More broadcast yackage. WBAL's Bill Vanko and I talk about Andrea Walker's story today on the Sparrows Point steel mill's reentry into the economy after the two-year financial slump.

Posted by Jay Hancock at 10:39 AM | Permalink | Comments (0)
Categories: Manufacturing
        

Andrea Walker reports that the Russian Severstal is extending a partial shutdown of the Sparrows Point steel mill in Baltimore County well into next year.

Severstal has left Sparrows dangling. But it's not because it lacks the wherewithal to invest and upgrade the plant, which is what it badly needs. Last month Severstal issued a prospectus for a $3 billion bond offering that outlines ambitious capital expenditure plans -- mostly in Russia, but also at other U.S. steel mills. From the WSJ:

Russian steel producer OAO Severstal is planning to spend $6.4 billion on capital expenditure, excluding maintenance, through 2014, of which about 68% will be invested in Russian mills, and about 12.3% in U.S.-based mills, according to a document.

Severstal said in a preliminary prospectus for a $3 billion loan participation that its capital spending will be focused on the so-called brownfield expansion of its mining businesses in Russia, Africa and the U.S., and on expanding its share of the Russian domestic steel products market.

Severstal said that out of $6.4 billion of capital outlays, only $786 million, or about 12.3%, will be invested in the company's mills in the U.S. Severstal's U.S. mills contributed 39% of all the company's steel revenue in the first half of 2010.

And here is an excerpt from Minesite.com (free registration required), which goes into further detail:

Severstal says it views the Russian market for steel products as “providing significant growth potential”. Accordingly, it continues, “the Group plans to continue to invest in its production facilities in Russia in order to increase production capacity, particularly of long products, pipes, sections and other products used in the construction and infrastructure industries, where the Group expects demand to grow in the long term....

Elsewhere, after almost two years of attempts to sell off its heavily indebted and loss-making US steelmills, all unsuccessful to date, Severstal now plans to spend more money on almost all the North American units. At the Columbus, Ohio, steel mill, for example, the prospectus says the strategy calls for fresh investment that will result “in an expected doubling of that facility’s production capacity by the beginning of 2012”. Meanwhile, Dearborn, the former Rouge steel mill, which was Mordashov’s first US steel acquisition, is expected to benefit from its long-term contract with Cliffs Natural Resources. And, the prospectus adds, “investments in the pickling line and tandem cold mill in Dearborn is expected to further improve its cost position and enable it to produce advanced automotive steels” And still in the US: “each of Sparrows Point, Severstal Wheeling and Severstal Warren are expected to focus on continuous cost optimisation and restructuring to achieve sustainable profitability levels”.

Posted by Jay Hancock at 9:31 AM | Permalink | Comments (1)
Categories: Manufacturing
        

Andrea Walker reports that Sparrows Point, the big steel mill in Baltimore County, may change hands again. The trades are reporting and the Steelworkers are confirming that present owner Severstal send out bid packets for its U.S. assets. Last month Nucor CEO Dan Dimicco was asked by an analyst about buying the plant.

Q. Okay. Have you looked at the potential alternative instead of building -- that of buying Sparrows Point, which has one of the largest furnace on a deepwater port and also would take out 3.5 tons of capacity in the industry as well?

Dimicco: Certainly making a very good point, Michael, about the Sparrows Point facility in terms of it being on the deepwater port, pointed out a couple of the positives. There are a host of negatives as well and while we have looked at that, I will tell you over the years we have looked at that, but as you know, it's presented itself on numerous occasions, we don't believe that would be the best way to go. If we are to move forward as we plan on with an iron project in Louisiana.

Sparrows' integrated steelmaking (they smelt the iron from ore) and port would have blended well with Nucor's operations, which are dominated by minimills that melt scrap. For Nucor, one of the "negatives" cited by Dimicco is the presence of the United Steelworkers. None of Nucor's plants is unionized.

Posted by Jay Hancock at 8:55 AM | Permalink | Comments (1)
Categories: Manufacturing
        

It's mind-blowing that City Council is talking about taxing the energy used by Baltimore's dwindling base of manufacturers as an alternative to the "bottle tax" of 4 cents a drink. Baltimore had 13,000 factory jobs in April -- the least ever recorded since the Labor Department began keeping track. That's down from 27,000 in 2000 and 43,000 in 1990.

These jobs typically come with decent pay, health plans and other benefits. Baltimore needs to do whatever it can to support manufacturing. It already does little enough. Factories are intensive users of electricity, which is already costly enough in Maryland. Taxing it at 8 percent would cost even small shops thousands. Maryland Thermoform's Scott Macdonald figures his 8 percent energy tax would be $28,000 a year.

