After a record-setting year, Cliffs Natural Resources plans to scale back in 2009 to bear through the economic meltdown.
MARQUETTE -- A room full of officials and local media listened attentively as Donald Gallagher described Cliffs Natural Resources' new approach to bearing the downside of a cyclical business.
"What we learned from the past is that building inventory and putting all your cash into development and building inventory is not a good idea,” explained the president of Cliffs' North American Business Unit at their annual state of the company presentation at the Holiday Inn in Marquette on Friday morning. “Trying to create or chase orders that aren't there by lowering the price only causes the death spiral."
Although 2008 was a record-setting year with profits up 59 percent to $3.61 billion in revenue, Cliffs determined combating the economic meltdown meant swift action. This has led to layoffs--so far over 400 at the Empire and Tilden Mines--decreased productivity as well as a temporary shutdown of both mines this July.
"We're running at a significantly reduced rate across North American iron ore, looking at producing 20 million tons of product in total from a capacity of 35-36 million tons,” Gallagher said.
Scaling down their iron ore operations after announcing plans to expand just last summer, isn't stopping Cliffs from moving forward with their iron nugget and Renewafuel projects, which Gallagher says are still in high demand.
While many who attended Friday’s presentation might choose to look at the glass half empty for the Marquette Iron Range, others are seeing Cliffs' strategy as a ray of hope for the future.
“The good news is that they haven't given up on their investment here!” exclaimed State Representative Steve Lindberg of the 109th District. “They will be positioned to, when the economy improves, to put people back to work and get the mines working again."
In the meantime, Cliffs doesn't foresee increasing their productivity or staff in the immediate future, but does plan to open their Renewafuel plant in Sawyer by the end of 2009.
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