Company feels the fallout of neighbor's bankruptcy

THE VINDICATOR, YOUNGSTOWN
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
WARREN -- Like a solitary building still standing after a hurricane, Ohio Star Forge is the only sign of life on the abandoned, 400-acre site that once housed CSC Ltd.
CSC's giant melt shop, rolling mills and scrap yards have been idle since April, when the steel bar maker ran out of cash and closed, leaving more than 1,300 workers jobless.
Trucks moving in and out of the plant gates are carting off equipment and machinery bought at a piecemeal auction of CSC's contents two weeks ago. By mid-December, the mill will be stripped bare.
Despite the devastation around it, Ohio Star Forge continues to thrive.
The company manufactures forged steel parts for the auto and bearing industries and has been independent of its giant, steelmaking neighbor since 1995. It operates on a small, two-acre wedge at the rear of the CSC property.
The plant can't be seen from Mahoning Avenue, where signs mark the CSC entrance. Visitors must drive about a half-mile around the vacant steel mill buildings to reach the 70,000-square-foot, peach-colored complex that is Ohio Star Forge.
A wholly owned subsidiary of DAIDO Steel, Ohio Star Forge is part of the Japanese steelmaker's five-plant bearing division. It is DAIDO's only manufacturing plant in the United States.
How it's doing: Jeff Downing, president, said business is strong and the company is profitable. Ohio Star's sales grew 250 percent between 1996 and 2000 and topped $30 million last year, he said, but this year's sluggish economy is expected to result in a 35 percent drop.
He said the Japanese owners allow Warren managers a free reign in running the plant. DAIDO has three Japanese executives on staff: the chief financial officer, an engineer and a forging manager.
"As long as we keep sending money, they're happy," Downing said with a grin.
No layoffs: The company has a no-layoff policy, so it is operating at full-staff with a work force of 80 despite the drop in sales. Billy Orbach, general manager, said layoffs hurt employee morale and cause companies to lose skilled employees.
"Good employees are hard to find, even in this market," Orbach said, explaining that the plant's forging machines are very complex and require skilled operators.
Downing wholeheartedly supports the policy. "Employees will never make a commitment to a company unless a company makes a commitment to them," he said. "Besides, layoffs don't save you much."
What cost: Despite its independence from CSC, the steelmaker's Chapter 11 bankruptcy case has been costly for Ohio Star Forge.
The smaller company shared gas, electric and water service with CSC, so it had to install new meters, waterlines, gas lines and other infrastructure when the mill closed down. Ohio Star Forge also had to hire attorneys to secure the utility easements on CSC property.
In all, Downing said, Ohio Star Forge spent about $600,000 so far on utility changes and legal fees. The company expects to pay another $200,000 to install its own waste treatment plant, as it would be cost prohibitive to continue to operate the large plant the two companies shared.
"The cost is obscene, but we had no choice," he said. "For a company our size, it hurts."
Downing said the company has a promising future, despite the unanticipated costs of the CSC bankruptcy and the economic downturn, because it's developed a strong reputation for quality.
"Every employee is an inspector; everyone is responsible for their own quality," he said. "They take it seriously because they understand the ramifications of losing quality."
Operations: As a second-tier supplier, Ohio Star Forge buys steel and forges it for bearing makers who, in turn, sell primarily to the auto industry. The plant produces more than 13,000 metric tons of parts a year.
The company used to buy steel from CSC, but in recent years, Downing said the Warren mill produced only "fair quality" bars compared to some other French and Japanese makers. He said surface defects were a problem, and CSC started having delivery problems, as well, in its last few months of operation.
Ohio Star buys some of its steel from its parent DAIDO's Japanese steel mills, but supplies also come from Aichi, also Japanese, Timken in Canton and Macsteel in Michigan and Arkansas. Downing said the Warren company has no control over where the steel comes from because the origin is specified by its customers.
Orbach said the bearing industry could be called a "cut-throat business" because it is so highly competitive.
When Ohio Star started operations in 1989, its machinery was considered highly advanced and there was little competition.
Now, Downing said, the Swiss-made forging machines are in operation at plants all over the world, and Ohio Star has to work with slim profit margins to compete.
"Sometimes we might drop our price so low that we're making no profit at all," Orbach said, "but we'll do it just to keep a customer."
vinarsky@vindy.com