AK Steel Settles Strike, Moves Corporate Headquarters

Thu April 12, 2007 - Midwest Edition
Linda J. Hutchinson



After more than a year, the 1,759 remaining locked-out union workers at AK Steel Holding Corp. in Middletown, Ohio, will return to work. Members of the International Association of Machinists and Aerospace Workers Local Lodge 1943 have overwhelmingly approved a contract deal by a vote of 1,275 to 226. Union members were formerly with Armco Employees Independent Federation.

AEIF was an independent union for 63 years before joining the Machinists in July, however AEIF has retained its own bylaws.

During the year-long strike, AK Steel/Middletown Works continued to operate with between 1,800 and 1,900 temporary replacement and salaried employees.

This was the third attempt to ratify a deal between Middletown Works and the union. The contract went into effect on March 15 and will remain in force until Sept. 15, 2011.

“When negotiations got stagnant, it took the power of the lead negotiation team of the Machinists and the company to get this TA (tentative agreement),” said Jim Tyler, Machinists’ grand lodge representative.

“I think it was very important to let the community and our membership know that the folks we supported and elected (last year) supported us,” Tyler added. “And it all came together.”

Officials from Gov. Ted Strickland’s and U.S. Senator Sherrod Brown’s offices were witnesses to the ratification vote count. Of the 1,545 votes cast, forty-four votes were thrown out because they were challenged by vote counters. The vote tallying was overseen by officials from the Federal Mediation and Conciliation Services in Cincinnati.

Both Brown and Strickland have been vocal opponents of the lockout and have met with members of the union and the company in efforts to negotiate a settlement. Butler County’s sheriff and commissioners urged the parties to end the labor dispute. While concessions were made on both sides, considerations were given; the union had shrunk to nearly half its size since the lockout; the steel market is changing, and; the continuing operation of Middletown Works.

Membership in the union has dwindled from about 2,700 in January 2006 to 1,901 last fall to 1,759 now. Members have passed away, retired, or walked away from AK Steel for employment with other companies. Some crossed the picket line, joining replacement workers out of financial desperation.

At issue in negotiations was employee security, including whether or not union members would be guaranteed a 40-hour work week, the proposed pension plan, employees sharing in a larger portion of health care insurance costs, a return-to-work agreement, and the allowance for contracting out work.

To transition from one work force to another, the contract calls for a three-month return-to-work period, when Local 1943 members will be called back in groups for physicals and training.

Under the new contract, Machinists will take advantage of the international union’s multi-employer pension plan. Health care cost sharing will be lower for members than what was previously offered, and they will have job protection throughout the critical return-to-work period which lasts until June 15.

AK Steel has preserved what it felt were the “four corners” of a new era labor agreement: Reduced employee levels, increased operating flexibility, an affordable pension plan and health care cost sharing, according the The Middletown Journal.

Different from contract offers in the past three months is that this one allows union members to file grievances in the three-month transition period.

Talks began Nov. 30, 2005, at Middletown’s largest employer, AK Steel. In March 2006 AK Steel Holding Corp. and members of Armco Employees Independent Federation both said they wanted to negotiate a new contract to replace the one that expired on Feb. 28. Rather than hammering out a deal then, the union authorized a strike and AK Steel locked out the approximately 2,700 union workers.

The plant 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.

In March, the independent steelmaker said it needed to cut labor costs to survive in the increasingly global industry. Union members, picketing outside plant gates, said they’d already made sacrifices and that the company had been antagonistic by bringing in replacement workers.

While profitability numbers while operating with replacement workers were not available, AK’s locked-out union members have certainly felt the pinch. In addition to lost wages, profit sharing payments to the locked-out employees will not be released until the dispute is resolved.

One of the issues on the table during intense negotiations was that of health care benefits of existing retirees. When Middletown-based AK Steel acquired Armco in the fall of 1999, they also acquired some 30,000 retirees. AK has said it spends approximately $1 million per day for monthly pension and health care 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 health care 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 health care costs in 2004 reached $236 million, the company said. Prescription drugs alone cost the company $84 million.

Benefits for existing retirees will be settled in a separate suit which is outside the scope of the new contract.

Fifty-four months from now when the new contract expires, the Machinists will have total control of the local union that voted them in during a representation election last July, according the The Middletown Journal.

“We like the Locals to be totally in control of negotiations unless there are some problems,” Tyler said.

On Sept. 21, in response to hostility on both sides, Butler County Judge Andrew Nastoff issued a temporary restraining order prohibiting the locked-out union members from picketing or assembling within 50 ft. of any entrances or exits on AK’s property or any other property where the company does business. The order was to remain in effect until a hearing was held on Oct. 4, but was extended to Oct. 24.

Officials on both sides are working to build better relationships with the goal of continuing to negotiate throughout the life of the new contract, hoping to avoid another strike in the future.

“Neither side wants to revisit 2006,” Tyler said. “I hope there will be ongoing negotiations. It was really difficult to come in here and get two quick strikes,” referring to the two failed ratification attempts. “It was really difficult.”

“Part of what we want to do is improve the relationship (with AK Steel),” Tyler said. “And we’re on our way to doing that.”

“It’s been a long year,” said Jim Smith, lead negotiator for the Machinists. “I think we need to heal some wounds and get back to work.”

Officials at AK Steel continue to say they will need to hire at least 200 replacement workers to become permanent employees to fill hiring gaps.

AK Steel to Move

Headquarters

AK Steel announced Feb. 21 it was moving its headquarters to a new Duke Realty office complex just off Union Centre Boulevard in West Chester Township, located between Middletown and Cincinnati.

According to John Lyons, Middletown’s finance director, the move will cause a loss of approximately 300 jobs, and $850,000 in income tax revenue per year. The city has lost an estimated 3,000 high-paying manufacturing jobs in the past 10 years.

“It’s obviously a big hit to Middletown because those are all the high-paying jobs,” Middletown Mayor David Schiavone said after receiving a call from AK’s Wainscott.

“I’m numb,” said Middletown Vice Mayor Anthony “Tony” Marconi. “I sure didn’t see this one coming. Three jobs concerns me, much less 300. I think it’s going to be a tough couple of years ahead of us, but we need to get through it.”

“This is extremely disappointing, especially as Middletown tries to turn the corner,” City Manager Bill Becker said. “It’s frustrating.”

West Chester Twp. Trustees President George Lang said AK did not ask for nor were they granted any tax abatements or incentives. He and other officials said they were not negotiating with AK Steel. Township Administrator Judy Boyko said, “This has been a Duke Realty relocation project.”

“Our new corporate headquarters will provide AK Steel with state-of-the-art technology, including advanced computing and communications capabilities that are necessary to improve our competitiveness,” said James L. Wainscott, AK’s chairman, president and CEO.

“It will also facilitate more convenient face-to-face interaction with customers, suppliers, and other important constituents.”

AK officials said they will continue to have “a significant presence in Middletown,” including about 525 managerial and support personnel, a research and development center, along with the company’s largest steel plant.

AK Steel has been in Middletown for more than 100 years.

Wainscott said AK Steel and the AK Steel Foundation would continue to support the Middletown community.

“Additionally, the move will assist us in attracting and retaining top professionals, who desire proximity to the abundant amenities and services available in the West Chester and northern Cincinnati area,” Wainscott said. CEG