Geneva Steel officials are keeping a wary eye on the steel market and hoping layoffs they announced Thursday will be all the bloodletting the company must do to remain competitive in the volatile steel industry.
The company is laying off about 100 production and staff employees, which is about 4 percent of its work force, because of a "disastrous" steel market. The reduction in force, which is effective Sunday, is aimed at reducing the plant's production level rather than saving sizable amounts of money.Ninety-six of the employees who are losing their jobs are involved in production. Most of those employees - 60 - work in the rolling mill, the most heavily staffed area at the plant. The next largest reduction will be in the open hearth.
Geneva will cut four staff positions from the operations side of the plant, which includes such departments as accounting, computer operations and public relations. This is the first reduction in force at Geneva since it was reopened in 1987.
Lynn Christensen, president of United Steelworkers union Local No. 2701, said he wasn't "happy (about the layoffs), but it's nothing that surprises us.
"It's the nature of the business in the steel industry," he said. "It's a survival move, as always.
"We're hoping it won't go much deeper but wouldn't be surprised if it did," Christensen said. "Our hope is that Joe Cannon (company president) and Robert Grow (company vice president) are smart enough to run the plant in a downturn like they did in a bull market."
Asked how he felt about the layoffs, Geneva Steel President Joseph A. Cannon responded: "Crummy."
"Our philosophy had been not to lay people off," Cannon said. "It's really a last resort. . . . We are not only laying off, we are putting a tourniquet on all our spending."
Despite the layoffs, Geneva still employs more people than when USX closed the plant in 1986. At that time, 2,000 people worked at the plant. Basic Manufacturing Technologies, which is now known as Geneva Steel, reopened the plant in 1987 with 1,100 workers. With the reduction in force, Geneva's employment falls from 2,800 to 2,700 people.
Employment at the mill hit an all-time high in the late 1970s when 5,000 people worked there.
The company has so far weathered the faltering steel market without cutting its work force, but increasing competition and falling prices make that no longer possible.
"The recession people are feeling in other states is coming home to us," Cannon said.
Three recent conditions exacerbate the steel industry's soft position:
- General Motors' announced Monday that it plans to cut its work force by approximately 15,000 people by 1993. That action will force steel companies that used to supply the nation's largest automaker to change their production lines, thus giving companies like Geneva more competition.
- Jitters over the economy and the war in the Persian Gulf is causing consumers to put off big-ticket purchases such as cars, water heaters, washers and dryers. Geneva produces steel for companies that make some of those items.
- USX was able to negotiate a new contract with its union, avoiding a strike. Smaller producers such as Geneva would have been able to fill the void in the steel market caused by a strike at USX.
Geneva's net income in the fourth quarter of fiscal year 1990 was $10.3 million, down from $15.7 million in 1989.
Geneva does not anticipate laying off more employees but will have to make such decisions "week by week by week," Cannon said.
"This is all we plan to do right now," he said.
The union is reviewing the layoffs to ensure proper procedure was followed but does not expect to find errors, Christensen said. The union is also planning to monitor operations at the plant to ensure work that could be done by union employees at the plant is not contracted to outside bidders.