The Modern History of Inland Steel

 

 

   

What'sNew

The public is invited to attend the museum meetings.  For 2010, meetings will be held at 5pm on the second Tuesday of April, June, August, October and December at USW, Local 1010 Memorial Hall located at  3703 Euclid Ave in East Chicago. To verify a meeting date, please call 219-399-8134.
   

 

   

CurrentNews

Read about NISHP in the Post Tribune

Click here.

   

 

   

RecentEvents

25 year Picnic

   

 

 

   

 

Inland had its beginnings in the depression of 1893. It was in that year that the Chicago Steel Works, a manufacturer of farm equipment, along with many other companies, went out of business. A group that included a foreman from the defunct company made an attempt to form a new company to begin producing steel on a site that Chicago Steel Works had acquired, in the village of Chicago Heights, Illinois. The necessary capital to finance the venture, however, could not be found, until the group enlisted Joseph Block, a Cincinnati, Ohio, iron merchant, who was in Chicago to visit the World's Fair. He brought his son Phillip D. Block into the venture.

 

After incorporating as Inland Steel Company in October 1893 and purchasing the idle machinery of Chicago Steel Works, Inland was ready to begin production in early 1894. By the end of the year, another of Joseph Block's sons, L.E. Block, had joined the company. In the next few years, the business grew steadily, with production centered on agricultural implements. Sales were boosted by a new product, side rails for bed frames.

 

In 1897 sales topped $350,000, and the company, which had been sinking much of its profits into improving machinery at the mill, purchased the East Chicago Iron and Forge Company and renamed it Inland Iron and Forge. The new addition was operated by L.E. Block and produced equipment for the railroad industry. The plant was sold in 1901 for ten times its original purchase price of $50,000.

 

By the end of the 19th century Inland was doing well, and sales were growing steadily. In 1901 it found itself in a position to accept an offer by a real estate developer promising 50 acres of land to any firm that would spend at least $1 million to build a steel plant on the site. The patch of land was beside Lake Michigan, which could provide water needed for operating a mill and a waterway for transporting material. The land was also near several major railroad lines. In 1902, when the first phase of construction of the new Indiana Harbor, Indiana, plant was completed, Inland had a steel ingot capacity of 60,000 tons. Due to a general recession, Inland lost $127,000 in 1903-04. For the same reason, from 1901 until 1906 the company did not pay dividends. By 1905, however, the plant got its first big order, for 30,000 tons of steel channels and plates.

 

In 1906, to meet the growing demand for steel, Inland added its fifth open hearth furnace and constructed the first blast furnace in northern Indiana. By purchasing the lease on an iron mine in Minnesota, Inland ensured itself of a source of iron ore to feed its furnaces that allowed it to reduce costs and significantly increase steel production. Production was increased further as Inland added more open hearth furnaces and sheet mills. In 1911 the Inland Steamship Company was formed to transport ore from Inland's growing mining concerns in Minnesota to the Indiana Harbor mill. A year later, Inland was manufacturing spikes and rivets for the railroad industry.

 

By 1914, when Joseph Block died, Inland had a steel ingot capacity of 600,000 tons. Capacity reached one million tons by 1917, and to accommodate the world market's growing demand for steel, Inland completed construction of a second plant at Indiana Harbor that year. Demand for steel increased during World War I, and following the war, between 1923 and 1926, all of the mills and machinery at the new plant were completely electrified, which provided the most efficient production. When the war ended, the railroad industry became Inland's top customer, replacing agriculture. When Phillip D. Block became president of Inland in 1919, Inland started to improve working conditions and to provide benefits for its employees. It was one of the first companies in the steel industry to introduce an eight-hour workday. The measure was soon abandoned, however, when the rest of the industry did not follow suit. In 1920 Inland was the first steel company to adopt a pension plan for its employees.

