The agreement abandons a traditional industry system that provided steelworkers generous, lifelong health care and automatic pensions after working a certain number of years. Instead, steelworkers will have to pay a far larger share of their health-care costs, according to a Wall Street Journal report.
Pensions will be replaced by a 401(k)-like plan funded by worker and company contributions.
Industry experts believe the ISG pact could well become a labor relations standard for the hard-hit steel industry, which has seen a steady parade of companies going into bankruptcy and their pension funds taken over by the federal pension insurer – in part because they could no longer afford promised employee benefit packages, the Journal said.
ISG was formed early last year to acquire the steel assets of bankrupt LTV Corp.
Trying to be Globally Competitive
The new agreement with the United Steelworkers of America comes as domestic steel makers are trying desperately to cut costs so they can regain some measure of global competition. In recent years, cheaper, imported steel caused steel prices to drop drastically, and the high-cost U.S. steel industry couldn’t make a profit, the Journal story said.
Indeed, the agreement, which covers about 3,000 ISG workers, was widely anticipated by other steelmakers, who have labor contracts up for negotiation or have said they will seek whatever favorable terms ISG won, especially those involving retiree benefits, the Journal reported.
The proposed labor pact, which would run for six years, could also pave the way for consolidation in the US steel industry, according to the Journal story.
ISG said such an agreement could help facilitate its proposed takeover of Bethlehem Steel Corp., the country’s third-largest steelmaker, which is currently operating under Chapter 11-bankruptcy protection.
That acquisition hit a snag last week when the Pension Benefit Guaranty Corp ., the federal pension insurer, took over Bethlehem’s pension, undermining Bethlehem’s plan to reduce employment by offering early-retirement packages.