For AK Steel’s new turnaround strategy to work and help improve the steelmaker’s profitability, it will require input from all levels of the company.
That’s one of the things this news outlet learned about steps the Fortune 500 manufacturer is taking moving forward from Chief Executive Officer Roger Newport, during his first interview with Cox Media since taking the role.
AK Steel entered 2016 with a new strategy to put more focus on growing sales of higher margin, value-added products; the development of new types of steel; and innovation of products and processes. The plan reduces sales of hot-rolled commodity steels sold on a spot market. AK and the industry’s sales of commodity carbon and other steel grades have suffered due to a surge in recent years of imported products.
Leaving no rock unturned, the company’s new strategy also means re-thinking not only about the steel products AK Steel makes and sells, but also about everything the company does from the manufacturing floor to the office floor, Newport described. It also means sometimes cutting costs such as temporarily idling last year the blast furnace at steel plant Ashland Works in Kentucky. And, it means sometimes spending on new investments such as expanding a product line at Dearborn Works in Michigan, he said.
“By focusing on margin enhancement, it incorporates every single person in this company,” Newport said. “The way I look at it is, if I’m selling steel, am I getting a return on it? I’m not just into selling volume.”
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Thousands of livelihoods are at stake.
For seven consecutive years, AK Steel has failed to turn an annual profit, netting a $510.7 million financial loss in 2015.
AK Steel is the city of Middletown’s largest employer where it operates a steel plant, and Butler County’s third largest employer of about 2,400 local workers in total including the West Chester Twp. headquarters.
Whereas previously sales were affected by the 2007-2009 economic downturn that hurt appetites for new cars, homes and construction activity that consumes steel products, the company’s latest challenge is foreign competition.
“I’ve been in the business 30 years and have not seen imports at these levels in my career,” Newport said.
When the company announced plans to idle Ashland, which laid off about 615 to 620 workers beginning in December, unfair trade was partly to blame, according to AK Steel.
“What that has done has moved some production levels because we weren’t running full everywhere. That’s what was hurting us some. That’s put more volume on Middletown and more volume on Dearborn for the blast furnaces,” Newport said. “We’re asking them to step up and deliver.”
The company claims it can compete with any steelmaker worldwide on a level playing field, but not government-owned or subsidized companies that sell steel below the cost to produce it.
Finished steel imports to the U.S. dropped 7 percent from 2014’s record levels to approximately 31.4 million net tons in 2015. However, raw domestic steel production also dropped 10.6 percent year-over-year to 86.9 million tons made, according to American Iron and Steel Institute. As a result, even though imports fell some in 2015, imports still captured a record 29 percent share of the U.S. steel market last year, according to the steel industry association.
“That is pressurizing the entire steel market worldwide,” said Thomas Gibson, president and chief executive officer of the steel institute.
AK Steel, whose predecessor ARMCO was founded in Middletown more than 100 years ago, has entered a new era under Newport’s leadership. Newport became CEO after James Wainscott — who still serves as chairman — retired as president and CEO at the end of 2015 after more than a decade as chief executive.
“Where we’ve been ramping up further is more innovation, more research and innovation, and I use more the term innovation because it’s innovation not just of products, it’s processes,” Newport said.
“We’re putting more resources towards it,” he said.
Currently construction is continuing to build a new approximately $36 million Research and Innovation Center in Middletown, which will replace the existing, outdated building on Curtis Street in Middletown once work is complete.
“The neat thing on the innovation front is you’ll discover things you weren’t even thinking you were going to discover,” he said. “Having more people do that is what’s different than in the past and they’re going to have a new place to do it. They’re going to have new equipment, new opportunities in an environment that’s going to promote it more.”
Additionally, AK Steel under Newport’s leadership is focused on improving communication and collaboration internally and externally, he said.
“I think collectively our employees, our retirees, our suppliers, how can we do things better? There’s a lot of resources out there,” Newport said.
A new program called Great Ideas has been launched and employees can submit their ideas about ways to do things better to avoid or reduce costs, or drive innovation, according to the company.
“My focus is not on the past,” Newport said.