 

In the early 1920s Inland began to make steel rails in its 32-inch roughing and 28-inch finishing mills that previously had been used only for rolling structural shapes. This was an innovation in the steel industry, and within a short time rolling and finishing rails was Inland's most successful operation in terms of both sales and earnings. At the same time, the company spent $1 million to build a structural steel finishing mill. During this period, Inland continued to modernize and expand. Millions of dollars were spent to improve quality and efficiency as demand for steel rose and sales skyrocketed.

 

The early 1920s were not only a time of great prosperity for the steel industry, they were also a period of upheaval. The second great wave of mergers and attempted mergers in the steel industry since the beginning of the century commenced in 1921. As it had been in the early 1900s, Inland was again the object of schemes designed to merge smaller independent companies into one huge corporation. A plan initiated in 1921 envisioned the consolidation of seven large steel companies--Inland, Republic Steel Corporation, Brier Hill, Lackawanna, Midvale Steel and Ordnance, Youngstown, and Steel and Tube Company of America. Rumors of the proposed plan circulated in the press in late 1921 and early 1922, but in May 1922 Lackawanna withdrew from the plan. Negotiations continued between Republic, Inland, and Midvale. After the Federal Trade Commission (FTC) issued a complaint in August 1922, however, executives of the three companies announced that financing would be difficult while the legal issues raised by the FTC complaint were being resolved. The plan was dropped.

 

Sales at Inland increased, and while the company continued to spend on expansion, it became the number one U.S. steel company in rate of return on fixed assets in the period from 1926 to 1930. In 1928 Inland was able to acquire a limestone quarry on the upper peninsula of Michigan, and formed Inland Lime and Stone Company. Inland acquired another source of raw materials by purchasing 15 acres of land in Kentucky holding high-grade coking coal.

 

Inland's expansion continued through the late 1920s and did not stop even when the Great Depression hit in 1929. Between 1929 and 1932 Inland spent $30 million on expansion. In 1932, the only Depression year in which Inland was not in the black, the company unveiled the widest continuous hot-strip mill in the United States. At a cost of $15 million, the mill was 76 inches wide and would later be used to roll sheet for the auto industry and for the U.S. Navy during World War II. While 1932 was a financially dismal year for Inland, which was operating at only 25 percent of capacity, that figure was one-third higher than that for the balance of the industry. During the period from 1931 to 1935, Inland's operating profit in terms of fixed assets was 6.1 percent, the highest in the industry.

 

At the time that Inland built the new mill, competition in the steel industry was intense, and Inland was forced to compete with companies like United States Steel, among others, that had their own warehouse operations through which to market their products. To remain competitive with its rivals, Inland chose to go into the steel warehouse business and in 1935 acquired Joseph T. Ryerson & Son Inc., a steel warehousing and fabricating chain. Ryerson provided an outlet through which Inland's customers could buy steel and have it custom processed. In 1936 Inland acquired Milcor Steel Company of Milwaukee, Wisconsin, which made a wide variety of steel products and had plants and warehouses in seven cities. Milcor provided Inland with a market for the products of its sheet-rolling mills.

 

When World War II began, Inland, still under the direction of Chairman Phillip D. Block, immediately began a program of expansion to provide added capacity by building new blast furnaces and coke ovens to provide steel for bombs, shells, tanks, ships, and planes. By 1944 Inland had become completely integrated. The company controlled its own sources of raw materials including coal, ore, and limestone. With Inland's total ingot capacity of 3.4 million tons by 1944, sales in the years between 1940 and 1950 ranged from $200 million to $400 million per year.

 

In the 1940s prosperity was tempered somewhat by a series of labor disputes in which the United Steel Workers of America (USWA) sought higher wages and certain benefits for its members. Although labor and industry had agreed to a no-strike, no-lockout pledge during the early 1940s, steel workers across the country went on strike to demand a $1 a day wage increase in March 1942. The effects of the strike on war production were not significant, and Inland and the USWA signed a contract covering working conditions for the company's 14,000 employees at both Indiana Harbor and Chicago Heights.

