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How are things in Granite City? Metro East town may be canary in the steel mill

This article first appeared in the St. Louis Beacon, April 30, 2009 - How are things in Granite City?

It's a question that Mayor Ed Hagnauer gets asked frequently these days -- largely because of the 2,000 steelworkers laid off in recent months from U.S. Steel's Granite City works. Their plant may be idle, but not so the members of the local United Steelworkers union who have captured national attention with "Put America Back to Work" rallies in support of President Barack Obama's stimulus package and fair trade.

Reporters from national wire services and the New York Times have come to town searching for clues about how the recession is affecting the heartland. Last week, CNN's Lou Dobbs aired a segment featuring local steelworkers upset over the importing of steel pipes made in India for the Keystone Pipeline that will deliver oil from Alberta, Canada, to Wood River.

Google "Granite City and steelworkers" these days, and you'll likely turn up stories and comment from all over the world.

To put things into perspective, the U.S. Steel plant, with its 2,245 workers, is the biggest employer in town. About 39 percent of the laid-off workers live in this city of 30,000 residents, Hagnauer said.

The layoffs, which began at the end of 2008, have contributed to an unemployment rate of 13.6 percent in March, up from 7.1 percent the year before. That change -- 6.5 percent -- was the state's highest.

And yet, Hagnauer says, his city is stable and does not have a funding problem right now. There is no city earnings tax, for example, that would have taken an immediate hit. 

His concern is that unemployment benefits will begin to run out for the workers this summer.

"People continue to come to Granite and ask, 'How is this impacting you?' " Hagnauer said. "Well, it isn't right now. Because these guys are being paid at a rate that some of them can live by. It's less than what they had, but it's still a livable income right now. Come June, July when they start losing benefits, then that is when the problem will exist for us. It will hit our stores and restaurants, and that's where the impact will be for us, with our sales tax and things like that."

"We can weather the storm, as long as they get our guys back to work within a reasonable amount of time -- the next three or four months. If we can do that, then I think we'll go through a little bit of a downturn. But I think we were set for a little bit of a downturn, and we can manage that."

A sharp turn for everyone

Local steelworkers have seen tough times before, but this layoff felt much different because it followed a spate of record profits for U.S. Steel, said Hagnauer, 56, who has lived in Granite City all of his life. U.S. Steel acquired the Granite City plant in 2003 when it bought the bankrupt National Steel Corporation.

Jonathan Ferry, the city's economic development director, said the layoffs caught everyone by surprise.

"I guess what's so unique about this time around is that it wasn't just 'ups and downs' -- it was such a sharp turn. The 'up' was just last year; it was the highest profit year for U.S. Steel in their history,'' Ferry said.

In the second quarter of 2008, the Pittsburgh-based company posted a net income of $668 million, which was double the previous year's numbers. It was the highest quarterly sales and net income in the steelmaker's history -- driven along by global demand, including the Olympics in China. Contrast that to U.S. Steel's report Tuesday that it has suffered a net loss of $439 million in the first quarter of 2009.

As the U.S. economy melted down last fall -- courtesy of the sub-prime mortgage collapse -- so did the demand for steel in consumer goods and construction materials.

"We never really expected it," said Hagnauer. "We go through layoffs occasionally. Over the years we've gone through threats to the mill. Through bankruptcy. But we always bounce back. This is the only time that we've really been concerned that things are maybe worse than what we hoped for. I still think we'll reopen -- it's just a matter of how long it's going to take."

To some extent, hope rests with a new state-of-the-art coke facility being built next to the Granite City works - a partnership between U.S. Steel and SunCoke Energy Inc. The $600 million project features low-emission heat-recovery technology to process coal into coke. Energy generated in the process will be used in a cogeneration plant owned and operated by U.S. Steel. Construction was to be completed late this year, adding about 88 jobs -- and long-term viability to the plant.

Russ Saltsgaver, president of United Steelworkers Local 1899, said Tuesday that despite U.S. Steel's grim first-quarter financial report, work continues on the plant upgrade.

"It's still moving forward, and it's on target for completion later on this summer," Saltsgaver said. "Now if they stop construction on that, I think it would give people reason to be alarmed -- but they have not done that."

According to the Associated Press, John Surma, CEO for U.S. Steel, said at a shareholders meeting Tuesday that the Granite City plant -- which he described as competitive and productive -- will reopen when the company gets orders for steel. Surma didn't say when that would be.

Fair trade: What's a mayor to do?U.S. Steel is not the only Granite City manufacturing plant to hit a rough spell. Amsted Rail, for example, has laid off more than 500 workers since February. But, Hagnauer points out, other trades and businesses are working in the city, including Kraft Foods, Prairie Farms and the Tri-City Port Authority.

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In Granite City

Leading Employers


1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

U.S. Steel
ASF-Keystone
Gateway Regional Medical
Kraft Foods
Granite City School Dist. #9
Tri-City Port Authority
City of Granite City
Prairie Farms Dairy
Heidtman Steel
Lewis & Clark Marine

2,245
1,000
980
705
700
600
255
250
220
205

{C}

Hagnauer worries about the loss of U.S. manufacturing to overseas companies -- and what that will mean to blue-collar workers across the nation. According to city statistics, 51 percent of Granite City residents are employed in blue-collar jobs. 

"We're losing the most common base to our economy, and that's manufacturing," Hagnauer said. "What are you going to educate [these workers] to do? Where are they going to go? Are you going to send them all into the medical profession? I don't think so. They're not all going to be teachers. Where are you going to send them? If we want to get rid of the blue-collar workers, our system is just going to crumble."

Hagnauer recognizes that there is little he can do as mayor to change U.S. trade policies.

"Do I see a problem? Yes, I see a problem. Where does the problem exist? It exists nationally," he said. "As a mayor and a city leader if we have an ordinance or resolution that doesn't work or we see failure in it, we have to change it. It's time for the federal government to do the same thing. NAFTA, the trade agreements -- they're not working.''

Two-thousand laid-off steelworkers aren't just a problem for one community, he said. If 39 percent of them live in Granite City, that means 61 percent live in St. Louis and other metro-east communities.

"And that's what we keep telling the other communities," Hagnauer said. "You need to get behind us because it's going to affect you. These guys own homes in all these other communities. If we don't go back to work here, guess what? It's going to add to your problems there."

Mary Delach Leonard is a veteran journalist who joined the St. Louis Beacon staff in April 2008 after a 17-year career at the St. Louis Post-Dispatch, where she was a reporter and an editor in the features section. Her work has been cited for awards by the Missouri Associated Press Managing Editors, the Missouri Press Association and the Illinois Press Association. In 2010, the Bar Association of Metropolitan St. Louis honored her with a Spirit of Justice Award in recognition of her work on the housing crisis. Leonard began her newspaper career at the Belleville News-Democrat after earning a degree in mass communications from Southern Illinois University-Edwardsville, where she now serves as an adjunct faculty member. She is partial to pomeranians and Cardinals.

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