Updates from Pittsburgh
October 18, 2012
Today, the United Steelworkers’ membership announced the ratification of the new collective bargaining agreement between the USW and ArcelorMittal USA. The new agreement, which is retroactive to September 1, 2012, covers approximately 14,000 USW-represented employees at 15 of ArcelorMittal USA’s flat carbon, long carbon and iron ore mining locations.
In response to the ratification announcement, Michael Rippey, president and CEO, ArcelorMittal USA provided the following statement:
“ArcelorMittal is pleased to receive confirmation that our new three-year collective bargaining agreement with the United Steelworkers has been ratified. While the new contract represents a shared commitment with the Steelworkers to enhance our competitiveness and create a business that is sustainable through the ups and downs of the business cycle, we recognize that work remains in the areas of productivity, employee engagement and operational efficiencies if we are to fully achieve our vision for safe, sustainable steel. We extend our appreciation to our employees, customers and communities for their patience and support throughout the negotiation process.”
September 11, 2012
ArcelorMittal is pleased to have reached a tentative agreement with the USW in what we believe to be a fair and equitable outcome for all parties involved, without disruption to our customers. We have received a number of inquiries for details on the tentative three-year agreement reached on September 8. While we appreciate the interest, out of respect for the Union’s internal ratification procedures, no details on the settlement will be available until after USW-represented employee ratification. The USW advises that the ratification process should take approximately three to four weeks.
We trust that our employees will remain focused on safely performing their daily job activities and not allow the contract ratification process to serve as a distraction.
September 8, 2012 - 1 p.m. EDT
The following statement is from ArcelorMittal USA and includes a quote from Michael Rippey, President & CEO, ArcelorMittal USA:
ArcelorMittal has reached a tentative agreement with the United Steelworkers (USW) on a new, three-year labor contract covering nearly 14,000 USW-represented employees at 15 of ArcelorMittal USA’s flat carbon, long carbon and iron ore mining locations. The tentative agreement will replace the existing contract that was originally set to expire on September 1, 2012 and remains subject to ratification by the USW membership.
“We are pleased to have a new, tentative agreement with the USW and to have reached a fair and equitable outcome without disruption to our business operations,” said Michael Rippey, president and CEO of ArcelorMittal USA. “We extend our appreciation to our employees, customers and the community for their patience and support during the negotiation process.”
September 1, 2012 - 9 p.m. EDT
Negotiations continue between ArcelorMittal and the United Steelworkers. We remain optimistic about reaching a fair and equitable contract with the USW. However, due to the sensitivities of the negotiations process, the Company will not address specific issues being discussed between the parties.
Updates will continue to be posted on this website as they become available.
August 31, 2012
ArcelorMittal USA and the United Steelworkers remain in continuous negotiations on the remaining open topics. Due to the sensitivities of the negotiations process, no additional information will be available on individual topics of discussion.
The company remains optimistic that a fair and equitable settlement will be reached before the contract expires at 11:59 p.m. on Saturday, September 1.
We trust that our employees will remain focused on safely performing their job functions and not allow negotiations to serve as a distraction. Updates will continue to be posted on the site as they become available.
August 24, 2012
As we get closer to the contract deadline of September 1, ArcelorMittal is in continuous dialogue with the United Steelworkers and remains optimistic about reaching a fair and equitable contract with the USW without a work stoppage. However, due to the sensitivities of the negotiations process, the Company will not provide updates on specific issues being discussed between the parties.
As a precautionary measure and consistent with measures taken during past labor negotiations, ArcelorMittal has recently begun the process of taking asset preservation steps at its facilities should a work stoppage occur.
Updates will continue to be posted on the site as they become available.
August 6, 2012
The parties focused the week of July 30 on ways to improve shop floor flexibility and employee engagement, two important drivers of a sustainable cost structure across the business cycle, as they help improve our transformation cost and quality performance. While these are difficult subjects, the parties have a good track record of working together to develop solutions in challenging circumstances such as these. Below is a video prepared for the Union-Management Partnership meeting earlier this year highlighting one such work, the agreement to assist the reopening of the Georgetown plant, including commentary from shop floor employees.
