Johannsen

Johnson Steel Company (JSC) was established by three Johannsen brothers in 1928 in Pittsfield, Rhode Island. The brothers began JSC by concentrating on high-quality, high-carbon, high-margin steel wire. Products included "music wire" for instruments such as pianos and violins; copper, tin, and other coated wires; and high tensile wire for the newly emerging aircrafts industry. JSC even pioneered new types of wire.

Throughout the 1930s and 40s, JSC prospered while maintaining its reputation for high-quality products and in-house design/construction of its own equipment. In 1946, the last remaining Johanssen brother sold the company to West Virginia Steel (WVS) for $ 4 million. For its investment, WVS obtained three Johannsen steel mills located in Pittsfield, Rhode Island (500 employees), Akron, Ohio (100 employees), and Los Angeles (16 employees), and two steel wire warehouses - one in Chicago (8 employees) and one in Los Angeles (4 employees). WVS kept Johannsen completely intact as a wholly owned subsidiary.

The 1940s and 50s witnessed increasing JSC sales to the U.S military and U.S auto-makers and tire makers. JSC also sold wire for use in staples, nails, cables, cookie cutters, steel brushes/wire wheels, and electrical products, leading to a continued healthy upward climb in sales and profits.

In 1960 was a climatic year for the U.S steel industry. A prolonged steel strike of 14 weeks caught steel customers off guard. With stocks nearly exhausted, steel customers throughout the United States looked for alternative sources. Up to this point, competition from Japanese steel plants had been minimal. However, with few options, steel customers turned to the Japanese. They found the quality, price, and even delivery of steel to be very acceptable. No longer was competition from offshore steel makers to be insignificant.

The combination of offshore steel competition and a productivity-minded economy drove steel prices down to very competitive levels throughout the 1960s and 1970s. Attention in the industry and in JSC turned toward cost cutting and sales expansion as means to maintain profit levels.

The selection of Joe Thomas, formerly the sales manager of JSC, as its president in 1978 resulted in a further emphasis on sales expansion. And indeed sales grew by nearly 2 million pounds per year through the 1970s and 80s. The growth in sales revenue paralleled the tonnage sold. However, after-tax profits on sales throughout the late 1980s were never above 2%.

Because profits had been meager since the mid 1970s for both JSC and WVS, the "mother corporation" was spending little on capital investment unless a 40% return on investment (ROI) before taxes could be demonstrated. WVS had other restrictions on its JSC subsidiary. Sixty percent of JSC's total purchase of steel rod ( the raw material for steel wire) had to be purchased from WVS, even though it was well acknowledged throughout the industry that WVS's steel rod was the lowest in quality. Also the smaller size of WVS rod coils (300lb), compared to the newest industry sizes from Bethlehem Steel (1500 and 3000 lb), increased the number