News Summary

MIDDLETOWN — The differences between two contracts offered by AK Steel Corp. in nine days were a result of industry conditions, the company said Thursday.

Waning production in the automotive industry — a large portion of AK Steel business — and competitors of the company scheduling idle time because of steel reserves are creating a sluggish U.S. steel industry.

Meanwhile, efficiency and production are improving at Middletown Works under the toil of about 1,800 temporary replacement workers and salaried personnel.

The contract that was offered Oct. 10 — and subsequently rejected Wednesday by a 1,050 to 489 vote — didn't reflect industry standards because it was a last-ditch effort to end the lockout, said Alan McCoy, AK's vice president, government and public relations.

The contract offered Thursday morning, however, takes those industry factors into consideration.

"It was a proposal that we knew didn't reflect economic conditions and changing conditions in our plant," McCoy said. "Despite that, we said we wanted to give (the union) one more chance."

The lockout of the remaining roughly 1,857 members of the International Association of Machinists and Aerospace Workers/Armco Employees Independent Federation Local Lodge 1943 has entered its ninth month.

IAM/AEIF President Brian Daley disagreed with the company's reasoning.

"I believe those are not legitimate excuses for the type of regressive proposal the company gave us (Thursday)," Daley said.

Among the changes from the Oct. 10 offer to Thursday's proposal are lower wage increases, elimination of the IAM multi-employer pension plan and an increase in health care and insurance premiums.

Said Daley: "Competitors didn't suddenly cut wages. Competitors didn't suddenly go back on the pension and wage benefits. Competitors have an obligation."

However, one of the country's leading steel industry analysts said soaring inventories will eventually force AK Steel competitors into doing all three — wages, wage benefits and pensions — if they haven't already.

"Today in the market there's a lot of capacity available," said steel industry analyst Charles Bradford. "So if AK doesn't produce, their customers can go elsewhere."

Larger plants, such as U.S. Steel and Mittal, have the capability to scale back production to match the ebb of industry, while AK Steel's Middletown Works does not, Bradford said.

For example, Middletown Works has two blast furnaces — the heart of a steel plant. If it wanted to scale back its production, it would have to shut down one of the blast furnaces, which would reduce its steel output by 50 percent. Whereas, if Mittal and U.S. Steel wanted to reduce its production by a smaller percentage — which would reflect the industry fluctuation — it could shut down one blast furnace, thus slowing its production by less than 10 percent, Bradford said.

In addition, AK Steel's dependence on the automotive industry subjects it to factors not experienced by companies with a more diversified customer base, Bradford said.

As a result, versatility in all costs — especially its labor costs — become paramount, he said.

"What they're trying to do with this contract is build in some flexibility," Bradford said.

Contact this reporter at (513) 705-2840 or dgreber@coxohio.com.