 

A much more serious strike, involving 750,000 steel workers, took place in 1946 and virtually crippled the steel industry as production fell to its lowest level in half a century. The strike lasted 26 days and affected 11,000 employees at Inland's Indiana Harbor and Chicago Heights plants. Only after Inland and the other companies involved agreed to a wage raise of 18.5 cents per hour did the strike end. Inland was then able to continue to produce the steel required by the huge postwar demand for consumer products. The steel Inland produced then went primarily to the automobile and home-appliance industries. After the war, Inland continued to expand its facilities for sheet and strip and also acquired more property from which to mine raw materials, in Minnesota, Michigan, and Kentucky. In 1945 Phillip D. Block resigned as chairman after serving for more than 22 years. He was replaced by his brother, L.E. Block, who served until 1951.

 

During the early 1950s expansion slowed at Inland. From 1952 to 1955 steel production capacity increased by 700,000 tons. This was half the amount needed to close the gap between Chicago area demand and capacity. In the years between 1947 and 1958 Inland's capital expenditures of $121 million were the most modest among the major steel companies. Expansion, however, picked up during the steel boom of 1956, when Inland began a new program in which the company spent $360 million to modernize its plants, to acquire new mining properties, and to build a steel building to serve as its new headquarters in downtown Chicago. The stainless steel for the curtain walls of the 19-story building had to be purchased from another steel company because Inland was still producing carbon steel almost exclusively.

 

Although the early 1950s were relatively unremarkable for Inland in terms of production and growth, they marked the beginning of a decade that was to include two bitter and costly disputes between the steel workers and the industry. The first conflict began in November 1951 when the USWA notified the industry that it wanted to bargain for a wage increase. In December, after no agreement was reached, union president Phillip Murray called for a strike. Almost immediately, President Harry S. Truman referred the case to the Wage Stabilization Board. The board held hearings and made a recommendation accepted by the union but rejected by the industry. In April 1952 the board tried unsuccessfully to avert a strike. A few days later, on the eve of a strike, President Truman issued an order for the nation's steel mills to be seized by the government to keep them open and avert a strike. The industry was outraged by the president's order and Inland's president, Clarence B. Randall, was chosen to give the industry's viewpoint in an address that was broadcast on nationwide radio and television. Randall called the president's order an 'evil deed' that he had no legal right to issue. The U.S. Supreme Court agreed that the move was not legal and in June 1952 ordered that the mills be returned to their owners. Within a few hours, 600,000 workers walked off their jobs to begin a strike that would affect 95 percent of the nation's steel mills and would last for 55 days.

 

Randall became chairman of Inland in 1953. After a few years of calm, the industry and the USWA became involved in another dispute that was to prove the longest and most costly in the industry's history. The dispute began in May 1959 when the industry called for a wage freeze. When negotiations stalled in July, 500,000 steel workers went on strike. In October, President Dwight D. Eisenhower applied for an 80-day injunction under the Taft-Hartley Act, ordering the workers back to the plants while negotiations continued. The Supreme Court upheld the injunction, and the plants reopened in November. In January 1960, the USWA won an agreement that gave it a substantial wage increase. The agreement brought to an end the 116-day strike that had shut down the steel industry and forced the closing of automobile plants because of a shortage of steel.

 

As the 1960s began, the steel industry planned record production to fill consumer orders and replenish inventories left depleted by the strike. Inland's steel shipments in the years 1961 to 1965 averaged 4.1 million tons per year, compared to 3.6 million tons per year in the previous five years. To keep up with new production demands, Inland embarked on a new expansion program in 1962. The plan included a new 80-inch continuous hot strip mill as well as Inland's first oxygen steelmaking shop. The new shop meant a shift away from the open hearth steelmaking process. It had a capacity to produce more than two million tons per year and enabled Inland to close down its oldest open hearth furnace plant, which had been operating for 60 years, since 1902.

 

The expansion plan was completed in 1966 and helped Inland to lower costs, improve product quality, and increase capacity. An important milestone for Inland was the completion in 1967 of its new research facilities in East Chicago, Indiana, where company scientists could investigate new processes in steel metallurgy and production. The large amount of capital that Inland invested in expansion in the mid-1960s, along with stronger competition, had the effect of lowering earnings by 25 percent in the period from 1964 to 1967. Joseph L. Block, who succeeded Randall as chairman in 1959, believed that the expansion was important for the future, as Inland faced stiff competition for its midwestern market.

