By Bob Tita
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 12, 2018).
Workers at two of the biggest U.S. steelmakers are demanding
higher compensation as tariffs on foreign metal push prices and
profits to their highest point in years in a buoyant economy.
Leaders for some 30,000 members of the United Steelworkers union
say United States Steel Corp. and ArcelorMittal SA aren't passing
those benefits to their workers, who have gone without raises in
recent years even as wages have started to climb more broadly.
President Trump has said the 25% tariff his administration
placed on steel imports earlier this year aimed to bring back
good-paying blue collar jobs."The steel industry is one of the
great things to be talking about," Mr. Trump told a crowd in North
Dakota last week. "The manufacturing jobs are back."
U.S. steel companies are some of the clearest beneficiaries of
the Trump administration's tariffs on foreign goods. The trade
action has enabled them to raise prices in a strong economy that
has boosted orders for steel.
The union's demands could put a damper of the sector's newfound
fortune. Higher costs for wages and benefits would pressure
steelmakers' profit margins that are only beginning to improve
after many years of being squeezed by cheap imports
U.S. manufacturers in general are facing rising costs, even as
they benefit from lower corporate taxes. Higher input prices,
including for steel, have weighed on their business. Also wages are
rising across the U.S. workforce as factories compete for a
shrinking pool of available labor. Inflation is also picking up
after years in low gear, putting pressure on employers to pay
workers more.
"We feel we need some recognition and to share in the profits of
the company," said Michael Young, president of the union local for
U.S. Steel's Midwest Plant in Portage, Ind.
The United Steelworkers union is in a contract standoff with
both companies. Workers have authorized union leaders to call a
strike against U.S. Steel, and say they could do the same at
ArcelorMittal if an agreement isn't reached soon. Contracts for
both companies expired Sept. 1.
U.S. Steel said it doesn't anticipate a strike. "Talks are
ongoing, and we continue to work diligently to reach a mutually
agreeable conclusion, " the company said. ArcelorMittal declined to
comment on the strike threat.
U.S. Steel and ArcelorMittal account for 40% of the U.S.
production capacity for flat-rolled steel used throughout
manufacturing for products ranging from tin cans to car doors. The
price of steel has risen by more than 30% this year, as the Trump
administration's tariffs on foreign steel have taken effect.
U.S. Steel has forecast a more-than-60% increase in adjusted
pretax income this year, compared with 2017. ArcelorMittal, which
has mills throughout the world, doesn't issue a profit forecast for
its U.S. operations.
A strike at either company could push domestic steel prices even
higher, putting pressure on equipment and vehicle manufacturers --
such as Deere & Co. and Winnebago Industries Inc. -- that have
already raised prices this year to cover higher costs.
Industry analysts say U.S. Steel already has higher labor
expenses and older, more complicated production processes than
competitors such as North Carolina-based Nucor Corp., where the
workforce isn't unionized.
The contract negotiations give U.S. Steel executives an
opportunity to restrain rising benefit costs, such as health
insurance coverage, and align pay more closely with profits and
demand, said Philip Gibbs, an analyst at KeyBanc Capital
Markets.
"U.S. Steel wants and needs more labor flexibility to deal with
the volatility in the industry," Mr. Gibbs said.
U.S. Steel workers agreed to forgo raises for three years when
the recently expired contract was negotiated in 2015. The
Pittsburgh-based company had been losing money amid a slump in the
steel industry.
This year U.S. Steel has proposed a six-year contract with a
raise of 4% in the first year and 3% in each of the next two.
Annual raises would drop to 1% in the last three years, with the
addition of new bonuses pegged to pretax profit. The lowest annual
base wage, excluding profit-sharing and other variable pay, would
rise to $71,726 in 2024 from $63,516 this year.
Union negotiators want U.S. Steel to provide bigger pay
increases or drop a demand that workers pay part of their
health-insurance premiums and higher copayments.
"They can use the windfalls of the tariffs and current industry
climate we helped to create to pay themselves even more and then
turn to us with dramatic cost shifting and wage packages that are
far below what we've earned and deserve," the union wrote last week
to its 16,000 members at U.S. Steel.
The union said ArcelorMittal's wage offer is also too low. The
Luxembourg-based company offered a three-year contract with pay
increases of 2% and 1.5% in the final two years. The union, which
represents 15,000 ArcelorMittal employees, said the company also is
seeking concessions on health insurance and other benefits that
would cost workers more than their pay raises would provide.
"ArcelorMittal clearly intends to test our solidarity," the
union said Friday in an online update on the negotiations.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
September 12, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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