By Mike Boyer
The Cincinnati Enquirer

AK Steel Corp., struggling to restore profitability, has decided to go ahead with a $65 million investment for new environmental controls at its Middletown mill, a move that would maintain 1,000 steelmaking jobs at the 100-year-old plant.

CEO James L. Wainscott, in reporting a smaller fourth-quarter loss Friday, said AK Steel's board of directors has OK'd the investment, subject to tax-exempt bond financing from the state of Ohio.

"We're reinvesting in iron- and steelmaking at the Middletown Works," Wainscott told analysts.

Gov. Bob Taft said the Ohio Department of Development is working with AK on an incentives package, including the tax-exempt bond financing.

"AK Steel is vital to Ohio's economy and provides thousands of good jobs for Ohioans," Taft said in a statement.

Said Ed Shelley, president of the Armco Employees Independent Federation, which represents hourly employees in Middletown: "This is a positive development for the workers and the community."

The pollution-control investment, allowing AK Steel to meet tougher new federal environmental rules taking effect in May 2006, is the latest sign of a turnaround for the company. AK has lost more than $1 billion in the last three years.

AK reported a narrower fourth-quarter loss Friday, including required non-cash pension charges, on slightly higher shipments.

For the three months ended Dec. 31, the carbon, stainless and electrical steel maker reported a loss of $163.9 million, or $1.51 a share, compared with a loss of $489.7 million, or $4.54 a share, a year ago.

Fourth-quarter sales increased slightly to $1.05 billion on shipment of 1.5 million tons.

Excluding items and results from discontinued operations in both quarters, the loss came to $34.1 million, or 31 cents a share, compared with a loss of $6.8 million, or 6 cents a share, a year earlier.

Results in the latest quarter included charges of $145.3 million to recognize losses from pension and post-retirement benefit plans, and income of $15.5 million from discontinued operations. Last year's results included charges of $483.8 million related to pension and other postretirement benefit charges and $7.4 million in income from discontinued operations, among other items.

For the year, AK reported a wider net loss of $560 million, or $5.17 a share, versus a loss of $502.4 million, or $4.67 a share, in the previous year.

Sales for the year were $4.04 billion on shipments of 5.83 million tons versus sales in the previous year of $4.16 billion on shipments of 5.8 million tons.

Richard Wardrop, Wainscott's predecessor who left in a September management shake-up, had indicated earlier this year that the company might abandon steelmaking in Middletown because of the environmental costs.

But Wainscott, who took over promising a fresh perspective, had said the company was re-examining the issue.

Eliminating steelmaking would reduce Middletown operations to coating and finishing steel slabs obtained elsewhere.

The sprawling Middletown Works employs 3,600, including about 1,000 in basic steelmaking operations such as its coke plant, blast furnace and steelmaking shop.

In October, Wainscott outlined a plan to cut costs and boost revenues aimed at generating $200 million in operating profits this year.

As part of that plan, AK said it was eliminating 475 white-collar jobs company-wide, including about 200 in Middletown, to save about $35 million annually.

Through yearend, Wainscott said the company has cut 400 jobs and expects to complete the remaining 75 by the end of March.

Earlier this month, AK Steel notified the union that it was suspending a contract guarantee for a minimum number of workers at the Middletown mill.

The move, which Shelley said the union is still studying, will cause mill employment to drop through attrition and retirements.

Wainscott said the company still has a $30-a-ton cost disadvantage vs. its competitors because of higher pension and retiree health-care costs. It hopes for some pension-cost relief from a pension bill approved this week by the U.S. Senate.

While Wainscott said he's been encouraged by private talks with unions about dealing with the issue, he said "we must accelerate the discussions."

On Monday, AK announced what it called an "historic" agreement with the United Steelworkers of America, resolving remaining differences from a bitter 39-month company lockout of the union at its Mansfield plant.

AK Steel's shares closed Friday unchanged at $4.90.

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E-mail mboyer@enquirer.com