Strikebound USX Acts to Cut Back as Rivals Hike Prices
Strikebound USX Corp. revealed plans Friday to cut salaries and lay off some white-collar workers, even as competitors moved to capitalize on the company’s problems by raising prices.
The austerity drive at USX includes 10% salary reductions for most management employees at its Pittsburgh corporate offices. In addition, about 700 non-union workers will be laid off. Another 800 are expected to take early retirement by the end of September.
Top officers who sit on the board of directors will take a 25% cut in incentive pay, which averages 40% of base salary for the top five officers. Chairman David M. Roderick, the highest paid executive, had a 1985 base salary of $733,000 and incentive pay of $275,000. If his 1986 base pay were the same, the 25% cut would cost him nearly $69,000. “Similar or deeper reductions have long since been taken by most of our major competitors,” Roderick said in a letter mailed Thursday to the company’s corporate staff. Similar letters were mailed to other non-union USX workers.
As the strike by 22,000 workers against the nation’s biggest steel producer dragged into its second week with no settlement in sight, National Steel said it would hike prices on its flat-rolled sheet steel by about 3%, effective Sept. 1. Inland Steel and Bethlehem Steel announced similar increases.
Other domestic steel producers are expected to follow the pricing pattern set by Inland and National on sheet steel, and analysts believe the increases will stick at least for the duration of the USX strike.
Industry observers believe prices will remain depressed on other steel products that are not selling as well as sheet. USX, formerly U.S. Steel, normally accounts for about 15% of the market for sheet steel, which is used in automobiles, appliances and in the construction industry.
National initially announced its price hike in May but was forced to delay enforcing it because of the weakness in the steel market.
Separately on Friday, Moody’s Investors Service lowered its credit ratings on bonds issued by two troubled domestic steelmakers, Armco and Bethlehem. Moody’s said the ratings were lowered to reflect both firms’ weakening financial health, as well as the severity of the steel industry’s crisis.
The pay cuts at USX will take effect Aug. 11. The company’s contributions to employee savings plans also will be suspended.
Company unemployment benefits, which supplement state unemployment benefits up to 35% of regular salary, will be available to any white-collar worker “whose services may not be required as a result of the strike by the United Steelworkers of America,” the letters to employees said.
No such pay or benefit cuts were announced at USX’s two principal subsidiaries, said spokesman William Ryder at Marathon Oil Co. in Findlay, Ohio, and spokesman Mike Dixon at Texas Oil & Gas in Dallas.
“Most lines of business . . . are presently under unique and extreme economic pressures constituting nothing less than a challenge to survival. Meeting this challenge requires sacrifices of all of us. So these measures, however painful, are necessary,” the letters said.
Officials at USX refused to discuss the letters.
“It is a communication within our management organization,” spokesman Tom Ferrell said. “This is a management activity and not an occasion for public disclosure.”
About 22,000 United Steelworkers members have been off the job at 16 USX steel plants in nine states since contract negotiations collapsed Aug. 1 over the company’s demands for wage and benefit concessions.
USX negotiators last proposed cutting the average union member wage of $12.24 by $1.25, or 10.2%, eliminating three holidays and one week of vacation and suspending cost-of-living bonuses. USX also offered to pay the workers 10% of steelmaking profits and to provide pension and layoff benefits for those whose jobs are cut.
