(FORTUNE Magazine) – How's this for a story line: Once upon a time the American steel industry was big and mighty. Steel's managers walked with a swagger and had enough clout to go nose to nose with Presidents, unions, and anything else that got in the way of the massive industrial machinery they lorded over. But the swagger, the power, and the profits all disappeared, undermined by managerial greed and stupidity that made for high-cost, low-quality steel. Sound familiar? It is. Steel's sad saga has been explored countless times in these pages and in books such as John Strohmeyer's Crisis in Bethlehem and John Hoerr's more recent And % the Wolf Finally Came. The subtitle of Mark Reutter's Sparrows Point (Summit Books, $24.95) is ''The Rise and Ruin of American Industrial Might,'' hinting at some I-beam- weight analysis. Reutter focuses on a single facility as a paradigm for the industry: Bethlehem Steel's gargantuan works at Sparrows Point, Maryland, a peninsula extending into the Chesapeake just south of Baltimore. Although that framework seems logical, readers searching for a revealing new insight into the steel industry's problems will be disappointed. But there is value here. The strength of this book is Reutter's wonderful social and economic history of the community that had the Sparrows Point works as its heart. This is another side of the story of American steel, the human side, and it has much to teach. Sparrows Point, forged in the hearth of America's industrial superexpansion and shaped by the forces of big-shouldered capitalism, is rich in character and characters, and Reutter is up to the task of portraying the mechanics of a steel town and the machinations of legendary steel masters such as Charles M. Schwab and Eugene G. Grace. Calling the Point a plant is a bit of an understatement. At one time it was the world's biggest steelmaking operation, with a rated production of nine million tons annually, or about 8% of the total industry output. Opened in 1889, Sparrows Point was a planned industrial community -- a mill and town owned lock, stock, and open hearth by Maryland Steel Co., a subsidiary of Pennsylvania Steel Co., which was in turn controlled by the Pennsylvania Railroad. The railroads backed the early steel industry so it could replace iron rails with higher-quality steel ones. Metalworking was entering a new era. Members of organized craft unions, who in the 1880s made as much as $10 a day (more than five times the pay of the average nonfarm worker), saw their livelihoods incinerated by the molten steel that spewed, mechanically, from the furnace created by Sir Henry Bessemer.

SPARROWS POINT was designed and set running by Frederick W. Wood, a consummate engineer who created an integrated steel mill, as well as the surrounding community, with unremitting passion for efficiency. Wood was an engagingly odd little man, portrayed by Reutter as an industrial genius who could not think on a human scale. Not a cinder escaped his attention, and Wood labored to get every last ounce of energy out of machines and men. He failed to correct dangerous furnace designs, says Reutter, after a sharp-penciled & cost analysis showed that paying for the hospitalization or funerals of the men regularly engorged by the steel monster was cheaper than fixing it. Much has obviously changed since then, but other parts of the story strikingly presage today's leading business issues. You want merger mania? Try Bethlehem's deft snatching of Lackawanna Steel and Midvale Steel & Ordnance from merger specialist Theodore Chadbourne in 1922, or the spectacular takeover play for Youngstown Sheet & Tube by Bethlehem in 1930. You think Drexel created junk bonds? Bethlehem bought Pennsylvania Steel, and Sparrows Point, in 1916 with ''gold bonds'' paying 5% interest -- well over the prevailing rate. Executive pay? Bethlehem President Eugene Grace in 1929 earned a salary of $12,000 and a bonus of $1.6 million, equal to nearly $11 million today. Gain sharing? CEO Schwab's incentive pay system for skilled workmen preceded modern plans by half a century. Where there is steel there is labor, as in organized labor. Reutter clearly carries a torch for the working stiff, and given the mill-vs.