AK Steel Holding Corporation History

Company Perspectives:

AK Steel offers a diverse product line unmatched by any other competitor in the market. Our flat-rolled carbon, stainless and electrical steels meet and exceed specifications of the world's most demanding customers in the automotive, appliance, construction and manufacturing markets. Key Dates:

Key Dates:

1899:

American Rolling Mill Company is established.

1910:

Another product plant is opened under the name Ashland Works.

1948:

The company adopts the acronym ARMCO.

1978:

The firm changes its name to Armco Inc.

1985:

Headquarters is moved to New Jersey.

1989:

The company enters into a limited partnership with Kawasaki Steel Corporation of Japan.

1994:

AK Steel Holding Corporation is established.

1995:

Headquarters is moved back to Ohio.

1996:

The company announces plans to construct a $1.1 billion manufacturing plant in Rockport, Indiana.

1998:

Production begins ahead of schedule at the new Rockport facility.

1999:

The company acquires Armco for $1.3 billion.

2001:

The company begins construction on the first antimicrobial home in the United States.

Company History:

AK Steel Holding Corporation is the controlling body for numerous steel production companies throughout the United States, including its own namesake, AK Steel Corporation. AK Steel manufactures and sells value-added hot-rolled and cold-rolled steel, flat carbon steel, stainless steel, and specialty electrical steels. AK then sells its product to other manufacturers, such as the construction, automotive, and appliance industries. AK Steel Holding Corp. also owns Sawhill Tubular Products, a steel pipe and tubing manufacturer; Douglas Dynamics L.L.C., the largest producer of snowplows and ice control products in North America; and the Greens Port Industrial Park in Texas. AK Steel Holding acquired steel producer Armco Inc. in 1999, a purchase that secured the firm as a leader in the carbon, stainless, and electrical steel markets.

The Early Years

The history of AK Steel Holding Corporation itself (incorporated in 1994) is extremely short, yet the company's roots actually date back to the late 1800s. In 1899, the American Rolling Mill Company was created to engage in the production of rolled steel, mainly for other manufacturers to use in their own products. After 20 years of successful production, the company had laid plans for and broken ground at the site of a new manufacturing facility at Middletown, Ohio. The facility, dubbed Middletown Works, remained in operation into the 1990s as one of AK Steel's two principal production plants.

The company's second production plant was erected in Ashland, Kentucky, 11 years later. The facility was named Ashland Works and joined Middletown in the production of both coated and uncoated rolled steel. The plants produced the company's custom-engineered, low-carbon steel products through two different processes. Both hot and cold flat rolling procedures were used to create the company's high-strength steel sheets.

The American Rolling Mill Company continued to operate its steel mills under that name for almost 30 years after Ashland was constructed. Then in 1948, the company adopted the acronym 'ARMCO,' and soon thereafter, changed its formal name to Armco Steel Corporation.

Acquisitions in the 1950s--70s

After realizing a decent amount of success with the Middletown and Ashland production centers, Armco began to purchase additional steel facilities in the 1950s. These purchases were added to the company's existing holdings, subsequently adopting both the Armco name and business procedures. This practice continued for two decades, as Armco expanded its operational base both geographically and throughout the steel industry itself. Geographic expansion enabled the company to distribute its finished product to a wider base of customers more easily, while expansion in the steel industry gave the company more market share.

In 1978, Armco Steel Corporation changed its name to Armco Inc., which more accurately reflected the company's few nonsteel holdings that had been added during Armco's acquisition phase. The original steel mill holdings, Middletown and Ashland Works, were placed in a newly formed group called the Eastern Steel Division. The company then left its Ohio-based headquarters location and moved to New Jersey in 1985, believing that the new location was better suited to serve the majority of its holdings' and customers' needs.

By the end of the 1980s, Armco Inc. was continuing to gain market share and increase annual sales, in an industry that many felt was prone to low profitability. Sales figures were hovering near the $1 billion mark, and the company began exploring options for future growth. In 1989, Armco entered into a limited partnership with the Kawasaki Steel Corporation of Japan, merging portions of each company to form the Armco Steel Company, L.P. Another partnership formed by Armco was with the Japanese steel maker Itochu Corporation, a deal that gave Armco an almost 50 percent share of Nova Steel Processing, one of the company's present-day operating divisions.

