MCDONALD – Portions of McDonald Steel Corp.’s plant are still punctuated with brick pathways, reminiscent of an age in manufacturing that began here during the era of Andrew Carnegie. An original “pusher” furnace that dates to the 1920s sits idle, juxtaposed with a modern walking hearth furnace that on a cold February morning is fired up and ready for production.
There are plenty of other reminders of the past throughout the old factory, which during its peak in the early 1970s employed more than 3,000 workers under the banner of U.S. Steel Corp. Today, as it enters its 40th year in business, McDonald Steel represents a living bridge that spans the Mahoning Valley’s industrial heritage and its future.
“There’s a lot of history here,” says Mike Havalo, vice president sales and marketing. “And the future is bright for McDonald Steel. We’ve been investing in our business and in our people.”
Established by U.S. Steel subsidiary Carnegie Steel Co. in 1918, the McDonald mill thrived during the next five decades. Then in 1979, U.S. Steel announced it would close its McDonald plant and its Ohio Works in Youngstown as part of a corporate-wide restructuring that affected 20,000 workers across the country.
Despite the efforts of the manager of the mill and community leaders to save the U.S. Steel plants, the McDonald mill was shut down for good by the summer of 1980. The Mahoning Valley, already devastated from Youngstown Sheet & Tube Co.’s closing of its Campbell Works in 1977 and its Brier Hill operations in 1979, now faced even deeper ruin.
Others, however, saw opportunity.
David Houck, superintendent of the McDonald operations, had created a business plan that demonstrated how the plant’s 14-inch and 8-inch mills could be profitable as stand-alone concerns. To the regret of the employees at the plant, he could not justify keeping the other operations open at the site. At least it would save some jobs.
Nevertheless, U.S. Steel executives balked at the proposal and opted to shut the entire factory.
Yet Houck remained convinced the plan could work. In 1980, he approached the principals of Torent Inc., a Youngstown-based venture capital firm led by David Tod and Daniel Roth, seeking financing to salvage a portion of the McDonald works.
“I thought it was too difficult a task to undertake,” recalls Roth, now a member of the executive board of the company. “This one scared me because I was seeing all the bloodshed in the industry.”
Tod, a scion of one of the Valley’s most influential families, convinced Roth otherwise. “I realized that if everything worked out the way Houck said it was going to work out, then it could be a profitable venture. But that was taking quite a risk,” Roth says.
First, the investor group needed to convince U.S. Steel that it could raise sufficient capital so it could buy the mill and operate it profitably, Roth recalls. Eventually, Torent was able to secure backing from then-Commercial Shearing Inc., a manufacturer on Youngstown’s North Side that years ago was acquired by Parker-Hannifin Corp. Other individual investors followed. Under the plan, Torent and Commercial each contributed about one-third of the financing, while a group of local businessmen and investors contributed another third.
“It took most of 1980 to raise the money and put the deal together with U.S. Steel,” Roth says. “Everybody who invested in it knew it was a high-risk situation. It was a pretty bloody scene in 1979 and 1980. So many people had lost their jobs.”
Roth says the pool of local investors who jumped in to back the deal did so to save as many jobs as they could, since the massive loss of employment resulting from the shutdowns affected their businesses, too. By the end of the year, the group had negotiated a deal in which McDonald would lease the equipment and the plant with the option to buy it later.
In September of 1980, the company was incorporated and began production in December of 1981.
Within three years of McDonald Steel rolling its first product, those investors had recouped all of their money, Roth says. Many of those investors remain shareholders today.
On a cold February morning nearly 40 years later, workers at McDonald Steel are tending to the 14-inch mill as it prepares to produce steel bar. The bar is formed from steel billets heated to about 2,300 degrees in the walking hearth mill, now governed by an automated control room with an array of digital screens that display various parts of the operation in real time. That furnace was added in 2008 at a cost of about $8 million, Havalo says.
The billets are then sent through an 11-strand “cross country” mill. The process alters a 15-foot billet into a more than 100 foot-long, glowing bar that, when cooled, will be further processed into intricate shapes.
On this particular run, these metal shapes will be used as expansion joints for bridges. Indeed, steel formed at McDonald can be found in major spans across the country, including the Ambassador Bridge that joins Detroit with Ontario, Canada.
“This mill can run different sizes and chemistries,” Havalo says. Tomorrow, for example, the same mill could be producing steel used in the automotive industry. “Most of the steel is low-carbon. But we can run a variety of different grades.”
A bar strander at McDonald, Brian Craig, is busy smoothing out an imperfection in one of the mill’s guide components that formed a small scratch in one of the pre-production bars. “This guide had a scratch in it and we’re grinding it out,” he says. “It could show up on the bar and this alleviates the problem.”
The company’s 8-inch mill is mostly quiet, since it processes steel used in commodity components – a market now dominated by Chinese imports, Havalo says.
“We’re running about 76 hourly and 16 salaried employees,” Havalo says, mostly driven by work on the 14-inch mill. The specialty shapes from the company serve three major markets: railroad, infrastructure and automotive, he says.
“Our goal is to continue to grow our customer base and continue our work with our existing customers on their projects,” says Mark Pecchia, chief financial officer. Among the more critical issues the company is watching this year is the creation and passage of a significant infrastructure bill in Congress, which would boost prospects for McDonald Steel’s customers in that market segment. “A lot of our customers are infrastructure-focused,” he says. “A big infrastructure bill would help.”
Automotive remains steady, the CFO adds, while business in the rail industry is projected to drop about 5% this year.
Over the past four decades, the company has paid $186 million in salaries and wages, shipped 1,063,303 tons of shapes and grossed over $913 million in revenues, Havalo says. “The company has also contributed significantly to the Valley’s economy through taxes, salaries and wages, and purchases of goods and services from local suppliers,” he says.
McDonald Steel has successfully navigated the changes in the market over the last four decades by continuing to diversify its products and customer base, Havalo says. In 1981, for example, the main line of the plant manufactured components used in tire rims for Goodyear and Firestone – at the time headquartered in Akron.
“That business has since dwindled, so we’ve diversified into the railroad business,” manufacturing the steel used in joiners along railroad tracks – probably the biggest market McDonald serves today. The steel shapes the company produces for the automotive industry, he says, are used to manufacture door hinges on a variety of vehicles.
“We’re always looking for new markets,” Havalo says. “We plan to be still talking about it another 40 years from now.”
Pictured at top: Steel bar that will be processed into bridge components moves down the 14-inch production mill.