The iconic Republic Building in Cleveland once housed LTV Steel and Wilbur Ross’ International Steel Group, before Ross sold the company to Arcelor Mittal. (PHOTO: Tim Evanson, Flickr CC)
Aaron J. Brown is an Iron Range blogger, author, radio producer and columnist for the Hibbing Daily Tribune.
May 25, 2000: The morning after LTV Steel announced it would close its Hoyt Lakes taconite plant, miners lined up outside the Workforce Center in Virginia, Minnesota. Each wanted to be first to submit a job application to another mine on the Mesabi Iron Range, none of which were hiring.
Though employed to monitor youth programs, I was quickly deputized to assist the overwhelming lines of worried miners. I was 20 years old. In my first meeting of the day I sat across from a man holding the original copy of a resume pecked out on a manual typewriter before I was born.
All the man wanted was the job he already had. All I could do was circle a typo on his old resume and suggest he use more dynamic wording. I disappointed both of us.
LTV would close for good in 2001. That Christmas, a very lost Santa Claus stopped at my family’s Christmas Eve gathering to ask my grandpa for directions to a private party. He wore steel-toed boots “issued by LTV! Ho ho ho!” Miners would retrain for new careers. Some found work at other mines. Many left the area. This is the story of deindustrialization in America.
What happened to LTV was complicated. What began in the early 1950s as Erie Mining eventually merged and changed hands through booms and busts to become part of the corporation Ling-Temco-Vought. After an epic 1980s bankruptcy, again swamped by debt, LTV Steel first announced the closure of its mine in Hoyt Lakes before declaring bankruptcy in late 2000. Once divested from the mine the following year, private investor Wilbur Ross bought out the remaining steel mills.
Dubbed, “The King of Bankruptcy, Ross gained a reputation of turning dying traditional companies like textile plants and steel miles into lean, mean companies capable of surviving the modern economy. Of course, with efficiency came consequences for workers — these companies would shed many thousands of jobs and millions of dollars in “legacy costs.”
For those unaccustomed to the term, legacy costs mean pensions and benefits. Bankruptcy and new ownership, especially when accompanied by cooperation from unions, allowed Ross and his company to unload scads of workers and retires onto the badly underfunded federal Pension Benefit Guarantee Corporation. The PBGC usually only pays dimes on a dollar for discarded pension plans.
If you don’t know someone who’s had their pension kicked to the PBGC, you don’t live on the Iron Range.
In just a few years, Ross would sell his newly formed International Steel Group to ArcelorMittal, the world’s largest steelmaker, and many of those “revitalized” mills would close anyway. Ross might have saved jobs, but only temporarily and only until he made himself a billionaire.
Two weeks ago, President-elect Trump announced he would appoint Ross to be his Commerce Secretary. Ross and Trump go way back. In the late 1970s, when working for the New York office of the well-known British financial firm Rothchild, Inc., Ross assisted Trump with financing to save his struggling hotel and casino empire. (Interestingly, both were Democrats at the time).
No one can say that a Trump Administration, with Ross at Commerce, will be silent on the matter of trade. Both Trump and Ross support for the kinds of steel tariffs credited with restarting United Taconite and Northshore Mining here on the Mesabi Range this past fall. Ross has indeed specialized in turning struggling companies into North American market competitors. Whatever happens to America’s steel industry will happen with Trump and Ross’ hands firmly on the tiller.
We know that about half the Iron Range voted for Trump, often because of the very trade and industrial concerns that consumed the jobs at LTV. But in doing so, the Range also created an interesting board of directors for the PBGC, which could end up busy if more steel companies consolidate as many industry people suggest to me they eventually will.
There’s the presumptive Commerce Secretary Ross, of course, but also presumptive Secretary of the Treasury Stephen Mnuchin. He’s a former Goldman-Sachs executive dubbed by financial press as “The King of Foreclosures.” (No shortage of “kings” in this court). The automatic chair of the PBGC board is the Labor Secretary. As of this writing, the leading candidate for this job was fast food CEO Andrew Puzder, the guy who runs Hardee’s who also has a long history of opposing minimum wage increases.
Like it or not, we run with the wolves now. The best wolves around. They assure us that our delicious, fleshy jobs are safe with them.
Meantime, last week the Speaker of the House Paul Ryan, the President-elect’s top ally in Congress, said that free school lunches for impoverished children give kids “an empty soul.”
As yourself, who will feed and who will starve under the coming government?
If you feel good about all this, you must run with higher class company than I do. All I wanted to do almost 17 years ago was tell that laid off miner that everything was going to turn out OK. I couldn’t. Now, I don’t know what the Trump Administration will mean for the Iron Range. But I do believe it’s as likely to hasten our fate as it is to alter it, just as Ross helped, then sold out those steel mills.
All the more reason for the Iron Range to plan for economic change, rather than fight it.
Aaron J. Brown is an author and college instructor from northern Minnesota’s Iron Range. He writes the blog MinnesotaBrown.com and hosts the Great Northern Radio Show on Northern Community Radio. This piece first appeared in the DATE edition of the Hibbing Daily Tribune.
