A storied contrarian who made a fortune investing in bankrupt companies such as Texaco and Fruit of the Loom, Ross didn't buy his first steel property until last April. That's when he snapped up the idled mills of bankrupt LTV Corp. for $262 million through his private-equity firm, W.L. Ross & Co. At the time, the industry was in pell-mell retreat: Done in by dirt-cheap imports, nearly half the nation's mills had gone bust, including three of the top five. Assessing Ross's chances, one industry veteran hooted: "It's Farmer Jones with baling wire and bubble gum."
Yet within a month, Ross and his partners were rehiring laid-off workers at what had been the No. 4 steel producer in the U.S., the renamed International Steel Group. Now, the ISG chairman is close to his biggest deal yet: a $1.5 billion bid for the assets of Bethlehem Steel Corp., which has been in Chapter 11 since October, 2001.
How did he pull it off? Part of it is timing. Ross, 65, who honed his restructuring skills through 24 years at investment bank Rothschild Inc., negotiated to buy the LTV mills just before President Bush set tariffs that squeezed out foreign suppliers. He also set up his deals to shuck most of the predecessor companies' debts, lowering ISG's breakeven point.
Ross brings an outsider's approach to management. Today, ISG has just 22 executives; LTV had more lawyers than that. Beyond payroll savings, the cuts have shifted more responsibility to the shop floor, which, in turn, has yielded productivity gains. Ross says that mill workers suggested calling for new slabs of steel 10 minutes before a run is about to end rather than waiting until it had ended, as was customary. That adds 30 minutes of extra output a day. "We were frankly taken aback" by Ross's attitude, says Thomas M. Conway, a veteran union negotiator. "We thought, `Is this guy for real?"'
The bottom line: Even with a well-paid union workforce, ISG has lifted productivity close to the levels of nonunion Nucor Corp. Not bad for wire and gum. By Michael Arndt in Pittsburgh