At 7 PM Sunday evening (tonight) the lockout of U.S. Steel Hamilton Works will enter its 10th week as USW Local 1005 battles USS over pensions. USS locked out Local 1005 the evening of November 7, 2010.

The steel mill has advised the union members at the former Stelco Hilton Works, which USS purchased in 2007, the lockout will continue until the union agrees to drop cost of living adjustments for those already under a pension and change the pension plan for new hires.

USW Local 1005 refuses to accept the terms set by U.S. Steel for the resumption of negotiations stating they are satisfied with the existing contract (the one acceptable to USS when they bought the mill in 2007).

Union management has been trying to rally Canadians against USS by turning the lockout and pension issue against foreign ownership of Canadian assets. In a post on the union website written by Ken Lewenza, National President of the Canadian Auto Workers, he calls the actions of U.S. Steel, “What’s happening in Hamilton today is nothing less than an affront to Canada’s national status as a serious, developed country. It’s not just the members of Local 1005 that are being bullied; it’s our whole country.”

In the article he says, “Of the many failed takeovers we’ve allowed in the past decade, the U.S. Steel case may be the most infuriating of all. It flaunted sombre commitments to preserve Canadian jobs and production, before the ink was dry on the deal. It threatened workers — first at Lake Erie, now in Hamilton — with the loss of their livelihoods, for refusing to accept corporate extortion.”

SMU Blog has Running Dialogue about Lockout Online

Through our SMU Blog we have offered both union and salaried workers as well as those not associated with the lockout an opportunity to voice their opinions and, in some cases, their frustrations. You are welcome to go to our Blog and review the Blog Posts we have made on the U.S. Steel Hamilton lockout and the workers reaction. Steel Market Update does not have a dog in this hunt (we are not taking sides) and we can only look at the lockout as an action which has taken approximately 2.57 million tons of steelmaking out of the market at a time when lead times are moving out and prices are rising. Even so, we do not know if USS would be running the mill at this time even if it were available. But, we do know without an agreement between the union and management the mill blast furnace and rolling assets remain idle.

Hamilton Retiree Contacts SMU with Different Opinion

Late last week a retired middle manager of Stelco Hilton Works (USS Hamilton Works) sent a letter to Steel Market Update outlining a number of short comings with the union’s position against U.S. Steel. The letter was quite detailed and covered many subjects. The author told us when asked why send the letter here vs. the local press? We were told the local press coverage was to one-sided. We cannot comment on his allegation since we do not consistently read the local Hamilton newspapers. However, we have determined the author is for real and has some genuine opinions which deserve to be heard and then discussed within the steel community.

We will present a good portion of the letter (but not all) and some subsequent conversations we had with the author in our Blog over the next few days. However, we wanted to give our readers a glimpse into the issues preventing the union and USS from coming to terms and getting back to work.

The author of the letter, Brian Hatch, joined Stelco in 1972 and became a middle manager in 1989 as Superintendent of the Primary Mills (Bloom & Billet Mill and Slabing Mill). During his career he also supervised the Coke Ovens and the Plate Mill. He admits he was never a member of the union representing the Stelco and now USS workers (Local 1005) but he does believe his pension is at risk of being “wound up” due to the stalemate between the union and USS.

Points to be Discussed

Mr. Hatch makes a number of observations and voices his opinion on a large variety of topics of concern to those affected (or potentially affected) by the stalemate between USS and USW Local 1005. These include:

The former Stelco would have never survived the recession of 2008/2009.

U.S. Steel Lake Erie – sister plant to Hamilton and another former Stelco facility – was locked out by USS for eight months before agreeing to the end of defined pension plan for new employees and USS cannot give Hamilton something it does not have at Lake Erie.

The value of the Hamilton mill to USS is much less than Lake Erie.

Indexing pensions adds huge liability to the funding of the pension. At the same time, many pensioners do not significantly benefit from indexing.

This is only the second time in the mill’s history the membership has not been allowed to vote on a final offer.

The Hamilton City Council has been voting “emotionally” criticizing U.S. Steel for shutting down the Hamilton blast furnace and then again for locking out the workers. It is Mr. Hatch’s opinion the local political leaders have been acting as a wedge between the two sides while at the same time having zero impact on the final results.

