The Steelworkers Vs. The `Smiling Barracuda'

Don't get Thomas Graham started on labor/management committees. He hates them. The chairman of AK Steel Corp. recalls endless meetings from his days at LTV Corp. in the '70s, when debates raged about where to hang shovels in the mills. Graham has been battling unions ever since. Not surprisingly, he passed when other Big Steel companies signed cooperative pacts last year with the United Steelworkers, guaranteeing jobs and granting board seats to union representatives.

Now, Graham and labor are about to face off again. On May 26, 3,348 workers at AK's Middletown (Ohio) mill will vote on replacing AK's independent union with the USW. Both sides are blanketing billboards and telephone poles in the small town, warning of disaster if the other side wins.

PROVING GROUND. In Graham, the union faces a formidable opponent. The dour 67-year-old former president of USX Corp.'s U.S. Steel unit is known among workers as the "Smiling Barracuda" because of his penchant for slashing costs. The USW has targeted Graham ever since he slashed U.S. Steel's workforce by 73% from 1983 to 1990. He has used similar tactics to cut costs at AK, the No.6 integrated steelmaker, formerly known as Armco Steel Co.

The Middletown vote sets up a marquee matchup between Graham and the feisty new president of the Steelworkers, 65-year-old George Becker, who took over in March. Beating the Barracuda would cement Becker's hold on the integrated steel industry and give his union a much-needed public-relations victory. That's important for USW organizing campaigns in mutside industries, from airlines to hospitals.

Graham remains one of the few holdouts against the new line of labor-management harmony spreading through steel and other unionized industries. To him, cooperation spells slower decisions and less control, which weakens AK's competitive stance against foreign companies and nonunion minimills. And the docile union that now represents Middletown workers has held only one five-day strike in the company's 95-year history, allowing Graham to reassure customers that strikes won't disrupt supplies.

The USW challenge comes just as Graham's old-style management seems to be paying off. In his two years in Middletown, AK cut its labor hours per ton by 33% and chalked up the integrated industry's highest operating profits per ton. In April, he took the company public, selling stock in Armco Steel--a joint venture between Armco Inc. and Japan's Kawasaki Steel Corp. After issuing $458 million of new equity, Graham emerged with a cleaner balance sheet and the new AK Steel name. "They've got a great start back to profitability," says Thomas M. Van Leeuwen, an analyst at CS First Boston Corp.

WARNINGS. True enough, assuming there's labor peace. In daily newspaper ads, the company reminds workers of an ongoing USW strike at Allegheny Ludlum Corp. Company mailings to workers' homes calculate that the average AK employee would have lost more than $5,000 in a similar strike at Middletown.

Meanwhile, the USW warns that AK workers will face relentless cycles of layoffs as Graham trims costs. "AK steelworkers deserve the same protections that the rest of the steel industry has," says Becker. Plenty of workers seem to agree. "If he'd spend as much time bargaining with us instead of working on keeping the Steelworkers out, then we wouldn't need [the USW]," says Tom Sorrell, who has been a repairman at the Middletown works for 22 years.

Graham has promised to stay aboard until he's 70. But unless he can pull off a last-minute surprise victory, he's likely to face three long years of those labor-management meetings he hates so much.

TOM GRAHAM, LABOR SCOURGE

1983 Graham becomes president of U.S. Steel

and eventually slashes the workforce by 73%.

Steelworkers dub him the Smiling Barracuda.

1986 Graham faces down U.S. Steel's unions

in a painful six-month strike.

1992 At Armco Steel (now AK Steel) he cuts

the workforce by 25%, partly by contracting

out work-which reduces union influence.

1994 At AK, Graham resists adding union

representatives to his board and bringing

the union in on management decisions.