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AK Steel Holding Corporation


703 Curtis Street
Middletown, Ohio 45043

Telephone: (513) 425-5000
Fax: (513) 425-2676

Public Company
Incorporated: 1899 as The American Rolling Mill Company
Employees: 5,800
Sales: $2.3 billion (1996)
Stock Exchanges: New York
SICs: 3312 Blast Furnaces and Steel Mills; 6719 Holding Companies Not Elsewhere Classified

Company History:

AK Steel Holding Corporation is the controlling body for numerous steel production companies throughout the United States, including its own namesake, AK Steel Corporation. AK Steel manufactures and sells value-added hot-rolled and cold-rolled steel flat carbon steel. AK then sells its product to other manufacturers, such as the construction, automotive, and appliance industries. AK Steel Holding Corp. also possesses a 50 percent interest in Southwestern Ohio Steel and an almost 50 percent interest in Nova Steel Processing. Sixteen percent of AK Steel is owned by Japan's Kawasaki Steel, with whom AK Steel entered into a joint venture in 1989.

The Early Years

The history of AK Steel Holding Corporation itself (incorporated in 1994) is extremely short, yet the company's roots actually date back to the late 1800s. In 1899, the American Rolling Mill Company was created to engage in the production of rolled steel, mainly for other manufacturers to use in their own products. After 20 years of successful production, the company had laid plans for and broken ground at the site of a new manufacturing facility at Middletown, Ohio. The facility, dubbed Middletown Works, remained in operation into the 1990s as one of AK Steel's two principle production plants.

The company's second production plant was erected in Ashland, Kentucky, 11 years later. The facility was named Ashland Works and joined Middletown in the production of both coated and uncoated rolled steel. The plants produced the company's custom-engineered, low-carbon steel products through two different processes. Both hot and cold flat rolling procedures were used to create the company's high-strength steel sheets.

The American Rolling Mill Company continued to operate its steel mills under that name for almost 30 years after Ashland was constructed. Then in 1948, the company adopted the acronym "ARMCO," and soon thereafter, changed its formal name to Armco Steel Corporation.

Acquisitions in the 1950s through the 1970s

After realizing a decent amount of success with the Middletown and Ashland production centers, Armco began to purchase additional steel facilities in the 1950s. These purchases were added to the company's existing holdings, subsequently adopting both the Armco name and business procedures. This practice continued for two decades, as Armco expanded its operational base both geographically and throughout the steel industry itself. Geographic expansion enabled the company to distribute its finished product to a wider base of customers more easily, while expansion in the steel industry gave the company more market share.

In 1978, Armco Steel Corporation changed its name to Armco Inc., which more accurately reflected the company's few non-steel holdings that had been added during Armco's acquisition phase. The original steel mill holdings, Middletown and Ashland Works, were placed in a newly-formed group called the Eastern Steel Division. The company then left its Ohio-based headquarters location and moved to New Jersey in 1985, believing that the new location was more well suited to serve the majority of its holdings' and customers' needs.

By the end of the 1980s, Armco Inc. was continuing to gain market share and increase annual sales, in an industry which many felt was prone to low profitability. Sales figures were hovering near the $1 billion mark, and the company began exploring options for future growth. In 1989, Armco entered into a limited partnership with the Kawasaki Steel Corporation of Japan, merging portions of each company to form the Armco Steel Company, L.P. Another partnership formed by Armco was with the Japanese steel maker Itochu Corporation, a deal which gave Armco an almost 50 percent share of Nova Steel Processing, one of the company's present-day operating divisions.

The Early 1990s: AK Steel Holding Corp. is Born

Entering the 1990s, Armco's annual sales had surpassed the $1 billion mark, with 1991 sales reaching $1.3 billion. Unfortunately, however, the company was not as profitable as its sales figures might indicate. Armco was realizing first-hand what analysts had been preaching for years, which was that the steel industry required such a large output of operating expenses that achieving a high profit was incredibly difficult. Armco had found itself with approximately $600 million in debt and negative equity, and made the decision that it was time to make moves to turn its situation around.

