Workers Buy Weirton Steel Summary

  • Last updated on November 10, 2022

In 1983, National Steel sold its Weirton plant to its workers. The workers and union at Weirton hoped to preserve the mill and the community and to offer a way to reconcile competing demands.

Summary of Event

In 1982, National Steel Corporation concluded that there was no future in putting more investment dollars into its plant in Weirton, West Virginia. On March 2, 1982, the corporation issued an ultimatum to the workers at the Weirton mill. Either they would have to buy the aging mill and operate it themselves or National Steel would gradually shut it down. Steel industry Independent Steelworkers Union Weirton Steel Labor unions;Independent Steelworkers Union Employee stock ownership plans [kw]Workers Buy Weirton Steel (Mar. 16, 1983) [kw]Weirton Steel, Workers Buy (Mar. 16, 1983) [kw]Steel, Workers Buy Weirton (Mar. 16, 1983) National Steel Corporation Steel industry Independent Steelworkers Union Weirton Steel Labor unions;Independent Steelworkers Union Employee stock ownership plans [g]North America;Mar. 16, 1983: Workers Buy Weirton Steel[05140] [g]United States;Mar. 16, 1983: Workers Buy Weirton Steel[05140] [c]Business and labor;Mar. 16, 1983: Workers Buy Weirton Steel[05140] [c]Manufacturing and industry;Mar. 16, 1983: Workers Buy Weirton Steel[05140] Loughhead, Robert Bish, Walter Spadafora, Skip Kelso, Louis

Precursors to this decision came long before the announcement. Declining new investment, orders funneled to other National mills, and engineers from corporate headquarters coming to evaluate old equipment as to its usefulness elsewhere in the company were just a few of the signs indicating an impending phaseout of the plant. Economic signs were apparent as well, including foreign steel producers crowding into the American market and the beverage industry’s decision to substitute aluminum cans for steel cans made from tinplate, Weirton’s specialty. The most obvious sign was the steady stream of layoffs that left only seventy-five hundred people working at the mill at the time of the announcement. The mill had employed eleven thousand as recently as 1980.

The Weirton mill was not losing money; the problem was that it was not making enough money to satisfy National’s criterion of a 20 percent return on investment. To satisfy this requirement, National had begun to move out of steel and to diversify into banking, insurance, and real estate. Weirton Steel, at least to National, was not profitable enough to keep.

The plant would also be expensive to shut down. Generous layoff, severance, and pension provisions negotiated in union contracts meant that a shutdown would cost National almost $800 million. National’s best option was to sell the plant, but in the depths of a recession and with economic factors working against it, the aging steel mill would be all but impossible to unload.

On September 23, 1983, the members of the Independent Steelworkers Union, which represented the workers at the Weirton mill, voted by an eight-to-one margin to become the new owners. Weirton Steel became the largest employee-owned company in the United States. In the eighteen months between National’s ultimatum and the vote in September, the workers at Weirton Steel had to deal with the consequences of corporate managers obsessed with short-term profits, the complexity of organized labor, and the problems caused by the separation of ownership and responsibility.

The rescue effort began the day National announced its ultimatum. The mill’s local managers took the lead by establishing a joint committee of labor and management representatives to coordinate the effort. They had to determine whether an employee-owned Weirton could survive. In 1982, major U.S. steel companies lost more than $3 billion. Employment of U.S. steelworkers was falling steadily, and low-wage steel producers such as Brazil and South Korea were continuing to expand their capacity in an already glutted market.

In April, 1982, the committee chose McKinsey & Company, a consulting firm, to help organize the employee ownership bid. By May, with the preliminary analysis completed, the committee started to line up the legal and financial talent needed to negotiate with National. It chose the New York City firm of Wilkie Farr & Gallagher and the investment banking firm of Lazard Freres & Company. In July, 1982, McKinsey & Company issued its final report. Weirton could survive, even within the worst likely economic scenario. The plant was basically sound, its reputation as producer of the best tinplate in the country was intact, and the market for tinplate, although declining, was the most stable of all steel products.

