Ford Motor Company’s plant in Dearborn, Michigan, known as the River Rouge facility, was Henry Ford’s signature plant. Under one roof, Ford built a self-sustaining production enterprise: manufacturing steel on one side of the plant, and assembling automobiles on the other. The complex included its own electricity supply and dredged raw materials from the plant’s namesake, the nearby River Rouge, along which it was built. Due to its ingenuity and historic significance, the facility was copied by other industrial entrepreneurs around the world.
For decades, the Rouge facility’s all-under-one-roof format worked beautifully - but then, the US economy began to shift. Foreign auto manufacturers were producing higher quality vehicles than their American counterparts, and customers were catching on. Meanwhile, the steel industry was heading into a downturn.
If the Rouge’s leadership closed down the steel manufacturing side of the business, they would be legally required to retain senior, unionized employees. This meant finding jobs for steel workers on the auto manufacturing side of the business; however, steel workers and auto workers have different skill sets. At a time when quality was of utmost importance in the auto manufacturing world, being forced to employ unskilled workers could be catastrophic to Ford.
The Ford Rouge facility managers approached Renaissance Partners for help, in large part due to our deep experience in the steel industry. One of our partners at the time had been closely involved in the formation of Weirton Steel’s Employee Stock Ownership Plan (ESOP), created in 1984 in a desperate attempt to save employee jobs when National Steel threatened to close the mill. The Weirton Steel ESOP was, at the time, the world’s largest employee-owned steel plant.
Renaissance Partners’ goal for the Ford Rouge facility was to split the business in two, keeping Ford ownership for the auto side and finding new ownership for the steel manufacturing side of the company. This would allow Ford to retain its skilled employees and continue the company’s mission to improve the production quality of its vehicles. Meanwhile, another entity could purchase the steel manufacturing portion of the business, allowing the steel workers to keep their jobs as well.
We negotiated a contract with the auto workers that allowed us to sever the two as planned. Through our network, we found a private equity firm interested in purchasing the steel business. Eventually, Renaissance Partners helped take the company public.
With Renaissance Partners’ help, the Ford Rouge plant successfully split into two discrete businesses, allowing the auto manufacturer to retain skilled employees without violating the original union contract agreements. The steel side of the business thrived under its new ownership; it is owned and operated today by AK Steel, a top steel supplier in the United States.
Ultimately, Renaissance Partners’ legal work allowed hundreds of employees to keep their jobs while Ford, along with other American auto makers, continued improving the quality of automobile production to stay competitive on a global scale.