C&B Notes

Michigan Steel Mill Responds to Globalization

Globalization has placed enormous competitive pressures on steel facilities in countries/regions that have higher labor input costs.  AccelorMittal’s focus on benchmarking to promote the adoption of best practices across its worldwide facilities has vastly improved the competitiveness of plants in geographic locations that have this inherent labor cost disadvantage.  Burns Harbor is a great example of an American plant’s path to productivity and efficiency gains and the challenges that remain:

Some steel mills are destroyed by globalization, others reborn.  Left for dead a decade ago, this 50-year-old facility on the shores of Lake Michigan has been rejuvenated thanks to an unusual experiment by its owner, Luxembourg-based ArcelorMittal.  ArcelorMittal’s steel mill in Burns Harbor, Ind., boosted productivity after twinning with a mill in Belgium.  In 2008, Burns Harbor was “twinned” with a hypermodern mill in Gent, Belgium.  Over 100 U.S. engineers and managers, who were flown across the Atlantic, were told: Do as the Belgians do.

Burns Harbor now enjoys record output.  Its furnaces, where steel is made out of iron ore, coal and limestone, are run with software developed in Belgium.  Robots are in.  Pencils are out.  Workers are learning to make the same amount of steel with nearly half the people it employed three decades ago.  Productivity is nearing Belgian levels.  The transition hasn’t been seamless. As a collective bargaining session looms this summer, union leaders say a tough battle is expected over wages, safety risks and the next wave of automation.  But there is also an acknowledgment that increased productivity has saved the mill from oblivion.

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Twinning — benchmarking two mills against each other — represents the next evolution.  “The process doesn’t change: melt iron, cast, roll.  But there are always incremental improvements you can make,” Mr. Mittal said in an interview.  Modern benchmarking was pioneered by Xerox in the 1980s and has become a common tool for multinationals.  But industrial historians say that what Mr. Mittal is actually doing is taking a page out of the productivity-obsessed playbook of 19th-century steel pioneer Andrew Carnegie and applying it globally.  “The foremen of the blast furnaces on the Allegheny competed on monthly outputs,” says David Hounshell, a professor of industrial history at Carnegie Mellon University.  In a similar fashion, ArcelorMittal twins pairs of mills — usually of similar size, age, product mix and output — against each other.  In addition to Indiana and Belgium, mills in Germany and Poland, and France and Romania, have been twinned.  The weaker mill is ordered to copy the practices of the better mill, while the stronger is told to keep its edge.  Managers are summoned to regular meetings and ordered to divulge and compare their performances.  Although there is no explicit policy on the consequences of poor performance, ArcelorMittal has been quick to idle or shut down unprofitable mills, as it did in Liège, Belgium, last year.

“Steel working used to be 80% back and 20% brain, now it’s the other way around,” says Mr. Trinidad, the union rep, who started when the plant employed 6,700 workers in 1974.  Now it has 3,700.   Twinning, workers say, has helped avoid catastrophe.  In 2008, as the global economy was melting down, ArcelorMittal said it would need to lay off 2,444 workers at Burns Harbor.  After negotiations with the union, 500 workers left voluntarily, and 900 agreed to work 32-hour weeks.  No layoffs have been made since…Burns Harbor achieved a record slab production of 4.8 million tons in 2011, says Bill Steers, the company spokesman, compared with 5 million at Gent.  Productivity is almost at 900 tons per employee per year, while Gent has improved to around 950.  “Much of this can be attributed to twinning,” says Mr. Steers.