From Failure to Failure

When Green River Steel was conceived at the start of the Korean war, it seemed to Kentuckians a bright idea. The Louisville area was loaded with surplus scrap that could be used to make steel. In the awakening Ohio Valley there were plenty of potential customers. With an $8,500,000 loan from the Government and the rest from private sources. Green River's $13 million plant rose near Owensboro, one of the few new U.S. steel companies in decades.

But Green River, hampered by inexperienced management and inadequate equipment, was hard hit by the post-Korea steel dip, ran up an overburdening debt of $16 million. For two years creditors tried to marry off Green River with 20 other companies. Nobody wanted Green River.

Last week struggling Green River finally found a groom. Running to the rescue came 56-year-old Jessop Steel, a Washington (Pa.) company which in just eight years has bounced back from a disaster itself.

Weeds & Wages. Jessop's business of high-grade steels for high-speed tools had gone to pieces in World War II, when it concentrated on defense items, e.g., armor plate, failed to recover its peacetime customers. By 1948 Jessop was almost bankrupt. Then in came a new boss. Frank B. Rackley, 33, whose blacksmith father had encouraged him to read and believe Horatio Alger. While working as a $13-a-week office boy in Pittsburgh, Rackley studied metallurgy at night school, was named Western manager for U.S. Steel's stainless and alloy division when still in his 20s.

When Rackley arrived at Jessop Steel, he found an obsolete, junk-filled plant among tall weeds at the edge of town with a $4,100,000 debt, only $7,000 in the bank and 600 sullen workers demanding $300,000 in back wages.

Do-lt-Yourself. Calling the workers together on his first day. Rackley made a blunt mill-yard speech. Jessop could survive, said he, if everyone contributed extra work without pay and accepted back pay in company stock. Then he led the workers in prayer. The union local president stood up and said: "The guy makes sense."

On their own time, Jessop's managers and workers alike pitched in for a year to lug away junk, paint cranes, repair roads, whitewash walls, mend roofs, hang office draperies--all led by Rackley in person. Only once did a tired worker complain, calling Rackley a phony. Equally tired, Rackley promptly punched the dissident in the nose. In admiration for his hard work and leadership, employees gave Rackley a $2,000 kitchen for his home last year, gather there for parties with the boss.

Foot on the Pedal. Working seven days a week, against local skepticism so profound that for a long while grocers refused credit to his own family, Frank Rackley slowly amassed community support that helped swing a $1,000,000 Reconstruction Finance Corp. loan in 1950. With the loan for working capital, Rackley was in business. He became one of the youngest steel presidents in the industry. With heavy Korean-war orders to help, Jessop Steel netted $400,000 in 1951, $1,800,000 in 1952. Though earnings fell to $25,000 in 1954, Jessop came back handily through the rest of the post-Korean years. "We didn't take our foot off the pedal," says Rackley. "We kept right on going uphill."

Last year Jessop Steel netted a hefty $1,500,000. It has a new Canadian subsidiary, a new Detroit plant, new modern equipment, 1,300 employees. Its sales last year climbed above the $25 million mark. The 1950 RFC loan was retired in 16 months; a subsequent $1,000,000 loan from the Bank of New York was paid off in full last month, and Jessop now is debt-free.

Dovetail. Green River, which makes semifinished steel, neatly dovetails with Jessop's finishing plant. Last week, aswarm with plans for his new acquisition, which he will operate as a separate company, Frank Rackley was sure that by putting $3,500,000 into Green River's new plant that failed, his old plant that succeeded can make Green River start earning at least $2,000,000 a year after the new facilities are in operation. "The foundation is there," said he, "to make Green River one of the finest quality plants in the country."

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