The New Deal

"Let's Make Steel!" was the rallying cry of the United Steelworkers of America (USWA) during the near-implosion of the integrated U.S. steel industry at the start of this decade. Now that the former plants of LTV Steel Corp., Acme Steel, Bethlehem Steel Corp. and soon National Steel are operating under new ownership and new contracts, that cry could be: "Let's Make Steel -- But Under Very Different Circumstances." Both the USWA and steel companies surviving the industry's consolidation are or will be operating under more flexible and less costly labor contracts. For instance, the contract between USWA and International Steel Group Inc. (ISG), effective Dec. 15, 2002, which covers the former LTV and Acme sites includes, among other things:

Greater allowances for outsourcing under certain circumstances, such as if plants are running at full capacity but still can't keep up with demand. Unions have traditionally opposed outsourcing.

Greatly reduced job classifications. LTV and Acme had hundreds of job classifications and 34 labor grades. Job duties were rigidly defined. The new contract includes six job descriptions and five labor grades. "As a result, ISG employees will perform a much broader range of duties than LTV or Acme, and a promotion from one labor grade class to another will bring a greater than usual increase in pay," according to the USWA.

A new pension plan for ISG employees calculated on a per-employee basis, and future retiree health-care plan that calls for retirees to pay a portion of their health care. Also, a benefit program based on profitability, as opposed to a fixed contribution. Retiree benefits have been cited by steel management as one of the top factors driving more than 30 steel companies into bankruptcy in recent years. For instance, Steve Miller, CEO of Bethlehem, has called the company's formula for calculating retiree benefits "the balance sheet anchor that has sunk Bethlehem Steel." According to Miller, in the mid-1940s, Bethlehem had 10 active workers for each retiree. As of 2003, it had one active worker per seven retirees. Both steel executives and the USWA say that the ISG contract will serve as a blueprint for future contracts on issues such as retiree benefits. "Every indication that we have with our discussions with our union is that there is a desire to maintain a level playing field, and that's what we're expecting moving forward," says Peter D. Southwick, vice president and COO of Ispat Inland Inc., East Chicago, Ind., which will be negotiating a new contract in 2004. Tom Usher, CEO of Pittsburgh-based United States Steel Corp., also expects the same "principles" of the ISG contract to be part of his company's contract negotiations. "We are optimistic that many of the things the union is interested in doing with us will result in a much more competitive industry." Gary Hubbard, a spokesman for the USWA, says for years the union has been open to the newer ideas in the ISG contract. "The USWA has consistently been open to innovative approaches with the steel companies that recognized the skills and multifunctional talents of production workers. It took a company management that understood this principle with the vision and the guts to finally address the issues." According to Douglas McCabe, a professor of industrial and labor relations at Georgetown University's McDonough School of Business, this evolution in labor agreements is not unique to steel. It's been cropping up in other industries for the past several years and will continue to spread. "This is the trend to come in most contracts," McCabe says. "The unions are going to have to continue to give give-backs."