The Early 1990s: Birth of AK Steel Holding Corporation

Entering the 1990s, Armco's annual sales had surpassed the $1 billion mark, with 1991 sales reaching $1.3 billion. Unfortunately, however, the company was not as profitable as its sales figures might indicate. Armco was realizing firsthand what analysts had been preaching for years, which was that the steel industry required such a large output of operating expenses that achieving a high profit was incredibly difficult. Armco had found itself with approximately $600 million in debt and negative equity, and made the decision that it was time to make moves to turn its situation around.

Armco began searching for a new management head to give the company some direction and build a new era of profitability in the 1990s. The company finally persuaded Tom Graham to come out of retirement and lead Armco Steel Company's redirection efforts. In 1992, at the age of 65, Graham had spent almost 45 years working in the management of different steel companies around the United States. Earlier in his life, Graham had spent substantial time at J & L Steel, U.S. Steel, and Washington Steel. When he came to Armco, he brought with him another ex-U.S. Steel and Washington Steel coworker, Richard M. Wardrop, Jr.

Graham and Wardrop immediately set about the task of turning Armco's financial situation around. First came an extensive evaluation of the company's holdings, which resulted in the divestiture of more than ten of the company's subsidiaries and operating divisions. These operations either lacked efficiency in production or profit potential and were relinquished in an effort to lower Armco's operating costs and subsequently boost earnings. Another notable change that occurred within the first year of Graham's tenure was the replacement of a whopping 75 of the company's top executives and managers.

Next, the newly restructured Armco worked on improving its actual operations and service. The quality of the company's finished steel product was improved upon first, in order to increase its ability to market and sell the steel to its customers, such as the construction, automotive, and large appliance industries. Then came an improvement in Armco's service, with an emphasis on increasing the company's ability to deliver its products to buyers on time.

Meanwhile, Armco had acquired a new subsidiary, Cyclops Industries, a producer of specialty steel products. In 1993, Armco again moved its corporate executive offices, this time from New Jersey to Pittsburgh, Pennsylvania. The following year, the limited partnership between Armco and Kawasaki was altered slightly and AK Steel Holding Corporation was finally born. Its main operating division became AK Steel Corp., at which steel production continued as normal. AK Steel Holding Corporation was then taken public later that same year, and the sale of common and preferred shares of its stock helped the company earn $654 million. The money was used to pay off AK's debt, leaving the company's balance sheet clear and in excellent financial condition.

Success in the Middle to Late 1990s

After relocating its corporate offices again--this time from Pittsburgh back to Middletown, Ohio--AK Steel entered 1995 with high hopes for strong financial success. Profits throughout the entire steel industry dropped, however, which briefly signaled problems through a turn of events. But despite difficulties in the industry, AK Steel still managed to achieve an estimated $146 million on sales of $2.26 billion. As a result of this success, the Regis ICM Small Company Mutual Fund increased its holdings in AK Steel, noting the fact that the company was averaging annual growth rates in the realm of 15 percent and above.

Graham then made the risk-laden decision to forge ahead with plans to construct a brand new, state-of-the-art steel production facility in Rockport, Indiana. The cost of building the new manufacturing site was estimated at $1.1 billion. Right away, many analysts and industry experts criticized the decision, some in awe of the fact that a company that had just rescued itself from massive debt would choose to put itself back into that position again. Immediately, comparisons were drawn between AK Steel and competitor Inland Steel, who had built its own $1 billion steel facility in a joint venture with Nippon Steel in the beginning of the 1990s. Inland's complex was completed in 1993, and four years later had still not earned a good return on its cost. Some thought that AK Steel should take a hint from Inland's situation and reconsider its plan.

But Graham insisted that the addition of a newer and more efficient production facility was important to AK Steel's future. He cited increased efficiency and lower energy consumption as factors that would aid in lowering AK Steel's operating costs if the new Rockport site was erected. In addition, the new facility would be equipped to produce 80-inch-wide rolls of carbon steel, whereas all existing mills were capable only of producing rolls with a width of 72 inches. Graham believed that this would increase the demand for AK Steel's finished product, because it would allow auto makers to save money through elimination of the necessity to weld together two pieces of steel.

In 1997, Graham retired once again at the age of 70. Wardrop took his place at the head of the company as chairman and CEO with the intent to continue not only Graham's plans for the new facility, but also the business practices that had helped AK Steel recover in the beginning of the decade. James Wareham, former president of Wheeling-Pittsburgh Steel Corp., was elected president of AK Steel.

