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AK Steel and AEIF Fail to Reach Contract Agreement

Tue April 11, 2006 - Midwest Edition
Linda J. Hutchinson

AK Steel Holding Corp. and members of Armco Employees Independent Federation (AEIF) both said they want to negotiate a new contract to replace the one that expired on Feb. 28.

Rather than hammering out a deal at the deadline, the union authorized a strike and AK Steel locked out approximately 2,700 union workers at the Middletown, OH, plant.

Talks began Nov. 30, 2005, at Middletown’s largest employer. AK locked out the AEIF after the former contract expired.

Union members are walking the picket lines in six-hour shifts at the eight entrances of AK Steel’s Middletown Works, at times with soggy signs and wet feet.

The city of Middletown has allowed the AEIF to maintain one temporary shelter, 8 by 8 ft., and one portable restroom at each of the AK Steel Corp. gates where union members are picketing, according to a media release from the union. The union also has agreed to limit fire barrels to no more than two at each gate.

Skirmishes have broken out and hecklers on both sides have voiced opinions.

A few tires have been slashed, a few bullets fired through windows; otherwise, disturbances have been minimal. Local police are documenting reports but essentially staying out of what has, so far, been relatively peaceful strike/lockout activity.

While negotiations continue, the mill that produces flat-rolled carbon, stainless and electrical steels, as well as tubular steel products for customers in the automotive, appliance, construction and manufacturing markets, with sales totaling $5.65 billion in 2005, is kept running by salaried personnel and replacement workers.

The independent steelmaker said it needs to cut labor costs to survive in the increasingly global industry.

Union members, picketing outside plant gates, said they’ve already made sacrifices and that the company has been antagonistic by bringing in replacement workers.

“We are operating in a manner that we unfortunately must do, under the circumstances,” AK Steel Spokesman Alan McCoy said. “This is not chest-thumping. This is not done to intimidate. It is about serving our customers.”

AK Steel said workers at its smaller Coshocton, Mansfield, Ashland, KY, and Rockport, IN, plants have accepted what it calls “competitive new era agreements.”

Brian Daley, president of the AEIF, has said that union members are frustrated and skeptical about how well the plant can operate with the replacement workers.

Union workers said they have helped the plant set records for productivity and quality, and they take pride in the plant’s operations.

Toyota Motor Manufacturing North America recently awarded AK Steel Corp. supplier recognition for its 2005 performance.

The company has said it needs to cut labor costs to be competitive.

Its latest offer would give raises to approximately 84 percent of workers and cut the workforce through attrition rather than layoffs.

The company also proposes shrinking job classifications from approximately 600 to five, freezing existing pension benefits while moving to 401(k) accounts, and forcing workers to pick up a greater share of health-care costs.

It argues the union’s recent proposal would have increased AK Steel’s employment costs by $150 million over the length of the three-plus year proposal.

One of the issues on the table is that of healthcare benefits of existing retirees.

When Middletown-based AK Steel acquired Armco in the fall of 1999, it also acquired approximately 30,000 retirees. AK has said it spends approximately $1 million per day for monthly pension and healthcare benefits.

According to information given by the company in 2004, a typical AK hourly retiree, leaving the mill at age 57, would see a monthly pension benefit of $2,040, with a possible supplement of $300, and company-paid health care benefits of $1,080 per month. That’s a total monthly benefit of $3,420, according to numbers the company provided.

AK is “self-insured” — it pays its own healthcare costs directly. In its February 2005 employee newsletter, “AK Steel Update,” the company said it had a total of 58,000 covered individuals — current employees, retirees, dependents and surviving spouses.

AK’s total healthcare costs in 2004 reached $236 million, the company said. Prescription drugs alone cost the company $84 million. These costs equaled $40 for every ton of steel it shipped in 2004.

According to Peter Morici, a professor of the University of Maryland’s Robert H. Smith School of Business, once contracts are no longer in force, parties can change the terms of existing retiree benefits in new contract negotiations.

“Absent the [contract] language, the retirees are pretty much at the discretion of the company,” Morici said.

