Lengthy lockout looms at U.S. Steel plant
‘You’ve got a big game of chicken going on with 1,000 employees,’ business expert says
The looming lockout at U.S. Steel’s Lake Erie Works plant comes as the steel industry is facing a weak economy and cheap imports from Europe, analysts say. For workers in Hamilton and Nanticoke, Ont., formerly employed by Stelco, there’s a sense of déjà vu.
“We’ve made it clear to the company we’re willing to negotiate but we’ve heard nothing back from them,” Bill Ferguson, president of Steelworkers Local 8782, said in an interview Friday.
“I think they’re intent on locking the gates. We’ve had three sets of bargaining between Hamilton and ourselves with U.S. Steel. It resulted in three lockouts.”
The company declined to comment on the labour dispute. It has said previously that its latest offer to workers was fair and reasonable.
A lockout, slated to take effect at 9 a.m. Sunday, would hurt employees much more than U.S. Steel, said Marvin Ryder, assistant professor of entrepreneurship at the DeGroote School of Business at McMaster University.
“You’ve got a big game of chicken going on with 1,000 employees in the balance,” Ryder said.
“At this point, given past history, I think we’re headed toward a lockout and it will last six months, at least. But I also think at the end of it, they’re going to sign for a deal that is not better than this one and may be a little bit worse,” Ryder said.
“U.S. Steel is a very political organization. It’s hard for an outsider to come in.” CHUCK BRADFORD PRESIDENT OF BRADFORD RESEARCH
Shares of U.S. Steel, which trade on the New York Stock Exchange, lost 26 cents to close at $17.36 on Friday. Last week, the stock touched $15.80, a 52-week low. This time last year, shares traded near $30. U.S. Steel has seen its share price decline compared to rivals because of investor concerns about management.
“They lost a lot of people over the last few years due to early retirement and other issues. They’ve had to bring in people from the outside,” said Chuck Bradford, president of Bradford Research in New York. “U.S. Steel is a very political organization. It’s very hard for an outsider to come in.”
The Pittsburgh-based steel producer reported net losses of $124 million for 2012. The company is expected to report a net loss for the first quarter of 2013 on Tuesday. It has operations across the U.S., as well as central Europe.
The Lake Erie plant in Nanticoke makes hot rolled coil in one blast furnace. The furnace at the neighbouring Hamilton plant was shut down in October 2010, about three years after U.S. Steel bought the fa- cilities from Stelco for $1 billion.
The federal government took the global steelmaker to court in 2009, alleging that it failed to live up to production commitments. The case was dropped when U.S. Steel agreed to keep operating in Hamilton and Nanticoke until 2015.
The Lake Erie plant has 978 workers making an average wage of $65,000 per year, Ferguson said.
Three years ago, a lockout at Nanticoke lasted eight months. A similar action at the Hamilton Works plant dragged on for 11 months.
“The old Stelco had as much to lose from a lockout as the union had to gain. If you weren’t going to make steel here, you weren’t going to make steel,” Ryder said. “What’s changed is that U.S. Steel is a global player. It owns steel mills all over the place.”
Jim Stanford, economist for the Canadian Autoworkers, believes the labour dispute shows a failure by the federal government to regulate foreign investment in Canada.
“The key issue is once the Stelco operations were merged into U.S. Steel’s whole continental network, the bargaining position shifts dramatically,” Stanford said. “U.S. Steel has shown it’s willing and able to starve out the Canadian workers because they have this excess capacity in America.
“That is the sort of factor that Canadian regulators should have recognized and worked to prevent as a condition of approving the takeover in the first place.”
U.S. Steel, along with rivals in the industry, is struggling as economic growth remains tepid. While the U.S. housing market is in recovery, non-residential construction, such as office buildings, hospitals and schools, has yet to bounce back.
The anticipated boom in the auto industry — it’s expected to expand by about 12 per cent this year — would be good for Nanticoke, analysts say. But steel makers are gearing up for a fight as the auto industry uses more aluminum in manufacturing in the quest for more fuel efficient vehicles.
“The last go round when steel had abig fight, it was over beverage cans, and they lost 100 per cent. Now you’ve got steel and aluminum going at it over the automobile,” Bradford said.