Fourteen months after its acquisition by OAO Severstal, Severstal North America, Inc. (SNA) reports that it has made considerable progress in restructuring its Dearborn, Mich., steelmaking operations.
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Raw Materials Sourcing
Severstal North America has made considerable progress in securing a reliable supply of strategic raw materials.
Over the past year, the company purchased over 1.2 million net tons of metallurgical coke for its blast furnaces from domestic and foreign suppliers.
SNA is also continuing efforts to secure domestic coke supplies through the development of strategic partnerships. In December 2004, SNA and Wheeling-Pittsburgh Steel Corp. signed a non-binding letter of intent to form a joint venture company that would refurbish Wheeling-Pittsburgh's Follansbee, W.Va., coke producing facilities. Deliberations with Wheeling-Pittsburgh are continuing.
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According to Mr. Vadim Makhov, the Chairman of SNA's Board of Directors, "The management team and employees of Severstal North America have spent the better part of the last year addressing key operating and maintenance issues and detailing specific action plans. All of this was being accomplished in the context of improving the company's overall financial and operating performance while supplying the North American automotive market with superior products and services and integrating SNA within the global network of the Severstal Group. We believe that, with proper planning and execution, SNA will continue to strengthen its competitive position as one of the leading suppliers of high quality steel products for the American automotive industry."
During the first 14 months following the acquisition, SNA has become considerably more efficient by expanding the productive output of its steelmaking facilities with a smaller number of employees. According to CEO Ron Nock, "We are fortunate that we have developed a constructive labor-management relationship with the UAW and its Local 600. We were able to implement the key elements of the UAW-SNA labor agreement with the desired results and without the painful effect of layoffs. In reality, we saved several thousand jobs in Southeastern Michigan, at a time when good paying manufacturing jobs in Michigan are a growing concern."
Production capability and equipment reliability also improved over the past 14 months through the application of substantial internal resources to equipment failure modes analysis and diagnostics, improved preventive and predictive maintenance processes and the acquisition of spare parts to reduce maintenance outage periods.
Many of SNA's quality and process improvements and cost reduction efforts were made possible through the introduction of the Total Operating Performance (TOP) process, which previously had been implemented at OAO Severstal's steelmaking operations in Cherepovets, Russia. The company focused additional resources on employee training in problem solving, team building and financial analysis skills. SNA has also expanded the number of employees participating in problem solving teams that focus on improving efficiency, equipment reliability, housekeeping, product quality and employee safety. Several thousand ideas and over $20 million in verified cost savings were achieved in 2004 alone and efforts continue to expand the TOP process throughout the company's steelmaking operations and staffs in 2005.
One of the fundamental elements of SNA's operating and business plans is to continue SNA's environmental and safety performance improvements through targeted investments and the use of the company's certified environmental and health and safety management systems. The Environmental Management System was certified according to the international ISO 14001 standard on December 14, 2001 and continues as an important part of the company's operating process improvements.
In early 2004, OAO Severstal challenged SNA to set even higher health and safety standards and expectations for its operations through the development of a new Health and Safety Management System that would conform to the international Occupational Health and Safety Assessment Standard, OHSAS 18001. SNA successfully completed its OHSAS 18001 certification audit on March 16, 2005 and was officially certified on April 1, 2005. "It is our sincere belief and expectation that by instituting these systems and through the vigilance of our employees, we will continue to drive further improvements in our environmental and health and safety performance which will be appreciated and deserved by our many stakeholders," said Mr. Makhov.
In conjunction with a worldwide Severstal Group initiative, SNA has begun the process to become Sarbanes-Oxley compliant, to ensure that effective financial controls are in place. The first phase of SNA's implementation plan targets Section 404 compliance.
Severstal North America, Inc. is an integrated flat rolled sheet steel producer that primarily serves the automotive, converter and service center markets in North America. SNA employs approximately 2,200 employees in its manufacturing facilities and corporate offices located in Dearborn, Mich. SNA is a subsidiary of OAO Severstal, Russia's second largest steel producer.