AK STEEL Times are good but the outlook is dark, says CEO

Profitability must be raised, he said.
MIDDLETOWN, Ohio (AP) -- The company's stock has tripled and it again is making money.
But AK Steel chief executive James Wainscott is warning that if additional steps are not taken, the worst may not be over for the 100-year-old steelmaker.
Wainscott, 47, who succeeded Dick Wardrop as CEO of the Middletown-based company, told retirees in a speech this month that the strong steel prices that have helped the company will not last. The price surge buoyed the company after concerns that it would have to file for bankruptcy protection.
"Ours is a cyclical business. I don't know when the markets will turn down but, as sure as day turns to night, the downturn will come," he said.
Industry analysts agree.
"The big, overriding issue is they have to be competitive," said independent steel analyst Chuck Bradford. "The other producers, the major ones anyway, have different labor contracts that make them lower-cost competitors."
The numbers
The maker of carbon, stainless and electrical steel, which lost $1 billion over the last three years, made $92.7 million in the second quarter, including one-time gains. Sales rose 34 percent to $1.3 billion.
After falling below $2 a share, the stock closed Friday at $7.02.
Discounting one-time gains, the company has profits from continuing operations of $3.8 million the first half of the year, lower than competitors such as Cleveland-based International Steel Group Inc., which had $216 million in operating profits for the first half of 2004.
Wainscott tells investors and retirees that the company has a disadvantage of $30 to $40 a ton compared with other steel companies.
To improve profitability, Wainscott said the company has to:
*make customers with long-term contracts pay a greater share of the rapidly rising cost of raw materials.
*develop reliable relationships with providers of such raw materials as iron ore, coal and coke to reduce exposure to volatile prices.
*have competitive labor agreements with unions at its seven plants.
Many competitors have new labor deals that allow them to cut employment by more than 40 percent. By filing for bankruptcy, some rivals have eliminated pension and health-care obligations.
Job cuts
After cutting the salaried work force by 20 percent last fall, or 475 jobs, Wainscott now wants similar cuts from the unions. In Middletown, that would be about 600 jobs, cuts the company said can be made primarily through attrition.
Ed Shelley, president of the 3,000-member local in Middletown, said there are concerns that the company wants to eliminate union jobs while giving more work to outside contractors.
Larry Staton, a maintenance mechanic at the Middletown Works who has worked for company for more than 37 years, said workers understand that the company needs to cut more costs.
But he said the company's 1999 deal to buy former parent Armco Inc. has increased pension and retiree health-care costs.
Wainscott said if the unions do not help the company reduce costs, it will have to consider other options.