The new company needed to make many changes. The joint committee would have to convince National to cancel contracts for ore and coal from mines that National itself owned. These contracts cost Weirton an extra $20 million a year. The plant also had an overly large management structure. The committee identified at least four hundred management positions that should be eliminated. Compensation would have to be cut 32 percent. Part of the cut would be transformed into stock owned by the workers. Walter Bish, the union president, worked diligently to devise a proposal that workers would approve.

The money to buy the mill was raised in a variety of ways. The Share in Our New Beginning Committee was formed to help defray the costs of lawyers and consultants, whose bills would eventually come to more than $5 million. Retirees proved to be the single most generous group. The group that contributed least were the workers themselves. The buyout was more of a town movement than a union movement.

On March 16, 1983, the parties reached an agreement. The workers would pay National $74.7 million in cash, financed from a $120 million line of revolving credit that Lazard Freres and Skip Spadafora, the joint committee’s financial liaison, secured from a consortium of New York banks headed by Citibank. The credit line carried a favorable interest rate of slightly more than 1.5 percent over the prime rate. The workers would also pay National another $120 million, and the mortgage would be held by National. No payment on the principal was due for six years, and no interest would be paid until Weirton’s net worth reached $100 million. The two toughest issues were those of pay cuts and pensions. The workers agreed to 20 percent wage cuts in return for stock that could be worth as much as $90,000 per worker. Even though nearly half of the union workers would have received pensions had the mill shut down, Weirton Steel workers voted by an overwhelming margin to become the new owners of the plant.


The new company was structured to be run under an employee stock ownership plan (ESOP), a device originally designed by Louis Kelso to give workers an ownership stake in existing companies rather than to enable them to manage companies of their own. The idea was to make each worker an owner of the company. The mechanism to do this was within the pension laws of the United States. National Steel Corporation

Ownership of Weirton initially rested in a trust established under the ESOP. The trust would purchase 6.65 million shares of Weirton stock with a promissory note. As the note was repaid, stock would be issued to employees on the basis of their compensation. The amounts repaid could be deducted by Weirton from taxable income. Weirton acquired from National assets worth $386 million. There was a cash payment of $74.7 million. Two promissory notes with a combined value of $119 million were issued to National. Weirton assumed liabilities of $192 million.

Even though many of the laws in place were beneficial to the newly formed company, many set limitations on worker self-government. Worker voting rights were limited, and even though the joint committee wanted to distribute the stock on a one-share-per-employee basis, it found that this would jeopardize the special tax breaks crucial to Weirton’s capital investment needs. The company ended up distributing shares in proportion to employee compensation instead. In order to satisfy the twelve banks underwriting the buyout, workers had to wait until 1988 to get full control of the board of directors.

Even with the problems that were encountered, the workers and union at Weirton had taken a large step, not only by preserving the mill and the community but also by offering a way to reconcile the competing demands that plagued many plants, causing declining profitability and sometimes bankruptcy. Employees, managers and workers alike, continually push for higher wages and benefits. Their interests are opposed to those of the largely passive shareholders, whose sole interest in a company is to maximize the return on their investment. More often than not, the pressure to produce profits quickly overwhelms other considerations.

The fundamental importance of employee ownership is the alteration of the decision-making process. In an investor-owned company, there is pressure to channel any surplus generated into dividends or profits for the shareholders. When employees own a company, there is greater freedom of choice. The company can hire more people, build new facilities, improve the work environment, offer educational opportunities for its workers, or commit resources to the community at large. Workers as owners generally are more likely to make investments that pay off in the long term than are outside shareholders.