Negotiations resume Monday in Pittsburgh.
July 30, 2012
Much of last week focused on understanding repair, maintenance and capital needs at the plants to ensure we continue to meet customer needs and achieve our mutual sustainability objectives throughout the business cycle. Related to that, and to the topics of shop floor flexibility and employee engagement, the parties also reviewed updated benchmarking data (worker hours* per ton and works’ operating costs** per ton) showing the relative productivity of our plants compared to both our competitors and our own ArcelorMittal USA best-in-class plants. The parties sought to understand how we come up short and exchanged views on how we can close those gaps. The parties are aligned around the objective of boosting productivity to move toward best-in-class status across the board, but have not yet reached consensus on the measures needed to achieve that objective. The management team again emphasized that the Company wants to continue to offer industry-leading compensation if we can generate industry-leading performance across the business cycle. Lowering transformation costs, or the costs to transform raw materials into finished product, can be one important way forward, and the accompanying video goes into that topic in more detail.
The parties recessed on Friday for internal discussions and will resume joint talks on Tuesday, July 31 in Pittsburgh.
*Worker hour accounts for represented and non-represented employees and contractors
**Works’ operating costs is a plant’s manufacturing costs excluding materials
July 25, 2012
During the week of July 16, negotiations focused mainly on subcommittee work. Ideas were exchanged on wellness opportunities, shop floor flexibility and quality and efficiency improvements, and how to most effectively variabilize costs. The discussions aimed to allow the Company to better handle the ups and downs of the business cycle, including investing in plants, equipment and training, even during periods of weak demand. The parties also discussed how to better utilize the flexibility already inherent in today’s labor agreements. Negotiations resumed at the plants on Monday, July 23 and in Pittsburgh on Tuesday, July 24.
July 16, 2012
Management and union negotiators resumed talks in Pittsburgh on July 9 after a week off for internal preparation. Talks resumed amid continued news of global economic slowdown and what it means for the USA.
In response to a request by the USW, the parties reviewed recent business performance by ArcelorMittal USA back to 2006 (pre- and post- Great Recession), to better understand what it takes to accomplish their mutual objective --- a business which is sustainable throughout the business cycle, and not just when the wind is at our back. This dialogue considered the journeys traveled by other industrial companies and their unions to lead change and become more competitive. Union-represented steel is not the first to face these challenges and can learn from others, including a number of other companies that have addressed change with the USW.
Subcommittees on capital/R&M, health care, and shop floor flexibility & employee engagement continued their work. The health group considered opportunities presented by the Patient Protection & Affordable Care Act, which the US Supreme Court upheld. Follow on work was identified, especially to discuss how to improve the health and wellness of our workforce. Please see page 29 of the Fact Book for more Health information.
Chief Operating Officers, Andy Harshaw from Flat and Alton Davis from Long, joined the Capital group to review recent experience and plant needs. The parties also exchanged views on variabilizing costs, including how to harmonize workforce needs for household continuity through the business cycle, with the powerful role that making costs more variable can play in flexing operations to achieve sustainability throughout the business cycle.
Talks will resume July 17 in Pittsburgh.
June 29, 2012
Negotiations resumed in Pittsburgh this week. The parties reviewed progress made on local plant issues since June 1. The parties also organized subcommittees on important topics including healthcare reform; shop floor flexibility, efficiency and employee engagement; and capital, repair and maintenance needs. In several subcommittee sessions, dialogue focused on generating a better understanding of company proposals, soliciting union ideas, reviewing business information, using fact-based data to support discussions and building a more sustainable business for the future of our facilities.
Negotiations will resume July 9. Major topics will include understanding healthcare opportunities and challenges as presented by the Patient Protection and Affordable Care Act, which the U.S. Supreme Court upheld on Thursday; understanding the gap for capital, repair and maintenance needs; and identifying how to improve operating efficiency and surpass mini-mill performance.