Neither AK nor AEIF spokesmen would offer any numbers, but union officials have confirmed that the matter is being discussed, claiming retirees have always been a big issue for the steelmaker.

When it went public in 1994, it put approximately half of its equity and debt offerings, approximately $450 million, into worker pensions.

Progress of talks is being closely monitored by union representatives at other steel mills.

Butler, PA’s full-time union officer since 1993, has negotiated with AK before. The issues in Butler’s contract are similar to the issues between the AEIF and AK and throughout the steel industry, Gallagher said. Those issues include pensions, health care, job classifications and seniority.

“You can’t leave anything to chance,” he said. “They have shown that they cannot be trusted. You need to get everything on paper or you’ll live to regret it.”

The Butler employees union was independent, like the AEIF, for 70 years before aligning itself with the United Auto Workers in 2003.

One reason, Gallagher said, was because workers “saw what was coming and was warned by Middletown’s union. The UAW has a huge strike fund, if necessary, as well as automotive industry customer contacts to put pressure on the company.”

The contract at the Butler Works expires Sept. 30. Gallagher said his union and AK have not had any conversations about when contract talks would begin.

“You have to start preparing for something like this,” he said. “You can’t wait until the last day of negotiations.”

A visit by Tim Conway, vice president of the United Steelworkers of America International has been scheduled to discuss the Middletown Works lockout with workers at AK Steel Corp.’s Ashland, KY, plant, USW Local 1865.

The union representative said he planned to discuss the “state of the steel industry worldwide” as well as reports of U.S. Steel Corp.’s interest in AK.

U.S. Sen. Edward Kennedy of Massachusetts sent a letter of encouragement one week after the lock-out to members of AEIF.

In the letter the Democratic senator told AEIF members: “You’ve worked hard to make AK Steel successful, and you deserve a fair agreement that honors your hard work, makes healthcare affordable and protects your future.

“I commend the steelworkers of Middletown for joining this important battle, and I’m proud of you for standing strong for these basic rights.”

Mark Rickel, a spokesman of Gov. Bob Taft, said that Taft and his staff are watching AK’s lockout of the AEIF “very closely.”

“The governor would hope that the two sides could come together to save those jobs,” Rickel said.

AK workers at its Ashland plant expect to receive an average 2005 profit-sharing payment of approximately $1,400 in the near future.

However, profit-sharing payments to those locked out at the Middletown plant will not be released until the dispute is resolved, furthering the financial impact to locked-out employees, even though the company has said that AEIF members qualify for 2005 profit sharing of approximately $930 each.

Brian Daley, AEIF president, has said that the 2005 profit-sharing amount that AK Steel Corp. has calculated for AEIF members falls short by nearly one-third of the proper amount.

“It actually should be a little bit above what Ashland is getting,” Daley said.

According to Dave Gossett, a spokesman of the Independent Steelworkers Union, which represents approximately half of the 4,000 current and former steelworkers concentrated in the Ohio Valley of eastern Ohio and the West Virginia panhandle, recruiters for AK Steel Corp. are looking to that region for workers to staff its Middletown Works during the company’s lockout of its largest union.

“We certainly discourage any of our members from working as a scab at any place,” Gossett said.

Alan McCoy, AK’s vice president of government and public relations, declined to specify what kind of response they’ve received to ads for replacement workers.

“We have had responses to all of our ads,” McCoy said. “I won’t say how many or where.”

Not only may AK be ripe for purchase by U.S. Steel, but other unions are watching and may be courting AEIF’s membership.

Tim Imes, president of USWA Local 1865, which represents approximately 750 Ashland workers said, “I think it’s safe to say that we would be more than happy to do whatever it takes to get them [AEIF members] into our union.”

Recently, the United Steelworkers of America, a union with 1.2 million working and retired members in the United States and Canada expressed support for the AEIF with a full-page advertisement in The Middletown Journal.

Conway, said he has had “ongoing discussions” with Daley.

On the flipside, union membership isn’t as popular as it once was, and crossing picket lines to replace striking workers doesn’t carry the same stigma it once did.

Whatever the outcome of the Middletown Works lockout negotiations, thousands are depending on it not going the way of Bethlehem Steel a decade ago. CEG

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