 

When Joseph L. Block retired in 1967, he had earned a reputation as a maverick in the steel industry. In 1962, when the steel industry had clashed with President John F. Kennedy over a proposed rise in steel prices, Block broke with industry ranks and insisted that the time was not right for a steel price hike. In 1966, however, Block took the lead in raising prices with the largest increase since 1963. Block was well known, as reported in Time magazine, for strengthening 'Inland's reputation as a civic-minded company' by among other things supporting a fair-employment law in Illinois as well as a redevelopment project for East Chicago.

 

Block was replaced as chairman by his cousin Phillip D. Block, Jr. Under the new chairman, Inland maintained its share of the midwestern market and also achieved the highest profit-to-sales ratio among the big-eight steel makers. In the late 1960s, as competition increased from foreign imports and markets eroded, Inland began a diversification program. The first step was into the housing market with the acquisition of Scholz Homes Inc. and later the formation of Inland Steel Urban Development Corporation. By 1974 diversification had led Inland into areas such as steel building products, powdered metals, and reinforced plastics.

 

The steel business started off slowly in the 1970s for the whole industry. Profits were down, and Inland's net profit declined from $81.7 million in 1968 to $46.7 million in 1970. By 1974, however, things had turned around, and the steel industry experienced one of the biggest booms in its history. After a tight period in the previous two years, demand for steel increased dramatically in 1974, and Inland's sales climbed to $2.5 billion. With demand showing no evidence of slowing, Inland, under Chairman Frederick G. Jaicks, who had replaced Phillip D. Block, Jr., in 1971, made plans for a $2 billion expansion, which it planned to finance from strong earnings and outside financing. Inland, however, along with the rest of the industry was hurt by the recession of 1975, and by 1977 the industry, plagued by overcapacity, faced another downturn, as imports flooded the market at prices domestic companies were unable to match. Inland's earnings slumped as costs went up and demand dropped, forcing the company to hold up the first phase of its expansion plan.

 

Business turned around for Inland in 1978, a record year for the company, in which it was able to capture 6.5 percent of the domestic steel market. The company produced 8.6 million tons of steel and generated profits of $158.3 million on $3.25 billion in sales. By the early 1980s, however, the steel industry was in trouble again. A combination of factors, including the high level of imports, decreased demand, and an oversupply of steel drove down prices at the same time that costs such as labor and energy were on their way up. These factors, combined with high investment expenses as well as depressed Midwestern industries--autos, farming, construction, and appliances--caused Inland's profits to drop 64 percent from their 1978 peak to $57.3 million in 1981.

 

Inland suffered four straight years of losses totaling $456 million in 1982 through 1985. The company was forced to shut down some of its steel mills and to lay off some workers. Yet Inland continued to develop new products and improve production efficiency. The company had success with lightweight, high-strength, and corrosion-resistant steel for the auto, farm, and construction industries; in 1981 it was able to push its market share to a record 6.7 percent.

 

In order to survive in a depressed industry, Inland--under Chairman Frank Luerssen, who took over in 1983--cut costs by shutting down unprofitable operations and divesting itself of certain assets. Inland began to sell various subsidiaries, including companies that had supplied it with raw materials. In addition, seven major operations at the Indiana Harbor works were shut down. Steel making capacity was reduced by 30 percent. While producing less steel, Inland began to shift its efforts into more profitable areas such as its highly successful steel distribution operations which it sought to expand by acquiring J.M. Tull Metals Company, a large metal-products maker, processor, and distributor, in 1986.

 

In May 1986 Inland made a move to separate its waning steel manufacturing operations from its profitable steel distribution sector by reorganizing as Inland Steel Industries, Inc., a holding company for Inland Steel Company, and Inland Steel Services, Inland's service center operations. Inland executives hoped that the reorganization would facilitate diversification and joint ventures.

