USW Offers Concessions to 5 Ailing Firms : Steel Talks Focus on Cuts
After granting $1.4 billion worth of labor cost savings to the nation’s ailing steelmakers in 1983, leaders of the United Steelworkers said enough was enough. They were through with concessions.
But since then, competition from imports has only gotten worse, and the industry’s financial problems have accelerated. So now, saying they can’t ignore reality, union leaders have reversed course and are preparing to give the industry some of the broadest wage and benefit cuts in its history.
In hotel rooms all over downtown Pittsburgh and in suburban Chicago as well, bargainers for the steelworkers and five of the most depressed U.S. steel companies are racing against a March 31 deadline to negotiate new labor contracts. Those contracts are likely to include dramatic wage and benefit cuts aimed at helping the firms outlast the industry’s worst crisis since the Great Depression.
‘Damage Control’
“This is damage control,” union spokesman Gary Hubbard says.
Industry analysts stress that this latest set of concessionary negotiations may be the most crucial in the industry’s history--and that the outcome may determine which companies and individual plants survive and which disappear.
“There are several plants in the industry that are definitely going to go unless there are major, major changes in labor costs this time,” warned Charles Bradford, steel industry analyst with Merrill Lynch.
After years of being squeezed by imports and low prices, many of the weakest U.S. steel companies are close to collapse. To a remarkable degree, that inescapable fact seems to have brought a consensus among union and management officials on the need for significant contract concessions to help employers avoid catastrophe.
No Talks With U.S. Steel
As a result, the union and the companies--LTV Corp., Bethlehem Steel, National Steel, Armco and Inland Steel--have agreed to open early talks, well before the July 31 expiration date for all of their contracts. Industry leader U.S. Steel is the only major firm that has refused to agree to the union’s terms for holding early negotiations.
Urging on the five smaller companies have been the industry’s biggest customers--the major auto makers--who have been pressuring the steel firms to settle before the end of the first quarter so they won’t have to worry about steel shortages during a summer strike. If labor accords aren’t reached by the end of the month, the steelmakers have warned, they will be forced to begin stockpiling steel to placate their customers, who otherwise might sign supply contracts with foreign steel firms to hedge against strike-related shortages.
“Without agreements by the end of the month, you add to the import pressures on the companies, because customers might start stockpiling foreign steel,” acknowledged Steelworkers President Lynn Williams. (Officials of the five companies declined to comment on the talks.)
But, despite the union’s willingness to grant concessions, major differences remain over which companies deserve the best deals. With the breakup of industrywide coordinated bargaining last year, union officials say it is possible that they will agree to different wage, benefit and work-rule provisions at each firm.
In return for opening early talks, the union won the right to inspect the books of each company, and so union officials now believe that they will be able to judge for themselves which companies need the most help.
“Our policy clearly makes the distinction between companies that are distressed and those that are not,” Williams said. “And we are insisting on a full examination” of their financial data to determine which firms need the most, he added.
The union is first trying to tackle the problems at LTV, the nation’s second-largest steelmaker and the most troubled of the major firms. In order to leave time later in the month to deal with the other companies, the union has agreed to push for a settlement with LTV by Saturday, but talks will continue if that deadline isn’t met.
Since acquiring Republic Steel and merging it with its Jones & Laughlin Steel subsidiary in 1984, LTV’s financial problems have grown so bad that the union was finally forced to defer February’s cost-of-living payment to LTV workers at least until April. It later sent a letter to its membership warning that the firm would go bankrupt without further cuts in its labor costs.
The Dallas-based conglomerate, which also has major aerospace and defense operations, posted a net loss of $723.9 million last year, compared to 1984’s loss of $378.2 million.
Unusually High Pension Costs
LTV’s problems have been compounded by the fact that it has a relatively large number of retirees--and so has abnormally high pension costs. As a result, its total labor cost is the highest in the industry at $25 per hour per employee, well above the $23-per-hour industry average.
The union has so far reached tentative accords with LTV on most non-wage issues, union sources say. But, despite their marathon bargaining sessions in recent days, the two sides have yet to settle on wage-related economic items. Still, industry analysts believe that the union will be forced to allow LTV to lower its total labor costs--including both wages and fringe benefits--by $2 to $4 per hour.
In return, the union is expected to make some major gains; it is likely to win some form of stock ownership or profit-sharing plan, significant limits on the company’s right to subcontract work out to suppliers, improved grievance procedures and perhaps board membership.
Bradford believes that LTV will give the union some form of preferred stock, with dividends based only on earnings--following the pattern established in a recent local contract agreement at Bethlehem’s Johnstown, Pa., plant.
A similar pattern, with somewhat smaller concessions, may develop in the companywide talks opening next Monday with financially troubled Bethlehem, which lost $196 million last year, compared to a loss of $112 million in 1984.
Joint Political Action Urged
But Armco, National and Inland, which appear somewhat more stable, may not get as much. (All of the negotiations will be held in Pittsburgh except in the case of Inland, which is staging talks in suburban Chicago.)
If the union does settle with all five this month, it will be able to negotiate from a position of strength with U.S. Steel next summer. Earlier this winter, U.S. Steel balked at the union’s terms for granting early talks, which called for joint political action by the union and industry to win greater trade protection against steel imports. The other companies agreed to sign the union’s “crisis agreements,” and they have already begun working with the union’s staff to develop publicity and lobbying campaigns aimed at increasing congressional support for tougher steel import restrictions.
U.S. Steel, which has often acted alone on trade issues, chose instead to bargain by itself.
“I don’t think you should have to adopt the United Steelworkers of America political philosophy in order to negotiate a labor agreement,” U.S. Steel Chairman David Roderick said. “I mean, labor negotiations should be labor negotiations.”
But now U.S. Steel, which said it will demand the same concessions given other steelmakers, could find itself threatened with a strike this summer at a time when the rest of the industry has already settled.
“If the union gets agreements at all five companies now, then it can really put the squeeze on U.S. Steel,” Bradford said. “In fact, I’ve been predicting a strike at U.S. Steel for a long time.” HOW IRON AND STEEL WAGES HAVE INCREASED
Cost per hour, in dollars, by country
1984 1974 United $20.28 $10.24 States Japan 10.95 5.26 U.K. 7.25 3.90 Korea 2.07 0.51* Brazil 1.60 1.29
*Includes production of other metals
Source: Labor Department
