Union Leaders OK Pay Cuts to Save Steel Firm

The United Steelworkers’ leadership Tuesday accepted a Wheeling-Pittsburgh Steel contract offer that would cut compensation by at least 11%.

The union leaders expressed hope that 8,200 picketing workers will ratify the concessions to end a walkout against the crippled company.

The agreement caps 14 months of sometimes bitter negotiations on labor-cost reductions needed to sustain the steelmaker through Chapter 11 bankruptcy reorganization and prevent its liquidation.

“This contract does not contain all the things that they are used to,” USW chief negotiator Paul D. Rusen said. “They realized . . . that, if this contract would be voted down, Wheeling-Pittsburgh Steel would probably be liquidated.”

The rank-and-file vote, to be conducted by mail between Thursday and Oct. 26, is only the first of many hurdles facing Wheeling-Pittsburgh, the largest steelmaker snared in bankruptcy court in modern times and the target of the nation’s biggest steel shutdown in more than a quarter century. The walkout was 87 days old Tuesday.

Bankers who hold more than half of the company’s $530 million in loans were weighing the agreement, meanwhile, against the economic conditions that led to the steelmaker’s fiscal crisis.

A source among the 11 banks said the wage and benefit package, worth between $18 and $19 per hour depending on steel prices, may be more costly than Wheeling-Pittsburgh can afford during a time of abundant steel supplies and weak prices.

“We’re working on the numbers, but we have doubts. It’s doubtful the company has sufficient cash flow and asset basis to go forward as a viable operation,” said a banking source, who spoke on condition that he not be named. “Our preliminary numbers indicate they don’t have enough.”

He said the lenders have been considering whether to file in court to have the company liquidated under Chapter 7 of the U.S. Bankruptcy Code.

In a press conference with Rusen, company Chief Executive George A. Ferris dismissed reports that Manufacturers Hanover Trust and 10 other banks might press for job eliminations and plant shutdowns to aid the reorganization and protect their troubled loans.

“We’re going to run Wheeling-Pittsburgh,” said Ferris, flanked by President John D. Fry.

Rusen acknowledged, however, that “the company has been very candid. There has to be a reduction in the man-hours worked in the production of steel. Jobs have to be cut or combined and work practices have to be changed.”

The labor agreement provides unspecified severance bonuses for workers whose jobs are eliminated.

USW members, who had granted more than $100 million in contract concessions before the current negotiations began 14 months ago, had been working under a pact costing the company $21.40 per hour in wages, benefits and related labor costs. That pact was rejected by the company under bankruptcy laws.

The hourly wage portion of the agreement was being decided by 19 local union presidents who had several options in dividing funds agreed to by the company.

“It’s going to be a blood bath for a couple hours in there,” Rusen said as he left the meeting in a downtown hotel to announce the agreement.

Union members will not return to work until U.S. Bankruptcy Judge Warren W. Bentz approves the contract, he said. A hearing on the issue is likely, and the lenders could object to the terms.

“They ain’t going to like it,” Rusen said.

The union leader said the concessions would not affect contract talks next year with other major steelmakers, although the nation’s top producer, U.S. Steel Corp., has already said it will seek equal treatment.