-worker choice, it would be hard not to here. In the 1890s men labored 11 to 13 hours a day, six days a week, and were required to pull a 24-hour shift every other Sunday in service to the cause. The labor cost of making a ton of pig iron dropped from $3.69 in 1875 to $1.18 in 1895, according to Wood's calculations. Reutter writes: ''The unblinking concentration of the engineer, the penny-pinching of the the timekeeper, the labor savings of new machinery, the substitution of unskilled for skilled labor, and the forcible removal of the union -- all of these factors had profound ramifications for the steelworker. As a unit cost he had been cut, trimmed, rolled down, and manipulated as fully as the steel he handled.'' But Reutter seems oblivious to the fact that the Point provided more than 25,000 workers better wages and housing than most of them could have hoped for. And despite the harsh working conditions, the mills were and are special places to the fraternity that toils there, a view reflected by the old-timers Reutter interviewed. BETHLEHEM fought the union furiously, of course. As lord and master of the property, the company kept the union at bay at the Point until 1942, several years after U.S. Steel signed with the Steel Workers Organizing Committee. In Reutter's unwavering view, organized labor is always the hero, victimized by the corporate monster. While the unions engaged in a courageous struggle to win the right to organize, their record was not always heroic. Nor is the union blameless in steel's decline over the past decade. The United Steelworkers of America and Bethlehem have been at war since the late Seventies, and Reutter is a bit short on analysis of the issue. He includes somewhat dutiful chapters on women and blacks. Guess what: Bethlehem discriminated against blacks and treated women as second-class workers. These facts certainly should not be glossed over, but Reutter turns them into made- for-television histrionics. The author got interested in Sparrows Point after covering some accidents there for the Baltimore Sun. That's not quite the same as business reporting, and he is at his weakest when trying to do an economic analysis. Although Reutter rightly fusses about secret, illegal marketing agreements negotiated by Pennsylvania-Maryland Steel and U.S. Steel in the early 1890s, he can't tell us why those agreements failed to make Pennsylvania-Maryland profitable, a failure that led to its being sold to the thriving Bethlehem in 1916. Reutter argues that Bethlehem's real problems began when the company greatly expanded the Point in 1967 using century-old technology. Bethlehem's installation of its No. 4 blast furnace 12 years after the development of the basic oxygen furnace, he maintains, was a monumental folly built on management's desire to own the world's biggest steel plant. Folly too was the company's smugness in the face of lightweight aluminum cans that eventually replaced tin-plated steel beverage cans. With 20 years' hindsight, such mistakes aren't hard to spot. Unfortunately, we don't learn enough of what Bethlehem's management was thinking about when it made these decisions, and Reutter certainly isn't going to weaken his own case by trying to reconstruct that thinking. Reutter's best explanation of Bethlehem's problems in the modern era: Management was arrogant. True enough, but there are other economic issues -- the increase in car imports representing some ten million tons of steel, the development of a steel industry in the Third World, and government subsidization of Western Europe's steelmakers. He doesn't mention the disastrous contract the steelmakers signed with the United Steelworkers in 1974, the so-called no-strike Experimental Negotiating Agreement that locked the industry into unsustainably high costs for three years and helped doom thousands of jobs at the Point alone. In Crisis in Bethlehem, author Strohmeyer does a far better job of analyzing the roles of labor and management as steel fell further into decline. AS RICH as Sparrows Point history is, Reutter seems too inclined to write off the company they call Bessie while she's still alive and kicking. Much to his annoyance, it would seem, Bethlehem is staging what he terms a ''modest comeback'' under CEO Walter Williams, for whom Reutter has few kind words. As Williams has pointed out, Bessie is a different company today, one that has invested nearly $3 billion since 1981 to lower costs, increase efficiency, and retire some of its aging capacity. Down to 5.5 million tons in annual production from nine million in the 1950s, the Point has two new continuous casters that have reduced the company's man-hours per ton to about four, competitive with any producer in the world. Reutter's pessimism may eventually prove justified -- but it is far too early to close the book on Bessie.

BOX: EXCERPT: People still worry that the country's economic fundamentals are askew when such an important industry as steel is outclassed not only by Japan but by former lightweights such as South Korea and Spain -- and when more people work for McDonald's than for U.S. Steel.