 

Shortly thereafter, Inland formed a partnership with a Japanese firm, Nippon Steel Corporation. The partnership, known as I/N Tek, was created to construct a continuous cold rolling facility near New Carlisle, Indiana. The I/N Tek facility was the only U.S. continuous cold rolling mill. By combining five basic operations that were usually done separately, the facility was able to complete in less than an hour a process that had taken as many as 12 days. The cold rolled steel produced by the plant was used for, among other applications, autos and appliances. Another joint venture with Nippon Steel, I/N Kote, was started in 1989 to construct and operate two steel-galvanizing lines adjacent to the I/N Tek facility. The project was to be used in combination with I/N Tek to galvanize the cold rolled steel.

 

With profits having declined 54 percent in 1989, and losses of $21 million for 1990, Inland expected its continued expansion and modernization through projects such an I/N Tek and I/N Kote to result eventually in profits nearly double the then record $262 million earned in 1988. Such a turnaround would ensure that Inland would remain an industry leader in growth and technology, while once again becoming a top industry performer.

 

By 1994, the steel industry began to recover. The overall economy had picked up and there was an increased demand for cars--good news for Inland, which was a leading supplier of steel to such automakers as Honda, Toyota, Ford, General Motors, and Chrysler. In addition, the dollar remained inexpensive so that foreign competitors did not have the advantage of asking lower prices, and difficulties with labor unions were resolved.

 

As a result of these combined factors, in 1994 Inland enjoyed its first profit since 1989. Other moves by the company also ensured greater revenues and profits. Inland closed some units that were unprofitable; sold off businesses that were outside its core steel business; and began the search for emerging markets overseas to compensate for slower growth in the domestic market. A separate operating unit, the company's third, was created. Called Inland International, the unit sold and distributed products to industrial customers all over the world.

 

One market was Mexico, where the company formed a joint venture in 1994 with Altos Hornos de Mexico S.A., to be called Ryerson de Mexico. In 1995, a joint venture was created with China's Baoshan Iron and Steel, called Ryerson de China; and another to deal with exports was formed in Hong Kong with two partners: South African Macsteel and Canada's Federal Industries. In 1996, a partnership was formed in India between Inland Steel Industries and Tata Iron and Steel Co. of Numbai, called Tata-Ryerson, which provided industrial materials management services to Indian customers.

 

Inland had focused on serving high-end customers with high quality steel bars and other products. However, some quality problems resulted in the loss of some customers and the company returned to the commodity steel markets.

 

New Steel noted that both Old Steel and New Steel paradigms existed within Inland Steel. Yet the future seemed to belong to more progressive modes of doing business. After a precedent-setting contract with the United Steelworkers of America in 1993, ISI's workers took on more responsibility in exchange for improved job security and working conditions.

 

The company had to buy coke since shutting down its coke batteries in the early 1990s; this resulted in cost penalties of around $25 million a year. Inland's empowered workers continued to look for ways to improve yields. At the same time, automotive customers, led by the transplants (factories established by such foreign makers as Toyota, Honda, BMW, and Mercedes-Benz in the United States), were growing ever more demanding in terms of quality.

 

Inland exited the unprofitable steel plate business in 1995. Ninety percent of Inland's steel output ended up in consumer goods, a third of it in automobiles. Unfortunately, Inland suffered disproportionately when auto sales fell. At the same time, a weaker dollar was helping the American steel industry increase its exports, and sales at Inland's Mexican unit doubled in 1995 to $150 million. All told, Inland had one of its most profitable years ever in 1995, although the next year's results were much less impressive.

 

Inland Steel Industries CEO Robert Darnall told New Steel that the company needed to help its customers exploit its technical expertise in order for it to survive the next economic downturn. As late as the fall of 1995, Darnall was dismissing the idea that the company spin off its profitable Materials Distribution Group, which included Joseph T. Ryerson and J.M. Tull Metals. 'Maybe it gives a little pop for current shareholders,' he told Financial Times, 'but it ... really doesn't create long-term shareholder value.'