First, the Most Important Fact (according to Mr. Hatch)

In the letter sent by Mr. Hatch to SMU he starts out by saying:

“There is not a single steel industry expert/analysis that believes the former Stelco could of, would of or should have survived the recession of 2008/9. That includes the industry experts/analysis working for the United Steelworkers International. As a result all of the former Stelco pension plans would have been Wound-Up. All of these pension plans were under funded. It is a fact that the Hamilton Hourly Pension Plan Solvency Transfer Ratio as of December 31, 2008 was 57.7% and as of December 31, 2009 was 61.3%. The Hourly Lake Erie Plans were even worst at 50.9% and 54.1% respectively.

It is a fact that without the deep pockets of a large multi-national corporation like US Steel existing and future pensioners would be getting at best 60 cents on the dollar for their existing monthly pensions with the certainty that they will get zero benefits and zero indexing forever.

I am a Stelco pensioner and I can say unequivocally that: The single best thing that has happened to my pension and benefits is that the former Stelco was purchased by US Steel!”

The Lake Erie Settlement & Pension Indexing

Mr. Hatch’s letter to Steel Market Update continues with a discussion of the Lake Erie settlement and then he asks (and answers) the question, “How important is pension indexing?”

“It is a fact that Lake Erie was out for eight months before agreeing to their new contract which includes an end to the defined benefit pension plan for new employees. It would be a huge mistake if US Steel were to give Local 1005 in Hamilton a contract that is better than the one at Lake Erie. How would US Steel ever deal with the employees and union at the Lake Erie in the future? Anyone who thinks the Hamilton operation is more important or more valuable to US Steel than Lake Erie needs to give their head a good shake. Hamilton needs to understand that the pension issues in dispute are and always will be a deal breaker. It is time for a reality check!

How important is pension indexing?

The reality is that pension indexing has a negligible impact on pension in times of little or no inflation. It is a fact that in the past decade the current indexing provision in Local 1005’s contract has had a miniscule effect on existing pensions.

It is a fact that if the economist who believe that recovery from this recession will be long and slow are correct and therefore inflation rates very low then pension indexing will be of little or no value for the next five or more years. This begs the question: Why have a lockout/strike today over an issue (indexing) that currently has zero value and is likely to have little or no value in the near future? If it becomes an issue ten years from now then why not cross that bridge and fight that battle when it will mean something.

It is a fact that when actuaries calculate pension funding requirements, pension indexing is very, very expensive. The uncertainty of what inflation might be 5, 10, or 15 years from now adds significantly to potential pension fund liabilities. This is a huge concern for companies that must put large sums of cash today into their pension plans to meet current funding commitments that may or may not be required in the future.

It is a fact that many (maybe most or a majority) of Local 1005 pensioners do not significantly benefit from indexing. Many Local 1005 pensioners own a vacation property, many spend several months every winter down south, many go back to the old country every year or so and others as a result of inheritance or prudent living/investing are considered quite well off.

It is a fact that a very few Local 1005 pensioners have a very small pension and would greatly benefit from an increase. So why not forget indexing for all and instead ask for an increase only for those that truly need it? I know this is contrary to union thinking that mandates a benefit for one must be a benefit for all, but in this case I think a little creative thinking “outside the box” might help those that truly need it while resolving this impasse.

It is a fact that many retries in Ontario have no company pension and most of those that do have a company pension do not have indexing. In addition there are currently over 3,300 Stelco salaried pensioners, many who retired under the same calculation as hourly employees who do not have indexing.”

In our next Blog posting on this subject, Mr. Hatch addresses Defined Benefit vs. Defined Contribution Pension Plans.

SMU Position:

Steel Market Update will present more of Mr. Hatch’s letter in Blog post(s) on Monday and/or Tuesday of this week. We encourage comments from interested parties as we know there is a lot of interest within the steel community as to how and when this lockout by USS is ultimately resolved.

We are aware this is an emotionally charged subject with opinions on all sides – thus the lack of a contract. SMU does not belittle the impact the lockout is having both on the workers and their families as well as the greater Hamilton community. Our hope is both sides will find some common ground and will be able to bring the workers back to their jobs as soon as possible.

Mr. Hatch’s comments and opinions are his own and do not represent the opinions of Steel Market Update. The same can be said for comments which are made by others to our Blog posts. We are publishing them on our Blog in an effort to keep the steel community aware of the lockout and the issues which are being discussed (and hopefully eventually negotiated) by both sides.

Until then we welcome your comments.

We reserve the right to not publish comments which we deem as offensive, threatening or non-productive to the subject being discussed.

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