Unfortunately , they will continue to tilt at windmills, IMO…and dig their heels in more deeply in denial .
You just can’t help yourself Aaron…you always have to put this false narrative out there, front and center – “All the more reason for the Iron Range to plan for economic change, rather than fight it”.
Both you and I know no one on the Range is fighting against economic change (other than the extreme, sky is falling, anti wood burning, rail is safer than pipe, I want water purer than God created wackos).
Yet you continue trying so hard to create the Obama “us vs. them” divisive approach to all issues which is destroying the country. Why is beyond me..
I would argue that most opinion leaders on the Iron Range remain fixated on our mining economy. I see little evidence to the contrary. My argument, demonstrated by recent experience and a reasonable view of what’s happening now, is that even the most optimistic outlook for mining includes insufficient employment and stability to maintain our communities with a high quality of life. That’s evidenced by the continuation of loss of population, lost business stock, declining housing stock, less fiscal stability in the cities and schools on the Iron Range.
So I do believe that our obsession with the mining economy is a barrier to building the kind of economic relationships with other industries and with workers and entrepreneurs who might otherwise consider living and investing here. That doesn’t mean I’m against mining, just that we must diversify. I’ve said this many times, of course, and you know that. But for the benefit of those new here, that’s my response.
I also believe that the practice of using bankruptcy to screw over people who have pensions is immoral, especially when the PBGC is simultaneously prevented from being able to pay back those pensions in full. I don’t know what the “us vs. them” is in that equation, other than that I believe that business people who default on their workers while protecting their associates and personal fortunes are especially evil. It’s part of my political philosophy. I can tolerate political differences on most anything, but this is a character issue. It’s about honesty and fulfilling commitments.
We shouldn’t be obsessed with mining but we shouldn’t turn our backs on it either. Every avenue should be explored.
Which is what everyone says. And everyone nods. And then we spend another year talking about what might happen if prices get better or when some new project finally gets its financing. Meanwhile, everything else stagnates. It will take conscious focus on some non-mining topics for them to get the attention they deserve. Mining tends to demand our attention. We’re going to need to “let mining be mining” while the rest of the Range works on some alternative paths for people to thrive in this community.
Have you written an IRRRB grant request for your March 20, 2016 proposal yet?
Not sure what else you are thinking that people should be consciously focusing on that is stagnating because people are thinking about mining? Broadband coverage is making some slow progress. A decent chunk of the IRRRB budget continues to be spent improving the downtown corridors of the towns of the region. A decent chunk of IRRRB budget continues to go towards making “wagers” at prospective new/existing employers in the region.
Maybe we should do what what we say?
I guess my only objection is when someone says to progress in other directions we have to be actively against mining or mining expansion.
You nailed it. If the anti mining sentiment could be left out completely I would love to get together and work with anybody and everybody willing to explore non mining opportunities on the Iron Range. But the anti mining crap always comes oozing in from the seams.
You are correct! Thanks!
CD 8 voted for Trump by a healthy margin and for those who voted for Mr. Trump you will get what you voted for. My gut tells me that he will not be the person you thought he would be. This revelation about one cabinet pick is but one small part of a slick Trumpian plan – now fully owned by the Republicn Party – to tear down the very thing many of you and we have spent our lives building. For that I am sad for all of us.
Is it against mining to be concerned about the environment ? Aaron was correct in the titling of his article . That so many think Trump and his minions give a care about the workers just boggles my mind. His only concern is to enrich himself and his cronies. Time will most certainly tell…it always does.
You gotta change what you read Jackie…
You gotta change what you read Jackie…
Aaron, you need to educate yourself as to why companies sometimes need to shed those legacy costs to survive. Look up the worker to pensioner ratio.
I certainly know why companies shed pensions. It infuriates me that the same people who think that’s necessary also oppose fully funding the PBGC so that people most affected by the “survival” of stockholders can afford to stay in their houses and cover their medical expenses.
What infuriates me is people who think it’s wrong for companies or people who follow the law to be blamed for breaking the law when they’re simply doing what’s right and legal.
I think, as a matter of principle, that because something is within the law it is not necessarily right.
By knowing why but not mentioning it in your article you provided a very one-sided view and a perhaps dishonest view imho. Fully funding of the pbgc is a different issue.
I mention the practice of shedding legacy costs and the underfunding of the PBGC in the same sentence in this piece. I understand that considering them separate issues is how some CEOs sleep at night, but for the discarded worker they are very much the same issue. Shedding legacy costs is a practice designed to protect the stockholder. If we put as much energy into protecting the worker who did everything right their whole career, we would have a stronger middle class and fewer “legacy costs” on the federal and state governments. But that is not a concern to some, who curl up in silk sheets lamenting those poor fellows. “Too bad the PBGC can’t help them,” while donating millions to elect a Congress that won’t fund anything. I understand we may disagree, but my position is not dishonest.
The PBGC is another example of a failed/failing government established program. It’s looming insolvency has caused some politicians to seek taxpayer assistance for the PBGC, but the PBGC is never supposed to have access to taxpayer dollars. The PBGC was established as a self-financed entity, meaning that it can only pay out as much in benefits as it takes in from premium payments.
