A steelworker solution: when all else failed they bought the shop.

The Shenango Valley, which hugs the border between Ohio and Pennsylvania, is perhaps most famous for Shenango Lake. According to Trailer Life magazine, "If you're interested in bragging-size crappies, Shenango is the place to go." But the valley is also home to small, quiet, middle-class towns where most citizens aspire to a simple life: raising a family, holding down a good job, and the occasional chance to hook and land some of those famous crappies.

If you want good fishing, stay on the lake. But if you want to see a community that took control of its future, go about six miles south of the lake, past well-kept homes, green lawns, churches, and sweetcorn stands, to Sharpsville, Pennsylvania.

In the 1980s, the leveraged-buyout craze reached beyond Wall Street to smalltown America. It sucked Sharpsville's largest employer into its vortex, choked it of capital investment, and then shut it down. What makes the Sharpsville story different is that the workers used every tool they could, including a forty-two-day plant occupation, to save their livelihoods. The community rallied around the workers' efforts and together they resurrected Sharpsville Quality Products from the ruins of bankruptcy.

Since 1907, the Sharpsville ingot-mold foundry of Shenango, Inc., had been a stable employer. Speaking of his early days as a laborer there, Jeff Burns says, "It was a good place to work - good money, good benefits, and a good bunch of guys to work with. These guys went to school together, they grew up together. It was close-knit, like family."

The family feeling was fostered by the Snyders, the local civic-minded owners. The Snyders provided new goalposts for the high-school football field, in an area where the sport is almost a religion. Even after the Snyders moved out of Sharpsville, they continued to maintain the football field.

When William Snyder II retired, the plant was purchased through a leveraged buyout and became part of Shenango Group, Inc. At the time of the buyout, most of the 300 local employees were represented by the United Steel Workers of America. They figured the new owners would scrap the plant for cash and leave the hard-hit community with yet another wound to lick.

But in the late 1980s, the steel industry turned around, and the Shenango Group began making money, precipitating two crucial changes. First, the parent company pursued increased market share by cutting prices and purchasing other ingot-mold foundries. Second, management at the Sharpsville facility embraced the new trend of employee participation, which allowed shop steward Jeff Swogger and his co-workers to learn the business. The information they gathered would be crucial to their buyout effort three years later.

Shenango's debt load and the 1990 industry downturn led to the closing of many plants. The Sharpsville foundry, however, remained competitive, thanks to labor-management participation and shop-floor cost committees. For example, the workers' compensation committee drastically reduced the number of claims by putting pe6ple back to work on light duty and getting rid of frivolous claims. Employee participation, concessions, and the union's creative money-saving ideas were not enough; lacking cash for capital improvements, the Sharpsville plant, too, seemed likely to close.

While union leaders in many communities would have prepared to fight for severance pay, the leadership of this union local sought alternatives to a shutdown. The Sharpsville workers were not surprised when Shenango Group filed for Chapter 11 bankruptcy protection on December 14, 1992.

Requests for more concessions quickly followed the bankruptcy filing. Company officials said the give-backs would keep the plant open during the corporate reorganization. These additional concessions were granted despite the fact that give-backs amounting to $11 per hour had been granted in the previous year, according to Swogger. By then, Swogger had become president of the USWA local.

Even these concessions were not enough; the announcement came on March 2, 1993, that the Sharpsville plant would close in three days.

To some Shenango employees, this was the final straw. "Maybe they ought to close the whole damn thing down and let the guys get on with their lives," said one fifty-nine-year-old employee. They had done their best to make the plant profitable for the owners. "We tried all we could, but it wasn't enough," says Swogger. Disbelief and anger prevailed.

Jeff Burns, now a crane operator, remembers, "I had finally landed a job in a crane that I liked, and then they closed the place down."

Like so many other shutdowns, the impact of the closing went far beyond the unemployed workers; it was one more economic blow to the struggling Shenango Valley, and it tore at the community. Many of their fathers had worked in the plant before them, and the foundry workers had grown up together. Their children were taught by the same grade-school teachers who had taught them, and both generations played street football and little-league baseball together. To Swogger, the bottom line was: "Our kids should not have to leave Sharpsville to find jobs." So the steel workers of Sharpsville's local decided it was time to reclaim their plant and community.