 

Nevertheless, a fraction of Ryerson Tull was spun off in 1996, helping to reduce Inland's considerable debt load. (An initial public offering sold 13 percent of Ryerson's shares, netting $60 million.) Frustrated by persistent production problems, Darnall replaced several executives early in 1996.

 

In July 1998, Ispat International N.V. bought Inland Steel Company--the steelmaking operations of Inland Steel Industries--for about $1 billion. Inland Steel Industries, the holding company, then renamed itself after its prime remaining subsidiary, Ryerson Tull, Inc. Inland Steel Company became known as Ispat Inland, Inc.

 

Ispat was a $2 billion a year global player that had grown to an immense size by buying troubled government-owned mills. Its acquisition of Inland Steel Company gave Ispat a major presence in the competitive U.S. market. The deal also suggested a new period of consolidation for an industry troubled by excess capacity worldwide, according to Industry Week. As it had with its other acquisitions, Ispat immediately went to work cutting costs at Inland. In its first year and a half as an Ispat subsidiary, Inland realized $275 million in annualized cost savings.

 

Information technology (IT) had become a key competitive tool by 2000. Automotive customers in particular demanded just-in-time delivery of products; Inland also used integrated databases to coordinate multichannel service.

 

At the turn of the millennium, Ispat Inland was the sixth largest integrated steel producer in the United States, accounting for 5 percent of national steel production. Its largest division, Flat Products, made carbon and high-strength, low-alloy flat rolled steel, primarily for automakers and appliance and furniture manufacturers. This division accounted for 85 percent of revenues. Bar Products supplied a variety of markets with special quality carbon, alloy, and free machining bar products. The company operated a steelmaking plant in East Chicago and two state-of-the-art finishing plants near New Carlisle, Indiana (both joint ventures with Nippon Steel), as well as a Minnesota iron mine.

 

Principal Divisions

Ispat Inland Flat Products; Ispat Inland Bar Products.

Principal Competitors

Commercial Metals Company; Earle M. Jorgensen; Worthington Industries, Inc.

 

Further Reading

Berry, Bryan, 'Inland Steel Redefines Itself,' Iron Age/New Steel, August 1995, p. 18.

Byrne, Harlan S., 'Inland Steel: Plotting a Return to Consistent Top Earnings,' Barron's, March 15, 1993, pp. 45-46.

------, 'Revival, Part II,' Barron's, July 22, 1996, p. 22.

Cimini, Michael H., and Susan L. Berhmann, 'Win-Win Contract at Inland Steel,' Monthly Labor Review, October 1993, p. 74.

Colkin, Eileen, 'Traditional Values in a High-Tech World,' Informationweek, September 27, 1999, pp. 233-38.

Evans, Richard, 'Man of Steel,' Barron's, March 23, 1998, p. 13.

Geer, John F., Jr., 'Steel Wallflower,' Financial World, November 21, 1995, p. 40.

Gilbert, R., and W. Korda, The Story of Inland Steel, Chicago: Inland Steel Company, 1974.

'Help Thy Customer, Help Thyself,' Forbes, December 18, 1995, pp. 196-97.

'Ispat Inland Settles Louisiana Fraud Case with U.S. for $30 Million,' IBJ Daily, January 18, 2001.

Kafka, Peter, 'Steel Steal,' Forbes, April 20, 1998, p. 486.

Mehta, Manik, 'Steel's Still-Growing Giant,' Industry Week, January 18, 1999, pp. 120-23.

'Nelson Retires As President of Inland Steel Co.,' Metal Center News, May 1996, p. 118.

'New Lease on Life,' Forbes, May 9, 1994, pp. 82-87.

'Picking Nickels Off the Floor,' Forbes, October 26, 1992, pp. 106-08.

Samuels, Gary, 'Help Thy Customer, Help Thyself,' Forbes, December 18, 1995, p. 196.

Sheridan, John H., 'A Global Future?,' Industry Week, January 18, 1999, pp. 124-28.

— Patricia Leichenko; Updates: Dorothy Kroll, Frederick C. Ingram