Although the company appeared to be financially back on track--sales in 1996 reached $2.3 billion--safety problems and rifts with its unions were casting a shadow upon its successes. The company had one of the worst safety records in the U.S. industry in 1996 with ten fatalities since 1993 and nearly $2 million in fines paid out to the Occupational Safety and Health Administration (OSHA).

By 1998, however, management was able to turn the safety issues around by focusing on eliminating workplace injuries, revamping its safety and health programs, and getting employees as well as contractors involved in safety awareness. Its positive safety performance was rated by OSHA and the American Iron and Steel Institute, and the company claimed that it had the best performance out of the eight largest integrated steel firms in the United States.

Along with its turnaround concerning safety issues, AK Steel was securing positive operating results and in November 1998 its Rockport facility began production nearly three months ahead of schedule. While many of its competitors fell victim to falling prices in hot-rolled steel due to overcapacity in foreign markets, AK Steel's stock rose by 50 percent from August 1998 to January 1999. The firm's focus on cold-rolled steel and coated steel in its Rockport facility gave it an edge over competitors and left it nearly untouched by the hot-rolled steel crisis, squashing analyst speculation that constructing the plant would have devastating effects on the firm.

In 1999, AK Steel announced plans to acquire Armco Inc. in a $1.3 billion deal that would secure its position as the fourth largest steelmaker in the United States. The deal would give AK Steel access to Armco's specialty steel products including Series 400 stainless steel, a market in which the firm controlled an 80 percent share. Later that year, however, the firm was once again plagued with labor issues when labor negotiations failed with about 650 United Steelworkers of America hourly employees at its Mansfield Works plant. AK Steel replaced the workers with temporary help and salaried employees, but the problems cost the firm nearly $21 million in profits that year. Nevertheless, the firm secured record revenues of $4.6 billion and earnings of $132.4 million.

Focus on Safety, Service, and Quality in the New Millennium

AK Steel entered the millennium dealing with labor issues, rising energy costs, and weakening market conditions. At the same time, Wardrop was awarded the Green Cross for Safety medal by the National Safety Council for the company's turnaround in safety issues related to employees and contractors--the United Steelworkers of America raised issue with the council for praising Wardrop, claiming it was undeserved.

To combat the issues plaguing the industry, AK Steel focused on quality and service as well as safety. It also continued to focus on cold-rolled steel due to the ongoing problems in the hot-rolled market. In 2000, hot-rolled steel accounted for just 5 percent of total shipments.

The company also began an innovative project with AgION Technologies in which the first antimicrobial home would be built in the United States utilizing AK Steel's carbon and stainless steels coated with AgION's antimicrobial compound, a product that reduced the growth of bacteria, mold, and fungus. The 11,000-square-foot home on 130 acres in California was entitled Camino de Robles--path of oaks. Management felt confident that it would continue to successfully battle negative market conditions and, by focusing on innovation, safety, service, and quality, it would continue to remain a leader in the industry for years to come.

Principal Divisions: AK Steel Corporation; Sawhill Tubular Products; Douglas Dynamics L.L.C.; Greens Port Industrial Park.

Principal Competitors: Bethlehem Steel Corp.; The LTV Corporation; USX-U.S. Steel Group.

Further Reading:

• 'AK Steel's Rockport Works Launches Early Start-Up,' Appliance Manufacturer, November 1998, p. 20.
• Frazier, Mya, 'Raw Material Prices Auger Hard Year at AK Steel,' Business Courier Serving Cincinnati, April 7, 2000, p. 27.
• Nelson, Brett, 'The Cortez of Steel Doesn't Look Back,' Forbes, January 11, 1999, p. 192.
• Robertson, Scott, 'AK Steel Chairman Is Hailed, Assailed,' American Metal Market, July 18, 2000, p. 5.
• ------, 'AK Steel, Once Under Fire, Shows Safety Success,' American Metal Market, March 10, 1998, p. 8.
• ------, 'The Country's Sixth-Largest Steelmaker, AK Is Poised to Move into Fourth Place,' American Metal Market, May 24, 1999, p. 1.
• Rudnitsky, Howard, 'A Throw of the Dice,' Forbes, February 10, 1997, p. 47.
• Sekhri, Rajiv, 'AK Steel Delivered Year of Record Performance,' Business Courier Serving Cincinnati, February 5, 1999, p. 3.
• ------, 'AK Steel Turns Around Its Financial Performance,' Business Courier Serving Cincinnati, May 30, 1997, p. 30.

Source: International Directory of Company Histories, Vol. 41. St. James Press, 2001.

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