(FROM THE WALL STREET JOURNAL 8/1/15)
By John W. Miller and Alex MacDonald
ArcelorMittal, the world's biggest steelmaker, said it needs to
raise health-care premiums for its U.S. workers and retirees and
freeze or cut pay for some employees.
"We should not have a condition of employment worse than our
competition," ArcelorMittal Chief Executive Lakshmi Mittal said in
an interview. "We should not be in an unfair position."
For instance, the current health plan doesn't require workers to
pay any premiums, while at similar companies employees make
significant contributions to their medical benefits package,
according to the company. ArcelorMittal retirees make relatively
small health-care payments.
With a Sept. 1 deadline to conclude a new three-year labor pact,
Mr. Mittal has met four times this year with Leo Gerard, president
of the United Steelworkers union, which represents about two-thirds
of the company's more than 20,000 American workers. The USW is also
negotiating a new deal with U.S. Steel Corp.
ArcelorMittal officials say the current contract, which includes
blue-collar salaries that can top $100,000 a year, doesn't reflect
economic realities because it is based on a deal signed in August
2008, before the global financial crisis hit full force.
The company, which makes 6% of the world's steel, on Friday
posted a profit of $179 million in the second quarter, up from $52
million a year ago, thanks in part to favorable exchange rates.
With iron ore and steel prices falling, sales fell 18% to $16.9
billion, from $20.7 billion a year ago.
Despite the increase, Mr. Mittal said the company is under
pressure from aluminum suppliers to the auto market, a global glut
of steel and record Chinese steel exports. He said 43% of Chinese
steelmakers are unprofitable, suggesting the industry depends on
unfair state subsidies.
ArcelorMittal has proposed freezing pay, cutting total
compensation for some workers and requiring monthly health-care
premiums of $150 for individuals and $250 for families, according
to a note the union leaders sent to workers.
"We are committed to negotiating a fair agreement that doesn't
include drastic reductions in compensation for active and retired
employees," union leaders wrote to their members. A union spokesman
declined to comment on the labor talks.
The proposal to reduce compensation would affect only workers in
entry-level jobs -- such as cleaning, maintenance and driving --
who currently earn $20.45 an hour, plus bonus incentives, a company
spokesman said.
He declined to say if the number of workers would be reduced.
ArcelorMittal's U.S. operations have a larger portion of older
workers than in Europe, which would allow it to reduce head count
through retirement rather than layoffs.
"Clearly people are [going to be] affected," Chief Financial
Officer Aditya Mittal said
ArcelorMittal's more than 20,000 U.S. employees are spread over
28 operations, with 1,200 employees in research, development, sales
and company offices.
In Europe, ArcelorMittal said operating profit increased to $386
million from $269 million in last year's second quarter. The
company endured several years of losses there amid restructuring
that included layoffs and the closure of unprofitable blast
furnaces.
ArcelorMittal envisions a U.S. restructuring, though one focused
on its steel-finishing operations rather than blast furnaces.
Company officials also said the U.S.'s expensive, private
health-care system poses an added burden.
Steel demand hasn't slumped as badly in the U.S. as in Europe,
where shipments are still below 2008 levels. "Europe required
primary capacity changes," said Aditya Mittal. "In the U.S., it is
more how do we further improve the productivity and cost
performance of our finishing operations."
U.S. steelmakers have been hit by wave of steel imports,
particularly from China as the Asian economy cools, prompting the
industry to file requests with the U.S. government for trade
protection.
Buoyed by construction and automaking, U.S. steel demand is
forecast to grow 2.3% this year, the highest out of all the regions
in which ArcelorMittal operates.
In South Africa, ArcelorMittal is considering closing
Vereeniging Steel, a minimill that produces around 400,000 tons of
crude steel annually and employs 1,200. Aditya Mittal said a final
decision will depend on whether steel-import pressures abate.
ArcelorMittal directly employed 8,825 people in South Africa last
year.
Industrywide, the second half is forecast to be better than the
first half because of increased steel shipments from Europe and
Brazil, where weakening currencies are making it easier to export
steel, and an expected rise in U.S. demand.
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