Valley should closely monitor purchase of North Star Steel

Perhaps it's unfair to refer to Copperweld Steel Corp.'s experience with the French when commenting on last week's announcement that North Star Steel's Youngstown and Houston mills are being bought by a group of foreign-owned companies, including Vallourec of France, but such a reference does serve to remind the Mahoning Valley not to be complacent.
In December 1975, Phillip H. Smith, Copperweld chairman who had led his company's bitter fight against being taken over by Paris-based Societe Imetal, conceded defeat and announced that Imetal had acquired 67 percent of Copperweld common stock. Smith noted that the French company had made a solid investment in a healthy and growing company.
"I am confident that Copperweld's growth is going to continue just as it has in the past, and we now welcome Imetal as an important shareholder," the chairman said.
But many observers of the Valley's steel industry did not share Smith's confidence and warned that the French company's stock purchase would not be good for Copperweld.
In 1977, Smith resigned as chairman, citing differences with the board of directors. And in 1987, in the midst of major losses in revenue, CSC Industries Inc. was created as an independent company based in Warren to hold all of Copperweld's stock. Whether these changes would have occurred had Societe Imetal not been in the picture is an issue for steel industry analysts to debate. But what is true is that a healthy, growing company collapsed in little over a decade after Imetal's takeover.
French and Japanese
Thus, when Cargill Inc., the Minneapolis parent of North Star Steel, announced that it was selling the company to three companies with foreign roots, we couldn't help but wonder if history were repeating itself. Vallourec & amp; Mannesmann Tubes of Houston, a joint venture between Vallourec, a steel tube producer, and Mannesmannrohren-Werke of Germany would own about 80 percent of North Star's tubular division. Sumitomo Corporation of America would be in for 14 percent and Sumitomo Corp. would own 6 percent. Sumitomo Corporation of America is a New York-based tube maker, but it is a wholly owned subsidiary of Sumitomo Corp. of Japan.
No, we aren't being paranoid when we ask whe ther the new owners will make the same commitment to the Valley as Cargill made when it bought North Star's Youngstown pipe mill on Martin Luther King Boulevard from Hunt Energy Co. in 1985.
Over the years, Cargill has pumped in millions of dollars to ensure that the Youngstown operation remained viable and competitive. State and local governments put together an incentive package, including tax abatements, that gave the company room to maneuver as it found its niche in the highly competitive steel industry.
In 2000, a $30 million expansion and modernization project was completed to meet the demand for North Star's seamless pipe, used mainly for drilling deep underwater oil and natural gas wells. The Youngstown mill has 430 employees and can produce 550,000 tons of seamless pipe a year.
The Houston operation has 130 employees and serves as the finishing plant for the pipe made in Youngstown.
Last year, Cargill announced it was selling its North Star Steel tubular division to Lone Star Technologies of Texas for $430 million. However, the deal fell through when Lone Star wasn't able to get its financing together. Vallourec & amp; Mannesmann Tubes and Sumitomo, on the other hand, are paying $380 million in cash, which Cargill needs for its expansion plans.
Local government and development officials are upbeat about the sale and believe that V & amp;M's commitment to research and development will stand in good stead for the Youngstown mill.
Uncertainty
But given that the change in ownership does bring an element of uncertainty into the mix, it would be advisable for local officials to seek a meeting with the principals of Vallourec & amp; Mannesmann Tubes and Sumitomo so they can judge themselves what the new owners have in mind for North Star's Youngstown mill.
Indeed, it would be helpful if Gov. Bob Taft let it be known to V & amp;M and Sumitomo that the state of Ohio would provide whatever assistance is sought to ensure that North Star does not go the way of Copperweld.