Forcing an expensive energy tax on Baltimore manufacturers is a great way to ensure that the city's number of factory jobs keeps heading toward zero. That'll hurt the city's budget a lot more than the tax might help it temporarily.

Meanwhile there is a good discussion of beverage and soda-pop taxes by Harvard's Greg Mankiw here and NYT's David Leonhardt here. Tax the soda, says Leonhardt:

A soda tax obviously would not solve the obesity epidemic. But it appears to be one of the most promising responses, given the central role that sugary drinks play in the epidemic and the fact that they have no nutritional benefit. A tax would also help reverse the big decline in the price of soda over the last few decades, at the same that the price of fruit and vegetables has been rising. Finally, as with a gasoline tax, a soda tax would help cover the broader costs that the product imposes on taxpayers.

Posted by Jay Hancock at 6:58 PM | Permalink | Comments (15)
Categories: Manufacturing
        

Solo Cup gets a few Brownie points for giving hundreds of employees two years' notice that they'll be losing their jobs. The company announced today that it will close its Owings Mills plant in 2012. Employees getting put out of work rarely get this much warning. It's a small consolation, but it's something. With luck and compassion people will get decent severance packages, too.

Ironically, Solo's early warning may be a sad commentary on the economy and the manufacturing economy especially. Downsizing companies normally don't like to telegraph their intentions. That's because employees will start quitting to find longer-term positions, which can complicate operations in the meantime. If you want to run until 2012 and half the workers quit in 2011, you've got a problem.

But in this economy the prospects for finding decent positions for manufacturing workers may be discouraging enough that Solo figured it could take the risk. As the Labor Department graph below shows, Maryland manufacturing employment is about down to 100,000, half of what it was two decades ago. With a slow recovery from a recession and national unemployment near 10 percent, Solo apparently figures it will keep most of the workers at the closing plants until the bitter end.

Posted by Jay Hancock at 6:59 PM | Permalink | Comments (8)
Categories: Manufacturing
        

General Motors is recalling more than a million Chevrolet Cobalts, Pontiac G5s, Pontiac Pursuits sold in Canada and Pontiac G4s sold in Mexico. They have power-steering motors that can fail in what GM says are rare cases. Note that the recall comes after regulators got complaints and opened an investigation. Some 1,100 hundred GM owners told the National Highway Traffic Safety Administration about power-steering failure, reports the Associated Press. Would be interesting to see how long GM itself has been getting complaints.

The GM problems are less serious than the Toyota accelerator disaster. Even if the power-steering motor dies you can still steer the cars. There are reports of 14 crashes and one injury in the complaints that NHTSA got, says AP. Even so, the GM recalls will remove the focus from Toyota, at least for now. But Toyota has a long, long way to go to repair its reputation.

From the AP story:

The recall affects 2005 to 2010 Chevrolet Cobalts, 2007 to 2010 Pontiac G5s, 2005 and 2006 Pontiac Pursuits sold in Canada and 2005 and 2006 Pontiac G4s sold in Mexico.

Posted by Jay Hancock at 9:06 AM | Permalink | Comments (3)
Categories: Manufacturing
        

Here are Maryland Public Television's Jeff Salkin and me talking about General Motors' decision to move the manufacturing of hybrid-vehicle motors to the company's White Marsh plant. The discussion is about this column.

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Categories: Manufacturing
        

Tackle Michael Oher and running back Ray Rice will be signing autographs at the "Keep It Made In America" meeting at M&T Stadium tonight. Other luminaries include Aris Melissaratos of Johns Hopkins, Mike Galiazzo of the Regional Manufacturing Institute, United Steelworkers 9477 President John Cirri and Severstal Sparrows President Thomas Russo.

The meeting is sponsored by the Alliance for American Manufacturing, a joint Steelworkers-industry venture that pushes U.S. policymakers to hold importing countries and industries accountable for currency manipulation, environmental despoilation, poor labor conditions and so forth. According to the press release they'll ask/answer questions such as "How do we bring good clean energy manufacturing jobs to Maryland? How can rebuild our manufacturing base? What changes do we need to [make] to tax and trade policies?"

There'll be an autograph session with Oher and Rice, "who will be signing limited edition 'Keep It Made In America' souvenir photos."

6 p.m. in the stadium's club level. Free admission. Free parking. Open to the public.

Posted by Jay Hancock at 6:49 AM | Permalink | Comments (3)
Categories: Manufacturing
        

Cute. This has been around for months, but I hadn't seen it before. In a stunning last-minute development, IKEA will rescue GM and cut costs to finance GM's cripping pension and health-care expense by shifting assembly to car buyers. And you do it all with that little hex wrench they give you.

Posted by Jay Hancock at 10:18 AM | Permalink | Comments (1)
Categories: Manufacturing