DECEMBER 1995 · VOLUME 16 · NUMBER 12
T H E F R O N T
DECEMBER 1995 · VOLUME 16 · NUMBER 12
T H E F R O N T
AS HULKING OLD STEEL MILLS give way to sleek new minimills, workers cannot help but to notice that their ranks are diminishing apace. Workers at steel mills owned by Cleveland, Ohio-based LTV Corporation feel especially betrayed by this shift, since they say that, without their sacrifices, LTV would not be around to invest in new mills.
"Say you were taking care of your husband, providing the income while he was going to school," says Mike Scarver, who represents LTV workers in Cleveland. "And as soon as he got his degree and got a good-paying job, he told you, 'Well, I've got this other woman out there, and I'll be leaving you now.' Well, we know how you would react."
LTV, the nation's No. 3 steel company, dove into bankruptcy in 1986 and did not resurface until 1993. While it was underwater, the company received huge concessions from its workforce and the community. "When no one else would help LTV, when the financial institutions turned their back, we helped them," says Scarver. "And the citizens helped them. In Cleveland, LTV got a 10-year tax-abatement plan that'll save them $38 million."
Profitable again, LTV recently decided to build a new steel minimill in Decatur, Alabama. Ground has already been broken for the new plant, which is a joint venture of LTV, British Steel and Japan's Sumitomo Metal Industries. LTV has a 50 percent share in the venture, which has been dubbed "Trico."
For the United Steelworkers of America, the Trico plant is a stab in the back. Rather than investing in what is likely to be a nonunion plant in a distant state, Scarver says, "LTV should put that money back into the communities that cared about LTV surviving." Instead, having taken Cleveland's money, LTV went looking for another handout. Alabama promised Trico $80 million in state tax subsidies to lure the new plant.
Scarver says the least that the new plant could do, given all that the union has done for LTV, is tolerate a union contract. "We don't want the company to fight us the way they've been fighting us elsewhere," he says. "We want a pledge of neutrality [toward union organizing], but we haven't gotten that."
LTV representatives did not return Multinational Monitor calls.
Getting blasted
The Trico furor is one manifestation of a dramatic transformation well under way in the steel industry: Minimills and other new technologies are making traditional "integrated" mills obsolete. "Integrateds" use a blast furnace to convert iron ore and coke to pig iron before making steel, a time-consuming, expensive process. Minimills, which dispense with the blast furnace, melt down scrap metal with electric furnaces. Minimills usually employ a few hundred workers, less than half the number typically employed at integrated mills. Partly because of minimill technology, the average number of worker hours it takes to produce a ton of steel has been cut in half, dropping from eight hours in 1983 to less than four hours today.
Minimills are also much cheaper to build than integrated mills. Mike Locker, a steel industry analyst in New York, says, "No one can afford to build an integrated mill in the United States or Europe or Japan anymore -- it would cost you at least $2 billion." By contrast, Trico will cost approximately $450 million. Another minimill advantage, Locker says, is that they are much kinder to the environment than integrateds. Initially, minimills could only produce lower-end steel products, such as the reinforcement bar used in concrete construction. But with improved technology, minimills can now produce medium-quality sheet steel and other products that were once the sole domain of the integrateds.
As a result, minimills are popping up nationwide and U.S. steel-making capacity is expected to skyrocket in the next few years. Between 1988 and 1997, "we'll have at least 18 million tons of new flat-rolled steel capacity," Locker says. This is the biggest increase in U.S. steel capacity since World War II. "It will put tremendous pressure on prices, and the weaker players -- some of which are over-leveraged minimills -- will not make it through the crisis," he says. Eventually, Locker predicts that U.S.-made steel will displace some of the 21 million tons of finished steel that the United States now imports and convert the country into a net steel exporter by the turn of the century.
Despite increased exports, steel industry employment is likely to contract even further. Given the declining numbers of good-paying union jobs, the steelworkers union is trying to slow down the shift from integrateds to minimills. Ultimately, however, this shift is likely to prove inevitable.
Betrayed "partner"
The most immediate fear of the steelworkers union is that the expected spurt of steel production in the next few years will cause such a market glut that the industry will collapse again. "If we go into another dramatic downturn in steel," says Steelworkers spokesperson Gary Hubbard, "are they going to shut down the minimills, with all this new investment in them, or are they going to shut down the integrateds?"
With dwindling integrateds as its stronghold, the union has been struggling to organize the minimills. So far, almost half of the 23,000 U.S. minimill employees are members of the union. Unionized or not, minimills have embraced "lean and mean" employment policies. "Minimills operate on the basis of trying to minimize the labor content per ton of steel," Birmingham Steel Company President Jim Todd told the industry newsletter New Steel. "Mills must get workers themselves to want to minimize labor costs. Steel mills usually do this by linking employee compensation to some measure of output."
