slavic Village, where I grew up.

Yet that marvel, the wonder of this steel, this creation of ingenuity and heart and sweat, has become separated from the people.

One year after buying ISG in 2005, Mittal Steel merged with European steel maker Arcelor to form ArcelorMittal, a steel behemoth based in Luxembourg. Where it once employed 30,000 people in the 1950s, then 7,500 under LTV Steel, and 3,000 under ISG, the Cleveland steel mill under ArcelorMittal employs just under 2,000 today, about the same amount as the local casino and horse racing track, a far sight lower than the county’s top employer, the Cleveland Clinic, at 32,000. Though LTV originally operated seven blast furnaces, the current mill only has three remaining. Two of them are active. Still, if anything it is a testament to the industrial miracle that the Cleveland steel mill has become. By some measures, it is the most productive steel mill in the world, able to now produce one ton of steel per man hour, about half the industry standard, while also specializing in a rarer and more sought-after form known as American High Strength Steels.

I cannot help but feel a strange welling of pride at this contradiction — Cleveland has not lost its manufacturing prowess, it has instead honed it to a fine-tipped spear. Where once steel was considered dead on Lake Erie, now it is a technical and scientific marvel. Yet that marvel, the wonder of this steel, this creation of ingenuity and heart and sweat, has become separated from the people. It is as if the steam drill has come between John Henry’s men and the mountain. The rising tide of automation and globalization, glorious and quixotic and alluring, has left us drowning, and the same steel that built Cleveland, the Democratic bastion of Ohio and, in that, the country, has caused a vestigial withering, a wasting away of this iconic connection. After all, even though John Henry sacrificed himself to defeat the steam drill. another faster, stronger steam drill was built — the same can’t be said for the steel-driven men.

During the Great Recession, production was halted again at the steel mill and, once again, the great flame went dim, yet a confidence remained that, this time, it would only be temporary, that it would come roaring back. There is no hindsight or revisionism for the deal the city made to save the steel mill, a devil’s bargain for 2,000 jobs and a smokestack. Perhaps it was only to spare us the ontological crisis of a complete industrial death and the uncertainty of any potential rebirth. In thinking of those 52,000 missing votes during the election of Donald Trump, I’ve tried to hold contradictory thoughts in my mind, how the ebbing of Cleveland’s industry was also saved by the same system that originally destroyed it. After all, Donald Trump nominated Wilbur Ross, the savior of steel, the next Andrew Carnegie, to be his Secretary of Commerce, a man that, had I been from anywhere else, I would have considered a craven, capitalist vulture hell-bent on profiting at others’ losses. During the administration’s first year, ArcelorMittal announced layoffs at its plant in Conshohocken, Pennsylvania. Ross, meanwhile, repeatedly pushed for the White House to enact tough import tariffs, and though he at first lost out to more influential free market globalizing voices, if Ross’s time in Cleveland shows anything it’s that he cultivates a certain relentlessness that should never be discounted. The mystery of those 52,000 votes has become insatiably frustrating for me, for the sort of crisis they have inspired in me, as if when Clevelanders heard a candidate say Americans “don’t make anything anymore,” we knew it might be factually and shamefully wrong, but felt in it some guilty, spiritual truth: the mill might make steel, but the people don’t. It is never so simple, so straightforward. Sometimes, you have to stop and admire the steam drill, for all its horror, as a creature of magnificent innovation and wonder. There is a duality to all these things: the steel mill, the invisible hand, the “phoenix” capitalist, the pendulum of American politics, the American presidency, that have only felt to me more contradictory and simultaneously true, and they help to let one believe that there is more out there, hidden in the corners and crevices.

I often wonder how people remember their hometowns, how they envision those places in their mind when they read related headlines. Cleveland is often portrayed so very wrong for me: the b-roll during sporting events or news reports of the downtown skyline glittering in the night, the city’s bridges over the Cuyahoga River, or, at worst, a sterile shot of the sloping front of the Rock and Roll Hall of Fame perched right above Lake Erie. But this is not Cleveland, not at all. When I think of the city, I remember what rises out of the river valley, the ominous and lovely spires of smokestacks, the blast furnaces and warehouses and the hot and cold rollers of the steel works, and pouring out amid the billowing clouds of steam is one brilliant light, a torch-like flame that shines at all hours of day, a sign that steel is still being made, that Cleveland — if not its people — is still a place that makes something.

 

Banner photo: Flame from one of the ArcelorMittal Cleveland smokestacks from its blast furnaces on the Cuyahoga River, photographed by Lonnie Timmons III for The Plain Dealer.

Mike Broida’s work has appeared in The New York Times, The Washington Post, and The Times Literary Supplement, among others.

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