(FORTUNE Magazine) – IN A BACK SHOP at Steel of West Virginia's plant in Huntington, members of the United Steelworkers of America spend spare moments building an electromagnetic hoist for stacking newly made steel beams. The hoist will boost productivity and eliminate at least 20 jobs. That is not the kind of goal union members normally work toward, but things are different at the Huntington plant; it was closed as a hopeless money loser in 1982 by its former owner, a subsidiary of H.K. Porter Co. of Pittsburgh, an industrial equipment maker. The plant was reopened a few months later by new owners who include the former plant manager and other local businessmen. With survival at stake, precedent-shattering cooperation between labor and management became the rule at Huntington. After a federal district court judge barred management from starting without a union, the bosses and the workers agreed to an unusual contract that swaps a drastic reduction in featherbedding work rules for profit sharing and a gentlemen's agreement that there will be no layoffs. (The company will reassign the 20 or more workers whose jobs the new hoist will eliminate.) With agreement on the industry's two most vexing issues, job security and management's right to run the plant efficiently, both sides have focused on the common goal of earning a profit. The workers form teams that go about their business with few formal guidelines. When colleagues are out sick, the teams work short-handed to save the cost of part-time replacements. At the same time, executive and administrative jobs have been cut drastically; in one department they went from 37 to 12. Six levels of decision-making were eliminated. Last year the plant racked up $5 million in profits on sales of $55 million. The renaissance at Huntington is a virtually unalloyed example of what can happen in the tradition-bound steel industry when management and labor cooperate to get rid of cumbersome work rules. Without them, fewer workers get things done more efficiently, and the savings can turn an unprofitable operation around. As in many other industries, the trick is often to break the hold of entrenched interests on both sides. ''Both union leaders and middle managers have a vested interest in keeping work rules,'' says Marvin Weisbord, an organizational consultant based in Ardmore, Pennsylvania. ''If you get rid of the rules, you turn the tables on the union. But in a participatory management system, you also need fewer supervisors.'' Some other recent success stories in steel: JOHNSTOWN CORP. U.S. Steel's Johnstown, Pennsylvania, fabricating works could not compete with low-cost non-union plants in such products as rollers used to shape steel in rolling mills. In 1984, after the steelworkers' union refused a final pay offer that would have cut the average wage from $21 an hour to $15, the plant shut down, putting 700 union members out of work. Within months the former managers, led by John Sheehan, a former governor of the Federal Reserve and a Johnstowner, bought the plant and reopened it as Johnstown Corp. Though not legally bound to deal with the union, Sheehan invited it in anyway. His 425 workers earn an average of $10.50 an hour including benefits, plus profit sharing that amounted to $1 an hour last year. Morale is so high that workers have gone in on Saturdays to clean and paint equipment on their own time. Johnstown Corp.'s sales last year were $24 million. The company has been profitable from the time shipments resumed. MARION STEEL CO. After Armco closed a small steel mill in Marion, Ohio, in 1981, a group of investors bought the plant and reopened it as the non-union Marion Steel Co. Initially business was slower than anticipated, and the new company could not meet payments on its debt, which included a loan from Armco that helped finance the purchase. Marion Steel went into Chapter 11 and did not emerge until March 1985. With restructured debt and new lenders, the plant is now profitable. Last year the company had $64 million in sales. The workers, whose wages were $23 an hour including benefits under Armco, came back to work for $14 an hour plus profit sharing that amounted to $1 an hour for the last six months of 1985. Marion President James R. Conway sees one of his main tasks as ''eliminating the adversarial problem between labor and management.'' Steelworkers traditionally wear hard hats of different colors, depending on their jobs, and only management's are white. At Marion Steel everybody wears a white hat. When the union tried to organize the plant last September, it was rebuffed 204 to 23. MCDONALD STEEL CORP. At McDonald, Ohio, near Youngstown, local venture capitalists teamed with a former U.S. Steel superintendent in 1980 to carve a / successful rolling-mill business out of Big Steel's closed McDonald works. McDonald Steel Corp. leases its facilities from U.S. Steel, including a mill particularly suited to rolling special shapes or bars with asymmetrical cross sections, such as the strips used to form tire rims for heavy-duty trucks and tractors. The non-union company earned $1 million on sales of $24 million last year; business has been growing at a 10% annual clip since the mill reopened. President David Houck has let workers take over many managerial functions, relying on peer pressure, not time clocks, to ensure that workers come in on time, for example. The workers are responsible for quality control, and when customers need special work done, Houck encourages them to talk directly to the employees. ''They know more about the customers' needs than I do,'' he says. The big steel companies seem to be getting the message. In some pioneering instances they have won union agreement to throw out traditional work rules and reduce staff to save plants. Two years ago U.S. Steel reopened the iron and steel furnaces at its Fairfield Works near Birmingham, Alabama, with the cooperation of the union. The work force was cut from 5,000 to 2,100. With manning cuts and investment in new equipment, the man-hours needed to produce a ton of steel dropped 50%. The plant is not yet profitable, but U.S. Steel says it is one of the most competitive of its type anywhere. Perhaps the most fascinating case is Bethlehem Steel's current effort to make its bar, rod, and wire division act like a swinger. The division president, Theodore A. Leja, talks of ''the fun of innovating'' and of ''eliminating bureaucracy to push decision-making to the lowest level.'' A special union agreement ratified in March 1985 gives workers profit sharing while deferring some scheduled pay increases. Part of wages is paid in preferred stock in the company. Not all the progress is on labor's back, however. Leja found a simple way to cut through layers of management bureaucracy. ''I just went down the list,'' he says, ''and eliminated every job that began with the word assistant.''