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RG Steel got at least $100 million to reopen

Gov. O'Malley gets political mileage out of the start-up of the Sparrows Point steel mill. But will customers come back?

steelworkers and guv

Gov. Martin O’Martin announces reopening of Sparrows Point as union officers and RG Steel President John Goodwin (seated foreground) listen.

Photo by: Mark Reutter

The head of RG Steel disclosed today that “a very large number. . . nine digits” – or at least $100 million – was injected into the company to ease the liquidity crisis that had shut down the Sparrows Point steel mill before Christmas.

V. John Goodwin, president and CEO, declined to be more specific about the cash infusion by Cerberus Capital Management that allowed the owner of Baltimore’s biggest industrial complex to resume operations during a news conference today with Gov. Martin O’Malley.

Cerberus, a leading private investment and hedge fund run by Stephen Feinberg, has not revealed the dollar amount of its investment in the company.

Photo Op for TV

Today’s announcement was staged following an event sponsored by the Democratic Governors Association, of which O’Malley is national chair.

About 20 members from Local 9477 of the United Steelworkers – told this morning to report to the union annex at Sparrows Point – were on hand at the International Union of Painters and Allied Trades building in Hanover, Md.

Grouped around the governor, they clapped enthusiastically when O’Malley announced the reopening of Sparrows Point before a scrum of reporters and TV cameras from Baltimore area outlets.

The reopening was not exactly news. The Brew reported a week ago that the plant’s “L” blast furnace had restarted and, more recently, on Cerberus’ investment.

Today’s announcement, however, permitted the governor to advertise his commitment to steelmaking and the saving of 2,000 jobs potentially at risk at the Point.

Goodwin confers with Leo Gerard, international president of the United Steelworkers, before today's press conference. (Photo by Mark Reutter)

Goodwin confers with Leo Gerard, international president of the United Steelworkers, before today's press conference. (Photo by Mark Reutter)

O’Malley mostly listened as Goodwin and Leo Gerard, international president of the United Steelworkers (USW), praised him for acting “in record time” to help the struggling steel company.

Gerard said the governor first contacted him on “the eve of Christmas” about the shutdown.

The two men, Gerard said, conferred constantly  to help RG Steel find a new source of financing, taking only a short break over the New Year’s holiday.

How RG Steel overcame its financial difficulties – which included its failure to pay iron ore and scrap metal suppliers – is still cloaked in secrecy.

A group of banks led by Wells Fargo and GE Capital had originally extended a $750 million credit facility to the company. Last month, the group placed new conditions on the loan, which led to O’Malley taking the unusual step of publicly calling on Jeffrey Immelt, CEO of General Electric, to review the loan restrictions.

It does not appear that the banks relented, which made the agreement by Cerberus to invest in the company all the more critical. Additional capital was reportedly supplied by RG’s parent corporation, Renco Group controlled by New York billionaire Ira Rennert.

Goodwin described the company’s difficulties as resulting from an exceedingly rough patch – with high raw material costs and low steel prices – that caught the company in a cash-flow pincer.

He said those problems were now behind the steelmaker and predicted that 2012 “is going to be a good year” because steel prices are increasing.

Labor Concessions Needed

Goodwin also telegraphed to the USW officials surrounding him that the union will have to make concessions. “These facilities [at Sparrows Point] have always been challenged,” he said. “It can’t operate like it has over the last 11 decades.”

At the same time, he said the company’s “biggest challenge” was obtaining raw materials at a reasonable price, saying raw materials constitute 85% of steel’s manufacturing cost.

He did not provide specifics about how the company will cope with raw material prices (the mill does not have “captive” sources of these items) except to say “we feel we have a strong strategy.”

Will Customers Come Back?

Goodwin also did not address another problem facing the company – the loss of customer confidence in its ability to supply steel without interruption.

RG Steel President John Goodwin addressing the press today. (Photo by Mark Reutter)

RG Steel President John Goodwin addresses the media today. (Photo by Mark Reutter)

There has been confirmed reports of dissatisfied Sparrows Point customers going to other manufacturers to fulfill orders – an ominous sign in an industry with excess capacity and strong competition for contracts.