The steelworkers union leadership, which has long advocated "labor-management cooperation" schemes, has no quarrel with much of this "united-for-productivity" mind-set. But union leaders are tired of being rewarded for such cooperation with the kind of runaway tactics that LTV pursued in forming Trico. "Our government is always preaching that for the American economy to flourish and the industrial base to prosper you've got to have a new partnership between management, labor and the government," says Scarver. "And we have exhibited that we are ready to get into that kind of partnership. Look at all the things we did in the 1980s to help LTV. They sat at the negotiating table with us for four months last year preaching partnership. But they never uttered a word about building this new minimill. I would call that a betrayal of trust."
Labor movement activists have criticized this one-way cooperation, arguing that it has crippled labor's ability to challenge corporate power. In fact, according to New Steel, "conventional wisdom" has it that the Steelworkers Union has had trouble organizing the minimills in part because "cooperation between labor and management has made adversarial relations -- and therefore unions -- obsolete."
Having been burned by such "cooperation," the union is now in a fighting mood. It is going after Trico and LTV with a variety of weapons. Together with the Sierra Club in Alabama, the union has challenged Trico's environmental control standards. The Steelworkers are also denouncing the millions of dollars in tax abatements that both LTV and Trico will pocket.
Tax giveaways to companies like LTV, says Scarver, make the building of Trico "a concern for all citizens, not just the union. All these CEOs brag about their minimills, but they're not bragging about a better product. They're bragging about less employment to assure higher profits to shareholders," he says.
-- Laura McClure
Disney Development Company is building 8,000 homes on 4,900 acres of land in rural Osceola County, Florida. Celebration blueprints call for a traditional downtown, complete with a general store, post office, bank, movie theater and boutiques. Celebration will also have a state-of-the-art hospital, an office complex boasting one million square feet and a fiber-optic network that will interlink the whole town.
The showpiece of Disney's cyber-town -- and the hook that it hopes will lure the right kinds of people to Celebration -- is the community's public school. To design the school's curricula, Disney assembled a special team that is currently on the road, attending education conferences and seminars across the country.
Disney is also building a $9 million Teaching Academy adjacent to the school to research and develop the school's programs.
Celebration School will be built, owned and operated by the Osceola County School District. The school is not expected to be completed until August 1997; the teaching academy should be done a year earlier.
Disney has promised Osceola County that the entire school district -- and the whole nation -- will benefit from Celebration's educational innovation. Disney eventually sees the school and the academy serving as a national educational laboratory where teachers will study the latest learning trends. The company plans to offer week-long seminars and leadership retreats for teachers nationwide. There will also be day trips for teachers who want to drop by the Teaching Academy during DisneyWorld vacations.
Education and market research
Across most of Osceola County, Celebration School is being welcomed as something for everyone to celebrate. The school district gets a state-of-the-art school and teaching academy, and Disney gets to sell its homes. But for a few people in Central Florida, Celebration School smacks so much of Mickey Mouse that they smell a rat.
"When you use taxpayer money to enhance a business, it could be trouble," says Martha Anderson, an eight-year Osceola County School Board veteran, referring to Disney's reserved right to develop and market any products or software developed at Celebration School or Teaching Academy. In addition to yielding products for Disney, Celebration could develop a nationwide market for the merchandise through the teachers who visit the academy.
Teaching Academy Director Larry Rosen says software and other product development is not an immediate goal of the academy. He says he wants the academy to focus on researching ideas and disseminating them throughout the country. According to Disney Celebration Company's Charles Adams, however, Disney's "Educational Publishing" unit will be on call to assist the teaching academy with new ideas. And the contract between the school district and Celebration specifically outlines Disney's retention of commercial development rights. The contract also gives Disney first rights to Celebration ideas and innovations, regardless of whether they were developed by school district or academy employees.
Adams says the district should not be concerned about developing commercial products because it should not assume entrepreneurial risks.
Adams stresses that the first goal of the academy is to establish teacher training seminars, which are slated to work with 4,500 teachers each year. Teachers will pay Disney for this training, which Rosen says the academy aims to keep "affordable." A one-week seminar -- including room, board and classes -- will cost less than $1,000, he says.
Another concern is that Disney, with its novel view of a magnet school, has urged the school board to break tradition by building Celebration School before children move to town. "We have schools in dire need of roofs and renovations," says Anderson. The district's $15 million pledge for Disney's school project drains district finances for school improvements elsewhere, she says.