Armco began searching for a new management head to give the company some direction and build a new era of profitability in the 1990s. The company finally persuaded Tom Graham to come out of retirement and lead Armco Steel Company's redirection efforts. In 1992, at the age of 65, Graham had spent almost 45 years working in the management of different steel companies around the United States. Earlier in his life, Graham had spent substantial time at J & L Steel, U.S. Steel, and Washington Steel. When he came to Armco, he brought with him another ex-U.S. Steel and Washington Steel coworker, Richard M. Wardrop, Jr.

Graham and Wardrop immediately set about the task of turning Armco's financial situation around. First came an extensive evaluation of the company's holdings, which resulted in the divestiture of more than ten of the company's subsidiaries and operating divisions. These operations either lacked efficiency in production or profit potential, and were relinquished in an effort to lower Armco's operating costs and subsequently boost earnings. Another notable change which occurred within the first year of Graham's tenure was the replacement of a whopping 75 of the company's top executives and managers.

Next, the newly-restructured Armco worked on improving its actual operations and service. The quality of the company's finished steel product was improved upon first, in order to increase its ability to market and sell the steel to its customers, such as the construction, automotive, and large appliance industries. Then came an improvement in Armco's service, with an emphasis on increasing the company's ability to deliver its products to buyers on time.

Meanwhile, Armco had also acquired a new subsidiary, Cyclops Industries, a producer of specialty steel products. In 1993, Armco again moved its corporate executive offices, this time from New Jersey to Pittsburgh, Pennsylvania. The following year, the limited partnership between Armco and Kawasaki was altered slightly and AK Steel Holding Corporation was finally born. Its main operating division became AK Steel Corp., at which steel production continued as normal. AK Steel Holding Corporation was then taken public later that same year, and the sale of common and preferred shares of its stock helped the company earn $654 million. The money was used to pay off AK's debt, leaving the company's balance sheet clear and in excellent financial condition.

The End of the Century and Beyond

After relocating its corporate offices again--this time from Pittsburgh back to Middletown, Ohio--AK Steel entered 1995 with high hopes for strong financial success. However, profits throughout the entire steel industry dropped, which briefly signaled problems through a turn of events. But despite difficulties in the industry, AK Steel still managed to achieve an estimated $146 million on sales of $2.26 billion. As a result of this success, the Regis ICM Small Company Mutual Fund increased its holdings in AK Steel, noting the fact that the company was averaging annual growth rates in the realm of 15 percent and above.

Graham then made the risk-laden decision to forge ahead with plans to construct a brand-new, state of the art steel production facility in Rockport, Indiana. The cost of building the new manufacturing site was estimated at $1.1 billion. Right away, many analysts and industry experts criticized the decision, some in awe of the fact that a company that had just rescued itself from massive debt would choose to put itself back into that position again. Immediately, comparisons were drawn between AK Steel and competitor Inland Steel, who had built its own $1 billion steel facility in a joint venture with Nippon Steel in the beginning of the 1990s. Inland's complex was completed in 1993, and four years later had still not earned a good return on its cost. Some thought that AK Steel should take a hint from Inland's situation and reconsider its plan.

But Graham insisted that the addition of a newer and more efficient production facility was important to AK Steel's future. He cited increased efficiency and lower energy consumption as factors that would aid in lowering AK Steel's operating costs if the new Rockport site was erected. Also, the new facility would be equipped to produce 80-inch-wide rolls of carbon steel, whereas all existing mills were capable only of producing rolls with a width of 72 inches. Graham believed that this would increase the demand for AK Steel's finished product, because it would allow auto makers to save money through elimination of the necessity to weld together two pieces of steel.

In 1997, Graham retired once again at the age of 70. Wardrop took his place at the head of the company with the intent to continue not only Graham's plans for the new facility, but also the business practices that had helped AK Steel recover in the beginning of the decade. Approaching the end of the century, AK Steel's future would be determined by the success of its new facility, once constructed, as well as by the company's ability to innovate and increase the distribution of its product.

Principal Divisions: AK Steel Corp.; Cyclops Industries; Southwestern Ohio Steel (50%); Nova Steel Processing (50%).

Further Reading:

AK Steel Holding Corporation Historical Timeline, Middletown, Ark.: Steel Holding Corp., 1994.
Rudnitsky, Howard, "A Throw of the Dice," Forbes, February 10, 1997, p. 47.

Source: International Directory of Company Histories, Vol. 19. St. James Press, 1998.

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