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Friday, September 19, 2003

AK Steel cans top execs; new strategy sought



By Mike Boyer
The Cincinnati Enquirer

AK STEEL HOLDING CORP.
Business: Produces various types of steel for the automotive, appliance, construction and manufacturing markets.
Headquarters: Middletown
Employees: 10,300 (as of 12/30/02). Roughly half the company's employees are in Middletown. It also has operations in Mansfield, Coshocton and Zanesville, Ohio; Ashland, Ky.; and Rockport, Ind.
Ticker/market: AKS/New York.
Thursday's close: $2.56.
52-week high/low: $8.59 (9/18/02)/$2.10 (8/6/03).
Revenues (2002): $4.29 billion.
Net loss (2002): $502.4 million.
TIMELINE
May 1995 - Richard Wardrop, who joined AK Steel in 1992 as vice president of manufacturing and later was promoted to president, is named chief executive officer. Wardrop, 49, is a former head of U.S. Steel.
May 1996 - AK announces extensive safety reforms in the wake of eight worker fatalities in three years, more than 80 citations from the Occupational Safety and Health Administration and settlements calling for AK to pay fines of $1.9 million. AK states its goal of becoming the industry leader for worker safety.
January 1997 - Wardrop is named to the additional post of chairman.
February 1998 - AK is named the safest of the nation's eight integrated steel companies by the American Iron and Steel Institute.
April 1999 - AK's stock price hits its Wardrop-era peak at $28.50.
August 1999 - General Motors names AK its supplier of the year. The automaker is AK's biggest customer, procuring about 20 percent of its annual steel needs from AK.
September 1999 - AK locks out 620 union workers at its Mansfield plant, an action Wardrop attributed to union sabotage, work slowdowns and threats.
January 2000 - AK's stock price tumbles 25 percent to $12.38 on a dim profit outlook for the coming year.
August 2000 - Federal and state environmental agencies file suit against AK, accusing it of violating air, water and solid waste laws in Middletown and seeking millions of dollars in fines. Some of the claims are still pending in court.
September 2000 - AK celebrates it 100th birthday. The company began as American Rolling Mill Co. in 1900.
January 2001 - For the sixth year in a row, AK is the nation's most profitable steel maker, but prices for hot-rolled steel reach the $200-a-ton level, down from about $300 in the course of a year. A competitor, LTV Corp. of Cleveland, files for bankruptcy, blaming cheap imported steel, a weak U.S. economy and higher energy prices. Other companies blame a global glut of steel and the strong value of the dollar for the industry's woes.
December 2002 - AK ends its three-year lockout of workers at the Mansfield plant, ordering an initial recall of 30 workers.
January 2003 - AK offers $1 billion for National Steel Corp. in a federal bankruptcy auction in Chicago, topping an earlier bid by U.S. Steel. But U.S. Steel prevails and is named the successful bidder in April.
June 2003 - In a full-page ad in the Enquirer, AK criticizes Ohio Gov. Bob Taft for joining a representative of an AK rival to tour an AK customer's plant in Mexico. A Taft spokesman said the governor didn't know the Mexican lighting company was an AK customer.
July 2003 - An AK employee in Middletown is killed by a falling crane, the first fatality at the plant in seven years.
July 2003 - AK's stock price falls to its lowest level of Wardrop's term as CEO - at one point hitting $2 a share during trading July 18 - after the company announces a second-quarter loss of $78.2 million. Wardrop blames low steel prices, costlier raw materials, higher energy and maintenance costs, pension obligations, rising health-care costs and expenses from complying with environmental rules.
September 2003 - The U.S. Equal Employment Opportunity Commission files suit against AK, accusing it of fostering a racially hostile environment for about 20 African-American employees of its plant in Butler, Pa. AK has no comment on the suit.
Source: Enquirer research
Middletown's AK Steel, faced with plunging shareholder value, continuing losses and labor unrest along with the economic uncertainties of other steel makers, announced late Thursday the resignation of its chairman and CEO, and its president.

The 103-year-old company, one of Middletown's largest employers, said Richard M. Wardrop Jr., 58, chairman since 1997 and CEO since 1995, and John G. Hritz, 49, named president in January, agreed to resign.

Attempts to reach Wardrop, Hritz and other company officials failed last night.

In a statement, the company said the departures signaled a change for the company, one of the nation's largest makers of flat-rolled carbon, stainless and electrical steels and the largest U.S. supplier of automotive steel.

"The board simply believes that now is the time for a new perspective to address the company's current challenges," the company said.

The company named James L. Wainscott, 46, chief financial officer, as its acting CEO.

An executive committee of three independent directors headed by Robert H. Jenkins, retired chairman and CEO of Sundstrand Corp., will provide oversight and communication with executive management.

The other members of the executive committee include Lawrence A. Leser, former chairman of E.W. Scripps Co., and Eugene A. Renna, a former Exxon Mobil vice president. A separate board committee led by Donald V. Fite, retired chairman and CEO of Caterpillar, will search for a new CEO.

News of Wardrop's resignation came after the stock market closed. The stock closed Thursday at $2.56 a share, up 1 cent. AK Steel's stock, which hit a closing high of $28.50 in April 1999, has traded recently at just over $2 a share.

"This needed to happen for AK Steel," Chris Olin, an analyst with Longbow Research told Reuters News Service "They were trapped in a shrinking box."

The timing of the move perplexed others.

"I think Wardrop was one of the best operating guys in the industry," said Charles Bradford, an independent steel analyst in New York City.

After the company lost out to rival U.S. Steel to buy Indiana-based National Steel out of bankruptcy reorganization in April, some analyst said AK Steel could itself be a takeover target.

The company's ongoing battles with the United Steelworkers of America, contract disputes with major customers such as General Motors Corp. and pending racial and environmental lawsuits have compounded AK Steel's struggles with a shrinking steel market.

"Really all its major stakeholders were somewhat disappointed with the direction AK Steel was going," Olin said.

Wardrop, a native of McKeesport, Pa., who worked at U.S. Steel Co. and Washington Steel before coming to AK Steel in 1992 as executive vice president, was also frequently at odds with those in his industry.

The company withdrew from the American Iron and Steel Institute, a leading industry trade group, because it disagreed with the industry position on protective tariffs.

Under Wardrop, AK Steel engaged in a bitter battle with the company for three years over the lockout of union workers at the company's Mansfield, Ohio stainless steel plant.

The company also has been at odds with environmentalists, who backed a multimillion dollar federal air pollution lawsuit against the company pending in U.S. District Court in Cincinnati.

E-mail mboyer@enquirer.com



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