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Last week, when AK Steel Corp.'s chief executive told investors the Middletown-based business was "back in the game," he was signalling the end of the company's period of recovery from a near-death experience.

In 2003, AK Steel faced hard choices. Fresh off net losses in seven of the eight previous quarters and stock prices that had declined some 90 percent, it was losing the battle against global steel leviathans — badly.

Company leaders consistently said they did not want to declare bankruptcy. But they were competing against companies who had picked up assets from bankrupt firms, shrugging off those firms' workers and retirees in the process.

Leaders of AK wanted to find their way back to sustained profitability.

What has emerged from three years of acronyms, plans and promises is a leaner company ready to achieve that goal.

One thing's for sure: This isn't your father's steel company.

Bankruptcy, buyouts

not an option

The plans of CEO James Wainscott — with the endorsement of his Board of Directors — included recharging the company's cash flow through improved customer service and, above all, cutting costs.

Since 1999, there has been one lockout each at two AK mills totalling nearly 48 months. (One lockout, at Mansfield Works, began in September 1999, shortly before AK acquired that plant from a previous owner, Armco. That lockout ended in December 2002.)

More recently, eight of nine of what the company calls "new-era" labor agreements were reached; the ninth is one 1,857 Middletown union members await.

"I have no desire to go the route that some of our competitors have taken and use the bankruptcy laws to eliminate pensions and benefits for our 32,000 retirees," wrote Wainscott in a October 2003 edition of AK's newsletter. "Having said that, we cannot operate indefinitely without some significant changes to our cost structure."

However, there was another option, the local union president said.

"Certainly the pressures of the industry have caused AK Steel to downsize the force and ensure some flexibility," said Brian Daley, president of International Association of Machinists and Aerospace Workers Local Lodge 1943, which has been locked out of Middletown Works since March 1.

Daley said the company should have done what automakers have been doing for years: Establish buyout programs and continue to bargain in good faith with hourly employees.

"That would have been an extraordinarily expensive proposition and unnecessary," said Alan McCoy, AK vice president of government and public relations.

McCoy said more than 1,200 Middletown Works union members since 2003 have retired voluntarily.

"To suggest at this point that we should have provided some economic incentive ignores the cost that it would have placed on us," he said.

Employee numbers drop

When Wainscott took the helm at AK Steel in September 2003, the company had problems.

On Oct. 26, 2003, AK Steel's stock was $2.23 per share in the wake of a nearly $400 million net loss through the year. On Thursday, the company's stock closed at $15.24, an increase of more than 625 percent.

In October 2003, the company's steel group totalled 9,000 employees, including 6,790 hourly and 2,210 salaried workers and 13 executive officers.

As of this month, steel group employment has dropped 26 percent — and still falling, albeit more slowly than in the past two months. Of the decrease in employees during the past three years, five have been executives, 820 have been salaried employees and 1,530 were hourly workers.

The drop in hourly employees during the past three years, at 23 percent, has been the smallest change, according to percentages.

New contracts cut costs; local mill chugs on

Amid retirements, new-era labor contracts were negotiated with each of the company's unions except the one in Middletown.

Hundreds of job classes companywide have been reduced to five or seven, which has led to increased flexibility and cost reductions by allowing employees to multi-task, company officials have said.

As Wainscott said Tuesday, "We needed major repairs ... to our noncompetitive labor agreements. The status quo was not an option for AK Steel."

It took 39 months in Mansfield for AK Steel hourly employees to settle on a contract; another two years before the last member of Mansfield's United Steelworkers of America local clocked back in.

Closer to home, 1,857 Machinists picket the gates at Middletown Works instead of entering them. Since the lockout began March 1, contracts with AK Steel's Zanesville and Butler, Pa., unions have been reached, making them the seventh and eighth agreements of nine.

"The sole exception to our attaining new-era labor agreements is with the Middletown Works union, where to date, that union has refused to change with the times," Wainscott said Tuesday. "But at each of our other locations, those union leaders and their members got it."

When investors inquired about how the Middletown mill was working with about 1,800 temporary replacement and salaried workers, Wainscott was emphatic.

"The plant is running exceptionally well," he said. "Couldn't be more pleased with the progress that they've made. It's a phenomenal undertaking and they've done simply a magnificent job."

Specific numbers from each plant have not been released.

Niche products,

three fixes

In August 2004, Wainscott introduced the second phase of the recovery, which "fixed" contracts with customers, labor unions and suppliers.

As a result, the company has increased revenues by nearly 50 percent — or about $2 billion to approximately $6 billion — set shipment records and established new contracts with customers and raw material suppliers for 2007, according to the third quarter report.

In addition to the fixes, AK Steel focused on niche products and customer service, company officials have said.

To further that concept, the company announced Monday a $55 million project to increase electrical steel production at its Butler, Pa., and Zanesville plants.

The future

AK Steel's financial future will be based on a new program — with another acronym: PEDAL.

Unveiled Tuesday, PEDAL intends to take advantage of profitable growth initiatives like niche products; enhance value for shareholders; fund the pension plan and pay down debt; maximize assets, and; create long term profitability. Still, AK Steel executives are expecting to take a hit from sluggish automotive, housing and construction industries.

Said Wainscott: "Unlike virtually every other steel company board in America, (AK's board) chose not to throw in the towel, not to abandon the retirees and give us a chance. Perhaps the only change we might ever have to rescue, to put this 106-year-old company back on its feet.

Contact this reporter at (513) 705-2840 or dgreber@coxohio.com.