Company and union steeled for strike. Steelworkers dig in as Wheeling-Pittsburgh fights off bankruptcy
Boston — The first major steel strike since 1959 pits two weaklings against each other. Neither can afford to give in -- and neither can afford not to. Wheeling-Pittsburgh Steel Corporation, the seventh largest steel company in the United States, is cutting wages and benefits of unionized workers by 18 percent, from $21.40 to $17.50 an hour, as part of its bankruptcy reorganization.
The company's opponent in this struggle, the United Steelworkers of America, is also fighting for survival. Since 1979, half of the steel-production workers have lost their job, with steelworkers' ranks falling from 380,000 to 189,000 today, according to the US Bureau of Labor Statistics.
The union sees this case, which comes a year before the other major steel companies negotiate their contracts, as symbolic. It is said to be willing to settle for about a 13 percent cut, but no more.
Caught in the middle are the steelworkers who belong to the union locals. ``The national union won't allow the locals representing Wheeling-Pittsburgh to give in, even if it means losing their jobs,'' says Frederick Gander, manager of the metals unit at Arthur D. Little, a consulting firm. ``The Wheeling-Pittsburgh union is being a stalking horse, even a scapegoat, for the national union.''
All eyes in the steel industry are riveted on the strike, which began Saturday night. If management wins, other companies will want the same kind of concessions next July when they negotiate new three-year contracts. (Wheeling-Pittsburgh was allowed to break its contract a year early because it was in bankruptcy court.)
But analysts don't expect a nationwide strike like the one that knotted up the country for 116 days in 1959. A strike would not have the same effect today because foreign countries -- especially Brazil, Korea, and Japan -- supply about 25 percent of all steel used in the US. Both management and labor in the US know their customers could go elsewhere.
Also, since the major steel companies dissolved their coordinating committee in May, they no longer bargain with the United Steelworkers in concert.
``You'll see some tough negotiation on a plant-by-plant basis, perhaps some bitter strikes, maybe some plant closures and bankruptcies,'' Mr. Gander says. But neither companies nor the union could present the unified front they did in 1959.
In the long term and short term, the steel industry has the worst of both worlds. US demand for steel has been waning in the last decade and, at the same time, imports have increased. Since 1974, steel shipments by US companies have fallen by a third. In addition, the industry is not only shrinking, but it is also cyclical, tied to the ups and downs of auto manufacturing and other industries.
The only way to make the US steel industry viable is to pour in investment dollars, says Frank Cassell, former assistant to the US secretary of labor and now a professor of policy at the Kellogg Graduate School of Management in Chicago.
``The future lies with those companies that invest in research and are willing to convert that research into efficient processes and new products,'' he says.
But that's like pouring water into a sieve, says Frank M. Yans, vice-president of resource consulting at Arthur D. Little.
``The expected return on investment in the steel industry is ridiculously low. You can do as well in Treasury bonds without the risk,'' he says.
``It's hard to justify investing in new plant and equipment,'' notes Dr. Yans. Apparently, steel companies agree: Between 1950 and 1981, the US built a total of two new large plants. About 10 percent of US steel is made in plants less than 35 years old, while almost all steel in Japan and more than half in West Germany, France, and Britain is produced in modern plants.
Better technology would not solve the industry's problems, but it would help. Labor, too, is a major factor, making up about 30 percent of the production cost in the US. By contrast, wages in Korea and Brazil are less than one-fourth the US level.
But steelworkers have taken it on the chin already and are digging in to prevent more losses. Dr. Cassell estimates that between 1983 and '86, the companies will have saved $2.5 billion in wages.
In the face of such challenges, analysts expect union workers to stick together. Virtually all of the large integrated steel companies are unionized. Nonunion workers would not dare replace striking workers at Wheeling-Pittsburgh, analysts say, since they might not be protected by the courts in the pro-union areas around the Wheeling-Pittsburgh plants in West Virginia and Pennsylvania.
Wheeling-Pittsburgh has all of the industry's problems, plus some of its own.
Analysts say it's too small to compete with the larger integrated steel firms or the cheap imports. It has a small share of each of its customers' business, so it gets smaller and less profitable volume orders. Its product mix pits it against the minimills, which have lower labor costs (mostly nonunionized) and lower overhead costs, in part because they don't do their own research.
Wheeling-Pittsburgh is also seeing its market move away from the Northeast to northern Indiana and Chicago. That has pushed its transportation costs above many of its competitors. Such costs are relatively small, says Gander, ``but in a situation where margins are cut to the bone, it can make the difference between making money and losing it.''
Joseph L. Bower at the Harvard Business School says the strike and the rhetoric surrounding it are not surprising.
``This is an industry in which everyone knows the ground is shifting under them, and they are all trying to play out the game,'' he says.