Hamilton: Hundreds of steelworkers locked out by U.S. Steel in Hamilton should brace for a long winter on the picket lines unless they’re willing to accept the global steel giant’s concessions, says one long-time industry watcher.
“I think it’s setting in now to the workers ‘you don’t have the power you once had,” said Marvin Ryder, a business professor at McMaster University in Hamilton.
Workers at the former Stelco plant were on the picket lines Monday after the company locked them out Sunday night in an ongoing contract dispute. U.S. Steel is insisting unionized workers vote on a “final” contract offer that demands a basket of employee concessions.
The last time there was a strike at the Hamilton steel plant was 20 years ago, when it was owned by Stelco. But the steel industry has undergone massive changes since then and unions lost much of their leverage as the industry became more global.
“When you had a strike 20 years ago, you truly brought the company to its knees because after a day or two there was no revenue coming in and the workers had a fair amount of power, ” Ryder said.
“Today, U.S. Steel being a diversified multinational global producer (they think) ‘we lock up Hamilton, we can still make steel at our other facilities’,” he said.
He believes the factory shutdown could last well into 2011 because the only thing that would force U.S. Steel back to the table would be a sudden surge in steel demand.
The company could not be reached for comment Monday.
In the current global operating environment—in which countries like China and Russia can pump out steel at a fraction of North American production costs due to lower wages, benefits and pensions—workers will likely have to be the ones to bring some sort of compromise to the table, he said.
With the Canadian dollar near parity with its U.S. counterpart, multinational companies like U.S. Steel that have operations on both sides of the border—as well as in Mexico—are under pressure to make sure costs are comparable where they operate since the steel market is global.
That means the cost of producing steel in Hamilton or Nanticoke, on the shores of Lake Erie, is compared with major plants near Pittsburgh—in Clairton and Braddock Pa.—that U.S. Steel still operates.
That puts huge pressure on companies like U.S. Steel, which says the changes are needed for the plant to be competitive. The American company, with 43,000 workers, has about 25 plants in North America, Europe and Brazil.
The Pittsburgh company is demanding that its latest offer, made Nov. 4 and delivered through a mediator appointed by the provincial Ministry of Labour, be put to the workers for a vote.
But the head of Steelworkers Local 1005, Rolf Gerstenberger, has refused to take the offer to the membership because he said it would amount to having the current 900 members change the contract for 9,000 past employees—the retirees.
“Last summer we intentionally didn’t take a strike vote because we weren’t interested in going on strike … but now U.S. Steel is locking us out, so really, it’s their call,” he said in an interview.
“The request for these concessions is very consistent with what we’ve been seeing over the past year and a half post the recession and with this very slow recovery,” Ryder said.
The company set a precedent for withstanding long labour disputes last year at its nearby Erie works, where it locked employees out for eight months.
“And that’s a younger, more efficient plant and at a time when steel demand was high,” Ryder said.
“If they were willing to shutter it a year and a half ago, they’ll certainly be willing to shutter it now.”
At the former Stelco, the main sticking points have been the company’s demand for concessions on pensions, the cost of living formula and benefits.
Among other things, the company wants the existing defined benefit pension plan closed to new employees and replaced with a defined contribution retirement savings plan. It also wants an end to the indexing of pension payments for current retirees.
Pension indexing ensures that monthly payments are in line with cost of living increases and inflation.
Gerstenberger said workers are frustrated because when U.S. Steel bought the former Stelco for $1 billion in 2007, the company told the government it would be able to meet pension obligations.
U.S. Steel made promises to the federal government in order to fulfil a requirement under Investment Canada Act that says a foreign takeover must provide a “net benefit” to Canada.
The company is already engaged in a court battle with Ottawa for breaking employment and production level promises it made when it idled most of its Canadian operations—which include the Hamilton plant and another facility in Nanticoke, Ont.—in early 2009.
U.S. Steel admits to breaking those promises, but said layoffs at its Ontario locations were necessary to cut costs during the recession.
“The problem is that U.S. Steel doesn’t need our production. They shut down our blast furnaces and started up two in the States and are shipping steel up from the States now,” Gerstenberger said.
U.S. Steel had a net loss of US$51 million in the third quarter and the last time it posted a quarterly profit was at the end of 2008.
Image courtesy of US Steel Corp.