They turned the shutdown into a new beginning.

The steel workers thought of an employee buyout. But first the local leadership understood that if the machinery was moved out, there would be nothing left to buy. So, taking a page from American labor history, the local staged a sit-in and organized community rallies at the plant gates. The goal was to stop the removal of equipment and to force the Shenango Group, its bank, its secured creditors, and the bankruptcy court to take the employee buyout seriously.

For forty-two days, through the blizzard of 1993, the employees occupied the plant. Sustained by the support of their community and families, eating donated pizza and discussing ways to make the new company successful, the workers steadfastly remained. Frequent visits from their families helped bind the steel workers together. Day after day, they learned how much they all had to lose. It was not just your job on the line here, it was your lifestyle - the lifestyle handed down by your parents. It was your kids' future. If your own family wasn't inspiration enough to do whatever it took, the other workers' families were.

The sit-in became a focal point for the community, which had lost more than 10,000 industrial jobs in the previous decade. A Rally for the Valley brought out thousands of people, demonstrating support for the sit-in despite the cold weather. Gradually, the steel workers' local found itself leading a valley-wide movement of faith and determination.

Art Fuller, pastor of the First Baptist Church, had been looking for a way to in-still hope in the "whole atmosphere of decline" in the valley. "No one was doing anything with young people," Fuller says. "There was no hope in the community."

He saw the buyout effort as an opportunity for social, economic, and spiritual renewal. People were scared and angry, he says, but "if people see that they can do [the buyout], they can do more and go on to bigger projects. The valley obviously needs life and it can come together."

To give the community a chance to help out, Fuller, other local ministers, and Swogger decided to set up the ANB - which stands for " A New Beginning" - to collect contributions and loans from the community to help the buyout effort. It took visits to five lawyers, but Swogger and Fuller finally found one who would set up the trust. Fuller and Swogger led the charge, backed up by many of the steel workers, who suddenly became public speakers and fundraisers.

Within a few months, the community, local churches, and the steel workers had pledged more than a quarter of a million dollars to the ANB trust. These funds would sustain the buyout committee over the long haul to reopen the plant. The community support and the ANB Trust were vital to the buyout effort. But huge barriers remained. There was no willing seller, the market for ingot-molds was declining, and the new firm was an unlikely candidate for financing. Undaunted, the steel workers dove in, determined to do "whatever it takes" to make the buyout happen.

"It's tough swimming upstream," remarks long-time Shenango employee Vic DiGiacamo about the buyout, "but the salmon have been doing it for years."

Under the pressure of the sit-in, publicity, and an argument that their creditors were getting ripped off, the Shenango Group and Mellon Bank agreed to meet with the buyout committee. Negotiations followed. On April 15, a letter of intent was signed. Shenango agreed to sell to the employees, ending the sit-in.

The employee buyout began in those cold days of March 1993. While the sit-in created a willing seller, it did more than just change the minds of bankers and businessmen in Pittsburgh: It solidified the commitment and solidarity of the employees. With their first victory behind them, the steel workers moved on to the next obstacle, confident they would find a way over, under, or around.

Mel Jordan, whose father and two sons had worked at the plant, summed it up: "We just believed. We just knew that we would do whatever it takes."

Even with the ANB's $250,000 behind them, financing was still very questionable. But with single-minded determination, the union local and the Sharpsville community began the long struggle to finance the deal. Wide publicity attracted two important new allies for the buyout group. The Steel Valley Authority (SVA), a Pittsburgh-area labor-community development agency, got involved with the buyout effort; and Ronald Anderson, an acquaintance of Swogger's who had read the extensive news reports, offered to help.

Tom Croft and Joe Bute of the SVA staff visited the sit-in and were impressed by the workers' enthusiasm. Bute rated them "a ten on the motivational Richter scale." In addition, Bute says, "We were most impressed by the degree to which they had thought about their business in practical terms, and how they would be able to turn a profit."

