Steel: The Strike's Blow

The cumulative effect of the longest nationwide steel strike in history (see NATIONAL AFFAIRS) cut deep into U.S. industry. With stockpiles reduced sharply, dozens of industries are slowing down and beginning to lay off. Auto, appliance, farm-equipment, machinery makers are all tightening their belts, and they face still more trouble before the economy is rolling at full speed again. The mills will need four to six weeks to get back to 90% of capacity, at least three months to fill the empty pipelines.

Detroit's automakers, who consume 15% to 20% of the nation's steel, are worst off, face heavy layoffs in the next few weeks. General Motors has already laid off 60,000 of its 330,000 production workers, will lay off another 60,000 this week. Chevrolet's Framingham, Mass, plant is closed; all but three of Chevy's other twelve assembly plants go down this week. Some of Chrysler's plants are on a four-day basis, and the companies may have to close some parts and components plants altogether this month because of the two-week to one-month lead time for steel to be fabricated after shipment from the mill. Even foreign automakers are hurt: Vauxhall Motors Ltd., G.M.'s British subsidiary, will chop production schedules over the next three months, largely because its imports of U.S. steel were cut off.

Missiles & Rails. The booming construction industry and the railroads are little better off. Builders estimate that it will take 60 to 90 days of renewed steel production before normal deliveries are resumed. Says Robert V. Tishman, executive vice president of Tishman Realty & Construction Co.: "With very few exceptions, all construction jobs in the initial stages, where steel is a big factor, have been stopped." The strike slowed construction of vital defense projects, such as the Air Force's new Intercontinental Ballistic Missile launching base at Denver's Lowry Air Force Base, threatened Atlas ICBM deliveries. Military projects need steel so badly that the Commerce Department has notified steelmakers that top priority must be given to missiles, missile-launching sites and nuclear submarines.

To the nation's harried railroads, who hoped for a boost in booming 1959, the strike dealt a smashing blow. In 13 weeks the roads lost an estimated $459 million in gross revenues. Railroad employment on Sept. 30 fell to 797,195, the lowest since 1900. Third-quarter rail earnings, when they come out in the next several weeks, will not make pleasant reading.

Repairs & Shortages. In the face of tremendous demand for steel (total stocks are down to 7,000,000 tons, v. pre-strike inventories of 20 million), the industry will have onerous troubles getting back to full production. The lengthy strike caused considerable damage to open-hearth furnaces by cooling and contraction of bricks. One estimate is that some 300 of the 920 open hearths in the U.S. will need costly repairs.

The overall effect on steel has been to take the bloom off what looked like a great year. Though nine-month production is still ahead of 1958, third-quarter production by the few unstruck mills dropped to a bare 8,201,406 tons (v. 33.7 million net tons in the second quarter), the lowest level since 1938. Though the earnings reports for much of U.S. industry still look good, the picture for steel is dark. Last week Allegheny Ludlum Steel Corp., the first of the majors to report for the third quarter, announced a $3,913,320 net loss, v. net income of $1,155,429 last year. The other companies will not do much better.

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