Just days after its unionized work force ratified a new labor pact that calls for steep reductions in wages and benefits, USX Corp. on Wednesday announced it will permanently idle four more mills around the country and eliminate an additional 3,700 jobs.
At a press conference here Wednesday morning, USX Chairman David Roderick said that the four facilities, in Utah, Texas and Pennsylvania, will not reopen as the rest of USX’s steel division resumes operations in the wake of the company’s six-month labor dispute with the United Steelworkers.
At least portions of all four plants--USX’s Geneva, Utah, works; the basic steel making operations at its Baytown, Tex., works; its National works in McKeesport, Pa., and its sinter mill in Saxonburg, Pa.--were operating before the dispute began.
In addition to the layoffs due to the closings announced Wednesday, the new contract calls for the elimination of an additional 1,346 jobs throughout the USX system.
As a result, USX’s work force will shrink to roughly 17,000 from the pre-strike level of about 22,000. The newly laid-off workers will join the 23,000 workers who were already on indefinite layoff from USX when the walkout began.
Union leaders had long known that the Geneva and Baytown mills were vulnerable, but the closing announcement still seemed to catch the Steelworkers slightly off guard Wednesday. “We’re going to seek a meeting with the company to clarify some of these issues,” said union spokesman Gary Hubbard. He noted, for example, that the union thought it had an agreement with the company under their new labor contract to keep at least part of the National mill in McKeesport open.
But Roderick stressed that he had warned before the walkout started last Aug. 1 that USX, an energy and steel conglomerate, might not reopen some of its least efficient mills if the company suffered a lengthy strike.
Expensive to Start
“Once you shut a plant down, it’s very expensive to start it up again,” said Roderick. “Now, the economic hammer has dropped,” he added. “It’s unfortunate, but that’s the way it is.”
USX, formerly U.S. Steel, apparently waited to announce the closings until after the contract ratification process was complete, to avoid angering workers about to vote on an agreement calling for them to grant $2 per hour in concessions.
In fact, when USX announced last week that it wrote off $1.5 billion in assets in the fourth quarter, the company refused to comment on speculation by industry analysts that new mill closings were probably included in the writedowns.
On Wednesday, however, Roderick confirmed that all four newly idled facilities were covered by the fourth-quarter writeoffs.
“Certainly the implication is there” that the company’s announcement was delayed until the voting was completed, said Hubbard of the Steelworkers.
In voting that was completed last weekend, rank-and-file union workers ratified the new four-year accord with USX, ending the longest labor dispute in the history of the American steel industry.
Meanwhile, the nation’s largest steelmaker plans to reopen its other active mills gradually, and Roderick said he doesn’t expect to be back up to full production until late in the third quarter or early in the fourth.
Roderick added that USX plans to convert its steel operations into a wholly owned subsidiary later this year, giving the company the legal flexibility to spin off its steel segment to shareholders if it later decides it wants to pull out of steel. He added that USX considered, and later rejected, spinning off steel as part of its recent restructuring that was aimed at fending off a takeover attempt by New York investor Carl C. Icahn.
But even without a spinoff, USX significantly reduced its presence in steel with the new mill closings announced Wednesday. The closings will take more than a quarter of USX’s annual steel-making capacity out of service, helping to reduce the huge steel glut that has been depressing prices and profits in the domestic steel industry for years.
Capacity Will Decline
Roderick said USX’s annual capacity will decline from 26 million tons to 19 million tons. But he said USX was operating at a rate of only about 12 million tons on an annualized basis before the walkout, so the company will still have at least 50% more capacity than it needs even after the closings.
Roderick added that steel demand appears to be weakening this year, so USX may not even be able to sustain a 12-million-ton annual rate of production in 1987. Still, the biggest impact of the closings will be on employment. In fact, USX will have about 5,000 fewer employees when its mills reopen than it did when the mills shut down last August.
The Steelworkers had been hoping that the new agreement’s restrictions on the company’s ability to replace union workers with low-cost subcontractors would offset the new job losses by forcing the company to recall 2,000 to 4,000 workers replaced by subcontractors under the previous contract.