The SVA staff helped the buyout committee locate and make use of state programs. Ronald Anderson, who was experienced in turnaround situations, offered his assistance, and the steel workers' international union financed a feasibility study. With the promising results of the study in hand, Swogger, Anderson, and the SVA began affanging the public, commercial, and private financing. The public sector came up with grants and loans enough to meet the purchase price of $1.28 million. Unfortunately, all of the loans were contingent on a solid business plan which called for $5 million to $6 million. The buyout committee still needed to find $4 million to $5 million. "I was skeptical about getting the loans," says thirty-two-year-old Mike Zomparelli, "but I knew it would all work out."

On November 11, 1993, the bankruptcy judge approved the sale of the SharpsviUe Shenango plant to the new company, Sharpsville Quality Products. Still short of cash, the buyout committee sought three separate employee-stock-ownership-plan loans, a line of credit, equity investments, and bridge financing from an equity investor who was impressed by the the community's and the employees' efforts. The final deal included financing from fourteen separate entities.

On Christmas Eve, 1993, the deal was complete. Like a giant gift for the Shenango Valley, the new beginning promised by the buyout committee became a reality. As Swogger had said ten months before, "If you do what's right and you do what's in your heart, never quit, and persevere, Shenango is gonna be running again." The workers had done it. Their commitment had brought ownership of the plant and control over their jobs back into the community. Commitment, says a big sheet of paper taped to the wall behind Swogger's desk, is what transforms promises into reality.

Everyone on the buyout committee gave up a lot to make the deal happen. Next to the Commitment sign is a handwritten essay titled "My Hero," by Swogger's son. To Jeff, his greatest accomplishment is not the buyout; it's being the hero of his thirteen-year-old son. But he has spent more time recently with the buyout than with his family.

Similarly, Jeff Burns says, "I haven't been there for [my youngest son]," adding, with a wince, "and it hurts. It wasn't the financial instability; it was not being there for him that was the hardest."

As the plant started up again, both Burns and Swogger said they hoped to spend more time with their families. By summer's end, though, Burns's fishing boat had still not hit the lake, and Swogger's new job as vice president of operations was taking almost as much time as the buyout.

On February 9, 1994, less than a year after beginning their sit-in, the employee-owners of Sharpsville Quality Products poured their first ingot-mold. Sparks flew like long-overdue fireworks as the molten steel flowed. And once again, the community turned out on a cold winter day - this time to celebrate as a bottle of champagne smashed onto the first mold shipped.

But what sort of new beginning is this? The employees own 53 percent of the company, but the company is in a declining market. Most business analysts would surely rank it as a poor investment. If the determination demonstrated in the buyout continues, however, Sharpsville Quality Products will achieve economic stability, and the employee owners will once again have the chance to work hard, enjoy their own homes and families, and go fishing on the nearby lake.

Taking the Initiative

Early on, the United Steel Workers of America had some doubts about whether ESOPs were in the best interests of its members, but the union has now embarked on a strategy to use employee ownership to stabilize members' jobs.

"We used to think of employee ownership defensively, as an alternative to a company going under," says Lynn Williams, former USWA president. "But now we're going in that direction quite aggressively."

USWA members participate in thirty-five ESOPs, twenty-four of which resulted from union-led buyouts. In fourteen, members hold majority ownership. And the union has recently set up a Worker Ownership Institute, co-chaired by Williams and Russ Maier, president and CEO of Republic Engineered Steels, the largest USWA-organized employee-owned company.

A Movement as Mean

as a `Pit Bull on Crack'

The Steel Valley Authority (SVA) evolved from a community coalition that fought the steel shutdowns in the Youngstown-Pittsburgh area in the late 1970s and early 1980s. The SVA has developed an array of legal and economic development strategies - including the use of eminent domain - to fight industrial decay in the steel belt and to prevent the destruction of factories, jobs, and the families and communities that rely on them. "It was a pleasure to see a group that was going to fight like hell for their jobs and community." says Tom Croft, SVA director, about the Shenango buyout effort. "If you lose your job in most industrial towns in this nation, you are not going to be born again as a successful computer operator, and your town is not going to replace the losses. These steel workers, religious and community leaders realized this from the beginning, and waged a campaign so strategic, militant, effective, and broad-based that the powers that be had to get in line rather than take on a movement that was as mean as a `pit bull on crack.'"