“RG Steel has to prove they are going to be a reliable supplier,” a knowledgeable source said today. “Customers want Sparrows Point to stay in business because it gives them options and keeps prices in line. But right now, many customers don’t have confidence in them anymore.”

A survey published yesterday by Steel Market Update, an on-line trade newsletter, underlined the challenge.

It reported that 28% of surveyed customers said they would continue to buy steel from the mill at their previous tonnage levels, 44% said they would buy at reduced levels and 28% said they would no longer do business with Sparrows Point.

Newsletter publisher John Packard said the company’s sales force has its work cut out.

Lemonade Out of Lemons

Gerard, of the Steelworkers, not only lauded the reopening of the mill, saying “jobs are going to be preserved,” but spoke at length today about what he called “the labor-governor partnership.”

He said such cooperation between politicians and organized labor should become a model for America in order to resuscitate steel and other basic industries.

In an odd choice of words, Gerard said that thanks to this cooperation, “We get to make lemonade out of lemons,” referring to RG Steel’s mills in Maryland, West Virginia and Ohio.

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  • Spotsticker

    In that picture he looks like Admiral Stockdale. “Who am I? What am I doing here?” 

    Hahahahahaha

  • senority is #1

    i feel for the guys with 40 yrs and cant hold msc   !!!!!!!!!!!!!!!!   i think every young guy there should be laidoff just like i have been for 3yrs  senority rules thats what a union is all about  !!!!!!!!!!!!!!!!!!!   so get your lips off daddys nipples  and get stepping   daddys going to be gone in next election

    • help

      no your wrong the people thats layed off cant run or vote so my dad will be back in like always and i will work as always. seniority does not matter the reps made an agreement on these things, so, sorry about your luck!.

    • BROTHER

      AMEN BROTHER

  • big dog

    Labor Concessions Needed    “NO”   close  it doun

    • help

      if the reps can make a deal to always keep the younger people working and never let older people train on jobs ill vote for concessions. but we got to keep the same reps in office, well im pretty earnie will vote on a deal like that, but im not taking a chance im voting for same ones.

  • jaywalker

    who in the hell is this help! is he a union officals releative or something!sounds like one. is this what our union has become! omg!

  • 25000formartybhood

    tell ur dad we will put him in another 3 years so we can keep workn…carmen is da man!!!

  • Bunboy

    DONT WORRY 25000 THEY WONT SHOW I KNOW WHO THEY ARE.   ALL TALK OLD AND BROKEN DOWN.  IM A 16000 AND IM STILL WORKING AND THE UNION SAID THEY MADE A DEAL TO KEEP US WORKING.

    • 10yrsneverlayedoff

      thank u 1190 for the friend and family pass…i will vote u all back in

  • Supersonic

    is it true that larry mallas is tryn to run for union president? what type of president was he before?

    • foryourinfo

      he was a good pres. the best in 30yrs.and might be the best ever

      • Supersonic

        would he be able to run or is that just rumor?

  • Showmetheseverance

    attention all 25000s…..bobby crowe and jim reitter just cut a secret  deal to eliminate all 25000s and have tenders work their jobs….vote booby crowe the hell out of office…wonder if our wanna be president/scheduler dan goodpaster has any knowledge of this or played a part in it? the end is near for us…make sure they dont get a free ride sitting at the hall…vengeance is ours !!!!

    • warrensteelman

      why is a union member a scheduler, whats up with that? he wants to run for office, he should look at the schedule and see that there not going by seniority. what kind of union do you got down there, are you uswa cant be.

      • Hymanroth

        thats a great question there!!!seems like a conflict of interest to me but he’s one of santos boys so he can do what he wants…work the battery, take vlo, come back for a few weeks as company scheduler…

        • meyerlansky

          ill make him an offer he cant refuse.

        • warrensteelman

          you people at 1190 are giving the union a bad name we did not give up seniority get with the program and get this shit straightened out or drop out of the uswa please.

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