Some people, however, are pushing for (and succeeding) in having taxpayer funds to cover the PBGC’s deficits. Taxpayers were never supposed to finance private-sector pensions. Any system that allows taxpayers to be on the hook for the unfunded promises of private pensions will inevitably encourage excessive promises. This is especially true for union-run plans, which effectively shelter contributing employers from having to declare bankruptcy before the plan fails and the PBGC begins paying benefits.
Taxpayers need to save for their own retirements. They should not be asked to cover the shortfalls in the pensions of their friends, families, or neighbors through a PBGC bailout.
I believe if a company commits to paying a pension to its employees then that pension plan should be fully funded. However that arrangement is a little old school and not an issue like it used to be years ago. Company matched 401k’s and IRA’s are a great employee option that allow a modern worker who doesn’t necessarily work for the same company for 30-40 years like our parents and grandparents to pursue opportunities throughout their career and continue accumulating retirement wealth that they actually have control over and the modern employee does not have to be a slave to any company in the modern era. You always hear employees that are still a part of an old school pension say “I wish I could go after a job at company X but I have 11 years here so I cant really leave now”. Its actually kind of sad.
If the company had not shed the legacy costs it would have gone out of business. How can any business support more pensioners than workers and stay in business? The math does not work. You need to look at a little bigger picture. Otherwise you are doing your readership a disservice with a lack of journalistic integrity.
If companies, by mismanaging or underfunding their pensions, then enter bankruptcy because their industries are changing faster than their thinking, we have a national problem. Not just a stockholder problem, but something that affects workers, communities and the whole economy. It’s not fair that CEOs and stockholders walk away clean while workers and communities pay the price. That’s a very big picture look at this. By the way, this is a commentary. It’s an opinion, and clearly labeled as such.
And Bob, the PBGC only failed because *it wasn’t funded.* Same as the pension plans to begin with. If you don’t save you don’t have savings. Same as anything else.
Nobody ever heard of economic inequality? Team of economists led by Raj Chetty focused on census research, millions of tax records that spanned decades and found:
Children who reached age 30 in 1970 were 91% likely to have higher incomes than their parents.
Children who reached age 30 in 2010 were only 50% more likely to have higher income than their parents.
The former spent their prime working years in a rapidly growing economy and money flowed to rich, middle class and poor alike.
In the 1980’s economic inequality began to rise due to globalization, tech changes, govern policies that favored the rich and a slowdown in attaining education and work force skills.
The American economy is far larger and more productive than in the 1980’s even if it isn’t growing as rapidly. Per-capita GDP is almost twice as high now. That increase alone should allow more children to live better than their parents. They don’t because the fruits of the growth has gone disproportionately to the wealthy. Incomes have stagnated due to the rise of corporate power, weakening of labor unions resulting in profits rising at the expense of wages.
Saying taxpayers need to save for their own retirements is a horrible, sick joke. Plenty of hard working, responsible folks lost most or all of their retirement funds 10 years ago due to greedy and corrupt bankers and are fortunate if they were some of the minority to able to regain that money. Why the heck do you think so many people who still had jobs suddenly decided to delay retiring after that happened?
That study would then use a base line of parents coming of age in the depression era? Not too tough to do better than you parents at 30 if they came of that age in the 1930’s & early 1940’s. Over time each generations increase has been smaller compared to a crazy starting point around the depression. Eliminating and/or preventing high paying mining jobs certainly won’t help our friends and neighbors earn a better living moving forward in our local communities.
Bless their souls, USS, Hanna, and Cliffs largely kept their pension plans funded. National Steel, LTV, Reserve, Evtac, and Bethlehem didn’t. That’s why those companies defaulted on their pensions, and incidentally, aren’t in business any more. I agree that not funding the plans sufficiently is immoral and should be illegal. The other pension benefits like medical insurance promised by these companies were funded directly and simply ended when the company died.
The whole steel business changed so quickly. The people in charge of the older companies were largely blind to the effects of the changes, a monumental failure for some very highly paid people.
Don’t blame people like Ross for the pension problems. The pensions were dead before he came on the scene. He was able to pick up a bunch of cars from a junkyard (all the plants were down and dead when he bought them) fix some of them up, and drive them again. Some of those plants are still running 30 years later and paying wages and benefits (and consuming pellets) because of him. Others stayed dead and were scrapped with the loss in market share for integrated steel mills.
If you want to blame someone, blame Nucor, Ipsco, and Steel Dynamics for having better managers that could actually make money making steel in the bad years. These are the ones who took away two thirds of the integrated steel companies’ business. They use almost no iron ore.
Yes, diversification is the key to the area’s future. Problem is, who wants to locate here? The IRRRB has to pay massive bribes to get anyone to come here, and those that do usually leave when the free money runs out. How do we get around that and find someone who actually wants to locate and stay here? Especially someone who has the talent and drive to be a success no matter where they are?
We aren’t growing them locally. Everyone from the Range who’s a success became a success after they left the area.
Ind, way to go ignoring where our money has been going in the last few decades.