Worker ownership calls for an entirely different conception of labor in an enterprise. Under the typical shareholder system, workers have no legitimate claim on the company; investors who may have little knowledge of the plant, its workers, or its product have complete control through the board of directors. Worker ownership puts the labor movement on the side of productivity as well as security and profitability. Given the general weakness of organized labor, however, it is likely that managers, not unions, will define most worker bids for ownership. No matter who initiates the plan, employee ownership can work and can eliminate many of the manager-worker tensions that plague many manufacturing organizations. Expending less energy fighting among themselves, workers and managers working together can solve corporate problems and use the flexibility inherent in ESOPs to make otherwise unprofitable companies successful.

Weirton appeared to have provided an example of what can be done when workers are made part of the ownership team. In 1984, which was profitless for the steel industry as a whole, Weirton had an operating income of $86 million. In 1987, the operating profit was more than $144 million. Putting workers in control of their own workplace in this case turned a marginal plant into a viable company.

In 1987, the company offered public shares in stock to finance a much-needed modernization campaign. It gained firmer financial footing in the mid-1990’s, but, along with the entire U.S. steel industry, it was hit hard by cheap imported steel. Under growing financial pressures, Wierton Steel declared bankruptcy in 2003 and was purchased by the International Steel Group and later by Mittal Steel Company. National Steel Corporation Steel industry Independent Steelworkers Union Weirton Steel Labor unions;Independent Steelworkers Union Employee stock ownership plans

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Bradley, Keith, and Alan Gelb. “Employee Buyouts of Troubled Companies.” Harvard Business Review 63 (September/October, 1985): 121-130. Discusses employee ownership as a practical alternative to bankruptcies or plant closings, and employee ownership versus other forms of reorganization such as government intervention.
  • citation-type="booksimple"

    xlink:type="simple">English, C. W. “When Employees Run Their Own Steel Mill.” U.S. News & World Report, May 7, 1984, 77-78. Outlines the details of the Weirton employee buyout. Discusses the involvement of the community and the workers in making the purchase of the mill a reality.
  • citation-type="booksimple"

    xlink:type="simple">Epstein, Eugene. “Reluctant Capitalists.” National Review, February 22, 1985, 38-39. Discusses the reactions to and impact of the Weirton employee buyout. Points out the advantages and disadvantages of the Weirton deal and the potential this new form of organization might have.
  • citation-type="booksimple"

    xlink:type="simple">Hoerr, John P. And the Wolf Finally Came: The Decline and Fall of the American Steel Industry. Pittsburgh: University of Pittsburgh Press, 1988. Analysis of the demise of the U.S. steel industry in the 1980’s, with a focus on Pittsburgh.
  • citation-type="booksimple"

    xlink:type="simple">Kuttner, Robert. “Worker Ownership: Blue-Collar Boardrooms.” Current 276 (October, 1985): 11-17. Examines a variety of examples of worker ownership. Discusses historical background and compares the worker ownership arrangements made at People Express, Eastern Airlines, and Weirton Steel.
  • citation-type="booksimple"

    xlink:type="simple">McManus, George J. “Weirton: Coming to Terms with Worker Ownership.” Iron Age 4 (December, 1988): 37-39. Discusses the terms of the Weirton buyout and provides information on the performance of Weirton Steel since the employees purchased the company. Looks not only at the accomplishments but also at the challenges Weirton still faced.
  • citation-type="booksimple"

    xlink:type="simple">_______. “Weirton Steel Begins to Pick Itself Up.” Iron Age 226 (November 7, 1983): 12-15. Interview with Robert Loughhead after he became president of Weirton. The discussion provides the reader with insight into the problems and the hopes and dreams of the newly formed employee-owned steel mill.
  • citation-type="booksimple"

    xlink:type="simple">Smith, Phillip Hartley. Board Betrayal: The Weirton Steel Story Failed Governance and Management Hand in Hand with Arthur Andersen, An ESOP Fable. Pittsburgh: Ladlesheet Press, 2003. Smith was a vocal critic of the poorly governed organization while he served on the Weirton board for eleven years.

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Categories: History