Time bomb in steel industry. Wheeling-Pitt pact could upset wage par, work rules
Chicago — When a dispute over wages caused Wheeling-Pittsburgh Steel Corporation workers to walk off their jobs in July, it did more than simply halt the flow of steel out of the company's plants. The dispute started a time bomb ticking, and the final impact will not be known until an industrywide wage pact is renegotiated -- with or without a strike -- next July. The agreement hammered out at Wheeling-Pittsburgh will establish a trend for next year's negotiations.
A settlement at the financially ailing company, whose massive debts forced it in April to file for reorganization under Chapter 11 of the federal bankruptcy law, could come as early as next week. On Saturday the union will announce the results of a ballot vote on a tentative agreement reached last week.
The two sides are scheduled to meet today with the federal bankruptcy judge in Pittsburgh, where the attitude of the creditors, who had vetoed a previous settlement, should become apparent.
``Wheeling-Pitts- burgh presages the breakdown of the uniform wage rate in the industry,'' predicts Robert Crandall, a steel economist at the Brookings Institution in Washington. Others suggest work-rule changes could be as far-reaching as a new wage rate.
The United Steelworkers of America publicly diminishes the importance of the Wheeling-Pitt situation. Lynn Williams, the union's president, told reporters in July, ``I don't think it's at all realistic to think in terms of what kind of an arrangement might be worked out in a Chapter 11 situation as having application to one of the strongest corporations in the country like US Steel.''
But in a veiled reference to the strike, David M. Roderick, chairman of United States Steel, said his company needs a ``fully competitive labor cost'' with other domestic steelmakers who are producing the same products in similar markets. Steel company executives say privately they want to get concessions from the union at least as large as Wheeling-Pittsburgh does.
Wheeling-Pittsburgh's financial troubles result from large debts accrued by massive investments in equipment. After filing for Chapter 11, the company received court permission to abrogate its union contract and unilaterally cut wages. The union refused the new wage rate of $17.50 an hour, including benefits, from a previous $21.40, and walked out in July. The industry average is around $23.
Creditors, the company, and the union have since been unable to come to terms. A tentative contract was recently reached setting an $18-an-hour rate, with bonuses tied to the price of steel.
The settlement also includes a change in the existing pension plan and a novel arrangement whereby the union will have one voting and one nonvoting director on the board.
If the union at Wheeling-Pittsburgh and other companies grants concessions, it would not be the first time. In 1983, the last time industrywide contracts were struck, the union agreed to give up a total of $3.3 billion in wage levels, to be restored by 1986. Although steel producers were in a deep recession at the time, the pressure to cut costs has, if anything, intensified.
Steel imports have skyrocketed to 25 percent of the domestic market, from 14 percent 10 years ago, according to the Commerce Department. The Reagan administration's recently negotiated steel import quota restraints are starting to take their toll on imports but are still being undercut by some third-world nations that are not party to the agreements.
Steel consumption has declined in important industries, such as automaking, with aluminum and plastic in greater use. Finally, mini-mills, which melt scrap to produce low-quality steel products, and which are often nonunion, have eaten away at markets previously dominated by the big mills.
The pressure on the mills to cut costs has forced the gradual erosion of the once-solid front the union presented at the bargaining table. Locals at individual plants have lowered wages out of fear that plants would be shuttered. Bethlehem Steel, for example, recently won a $4.90-an-hour wage cut at its bar, rod, and wire division. These three products are facing particularly severe pressure from smaller mills and imported steel.
More ominous for the fate of the union has been decertification. Kaiser Steel's unionized Fontana, Calif., plant, closed in 1983, has since been reopened as a nonunion plant under new owners.
The declining power of the union is reflected in its numbers. At its peak, the steel union, which comprises workers in a variety of industries including steel, had 1.4 million members in 1975. This has fallen to 920,000.
Steel executives contend that high wages are one of the most important causes of the industry's inability to compete in an increasingly global market. But Commerce Department figures suggest that steel wages in some major steel export countries, although lower than in the US, have more or less maintained their levels relative to American wages.
Using a base index of 100 for the wages of US iron and steelworkers, since 1975 Japanese wages have risen to 54 in 1984, from 51, while Canada's wage index rose to 76 from 74. The German index did fall to 52 from 70, while Brazil, stable at 13 for many years, drifted down to 8 in 1984.
While international economic forces -- including the high dollar -- are pushing both sides toward a confrontation, a drama of a different sort is being played out within the union. Lynn Williams, the Canadian-born president, is up for reelection in November. To maintain rank-and-file support, he must sustain a hard line, backing away from the ``soft'' agreement he helped negotiate as secretary in 1983.
Mr. Williams must attract support from members like Jack Parton, director of District 31 in Chicago and northern Indiana, who now regrets having accepted concessions. ``The industry said it would invest and stop imports and tighten their belts,'' Mr. Parton said in an interview. ``None of that came about.'' One union official said privately, ``We gave once and they tasted blood.''
Investment in new equipment by steel companies, part of the quid pro quo with the union in 1983 and with Congress when it adopted import restraints, has declined, according to Mr. Crandall at Brookings. But he pointed out that it has been focused in key technologies like continuous casting, and in specific plants, rather than loosely spread around. Most analysts agree that steel producers have come a long way toward modernization in just a few years.
With their backs to the wall, steelmakers whittling away at costs are as adamant as the union. The main companies decided in May to dissolve their coordinated bargaining group, acknowledging a growth in individual concessions, and a desire to bargain plant by plant. They will also press for a reduction in rigid work rules which, they say, prevent efficient production.
Whatever the settlement at Wheeling-Pittsburgh, the strike has been like the shots across the bows between two warships. There is no war -- yet -- but each side is sizing up the other's firepower.