Because the district entered into a binding contract to spend $15 million to build a school where there are no students yet, Anderson says there is a danger that citizens will oppose a bond referendum or tax increase for badly needed district maintenance and renovation projects.
Adams says Disney wants Celebration homes to be primary homes -- not vacation homes. And to sell primary homes to families with children, he says, the school must go up first. He says Celebration school will attract the "particular types of families with children" that Disney wants.
To sweeten the deal, Disney promised the school board $5 million in "enhancement money" to defray Celebration School's operating costs; Disney has sole discretion over this fund. So far, the money has been spent on salaries for the curriculum road-show team. "I think it's all networking to advertise Celebration," Anderson says.
School board and boardroom
Florida law explicitly entrusts locally elected school boards with decision-making power over school and staff policies. While this authority will remain in the hands of the school board, there will be a formal process to keep the board abreast of Disney's policy views.
A board of advisers featuring Disney Celebration Company's Charles Adams, Teaching Academy Director Larry Rosen and school board member Dee Stevens, will make regular recommendations to the school board and district superintendent. Adams says these advisers will set criteria for the types of teachers and administrators who will work at the school. Disney will be involved in interviewing for key positions. Disney and the company already had a say in choosing Academy Director Rosen.
Pam Ollis, Osceola County Teachers Association President, says she feels "cautiously optimistic" about Disney, while harboring vague concerns about the implications of mixing a public school with a private corporation. School Board President Donna Hart, however, is comfortable with the relationship. People are crazy to think Disney would build the academy "out of the goodness of their heart," she says. "There's got to be something in it for them." Hart and Disney officials acknowledge that a motivation for Disney's involvement in Celebration School is its marketing strategy for Celebration homes.
Donna Hart and Martha Anderson both say they received Disney campaign contributions from the Disney Development Company before negotiations over Celebration began. While Hart dismisses the influence of the Disney campaign contributions she received, Anderson thinks Disney deliberately contributed to her campaign to gain leverage.
Anderson also says Disney stretched Florida Sunshine laws, which prohibit board members from discussing issues with each other outside of public board meetings. During private meetings with individual school board members, Disney revealed the views and concerns of other board members.
Board members were eventually swayed by Disney's promise to provide district teachers with 1,550 free in-service days at the academy each year for 10 years. The board was also consoled by an "80/20 agreement." Under the agreement, 80 percent of Celebration students must be from Celebration but up to 20 percent can come from elsewhere in the district.
The board has yet to decide how it will determine who attends Celebration School. The agreement to accept Disney's school proposal passed the board on a 4-to-1 vote, with Anderson as the lone dissenter.
Selective planning
Some urban planners also are concerned. Dawn Bisplinghoff, of the East Central Florida Regional Planning Council, says Celebration is designed as a closed community. The town is set off from the surrounding area by a plastic gate that is slated to be replaced by a real one. Bisplinghoff says gates often are built to keep out "lower-income people."
Adams, who has helped plan Celebration for five years, says the town and school were designed to attract "particularly the types of families with children that we wanted to have here."
Bisplinghoff says Disney has said it intends for Celebration to provide affordable housing for some of its 34,000 regional employees. While the average house in the area costs approximately $85,000, according to the Greater Orlando Association of Realtors, Celebration homes will be priced between $127,000 and $500,000. "For them to say those are affordable homes seems strange," Bisplinghoff says. Robin Wells, another central Florida regional planner, says many of Disney's employees work hotel or theme park jobs for $5.25 an hour.
Celebration will attract the wealthier people now living in nearby Orange County and Seminole County, not Disney employees currently living in Osceola, which is "more blue-collar," Bisplinghoff says. With the cheapest home in Celebration costing approximately 150 percent of the average county home, residents will pay much higher property taxes. They also will pay additional fees to support the infrastructure and municipal services, costs that Disney will pass on to residents through so-called "Community Development District" fees. As a planned community, Celebration will have two homeowner associations, which Celebration residents must finance through dues.
What sets Celebration apart from other developments is that its planner is a multinational -- with $10 billion in annual revenues -- that is taking an unprecedented role in the local school. Martha Anderson says Celebration is too reminiscent of 1920s corporate towns, whose inhabitants had the same employer and landlord.
As in Disney's acquisition of Capital Cities/ABC [see "Media Monopoly Makers," Multinational Monitor, September 1995], questions are being raised about whether the behemoth's expanding ownership and control will encourage or stifle innovation and diversity in the neighborhood and classroom. It also remains to be seen whether conflicts will arise between Disney's roles as educator and marketer.
-- Rachel Burstein