June 5, 2012
More than 100 union and management representatives gathered in Pittsburgh last week to formally open negotiations on new contracts to replace those expiring on September 1, 2012. Both parties presented their perspectives on the state of the industry, the state of the company, the state of the workforce, the impact of the Great Recession and the subsequent slow and progressive recovery on the business and the workforce. Both parties discussed the industrial outlook for the next few years and their goals and aspirations for new agreements.
Negotiations kicked off at a somber time as the parties noted that RG Steel filed for Chapter 11 bankruptcy last week, which will result in the layoff of thousands USW-represented steelworkers.
Building off “Challenges Facing the Unionized Steel Industry,” the joint message sent to the workforce in August 2011 about the call for action to lead change, the parties expressed their agreement that the mission for this summer was to build a USA business platform that is sustainable throughout the business cycle, attracts investment and, in turn, delivers good job security.
In Pittsburgh, the management team outlined the substantial, competitive labor cost gap ArcelorMittal USA faces compared to the non-union mini-mills. Management highlighted their ideas to close the competitive gap which included:
- implementing changes in benefit programs
- increasing shop floor flexibility and employee engagement
- transitioning to a lower and more variable cost structure
- maintaining industry-leading pay through industry-leading performance
The management team continuously solicited Union ideas on how to close the cost gap and improve performance throughout the week. The USW, while agreeing on the goal of creating a sustainable business, expressed reservations about a number of the ideas advanced by the Company and reserved offering any specific suggestions for change until a later date.
The parties recessed for discussion of plant-level local issues and expect to resume negotiations in Pittsburgh the week of June 25.
FREQUENTLY ASKED QUESTIONS
Q: ArcelorMittal USA is required to report using two sets of accounting rules – one for the USA and one for the global company. Does this process yield different results?
A: ArcelorMittal USA has publicly traded debt. As a result, we must provide standalone financial statements to our bondholders. These financial statements must be prepared using U.S. Generally Accepted Accounting Principles (GAAP). These are the same rules that are used by all other USA companies, including our competitors (U.S. Steel, Nucor, AK Steel, etc.). The statements are reviewed by independent auditors to validate that we have properly followed the GAAP rules.
Because our parent company, ArcelorMittal S.A., is based in Luxembourg, the Company prepares its financial statements in accordance with International Financial Reporting Standards (IFRS). The results are also audited by an independent third party.
Both the GAAP and IFRS rules were designed to ensure a company represents their profit or loss in a way that accurately measures the actual performance of the business. Cash flow is the exact same under both of these standards, and over the long run, the expense under either standard will match the cash.
There have been on-going efforts over the last few years by both standard-setting bodies to converge the two accounting systems, but significant differences still remain. For ArcelorMittal USA, there are four important differences between GAAP and IFRS.
• ArcelorMittal USA uses the Last In, First Out (LIFO) method to value inventories, a method that is not permitted under IFRS. Under LIFO, material being consumed is valued using current costs. Under IFRS, material being consumed is valued at the average cost (including material purchased earlier). When costs of raw materials increase, costs are higher under U.S. GAAP. When costs of raw materials decrease, costs are lower under U.S. GAAP.
• There is a difference in timing of post-retirement benefit expenses when plan changes are made. While both standards allow for any plan change to be accounted for over the expected future service of an employee, IFRS requires that costs be recognized immediately to the extent any of these benefits are vested. Therefore, for ArcelorMittal USA, some of the impact of the 2008 labor agreement is still being recognized in expense under U.S. GAAP, while those costs were recognized in 2008 under IFRS. This difference is a matter of timing, not a difference of the total amount expensed.
• There is also an issue of categorization of the financing component of post-retirement expenses. U.S. GAAP views all post-retirement benefit costs (including financing cost) as employment cost and thus must be included in operating cost. Under IFRS, the cost of financing the post-retirement obligation is treated as interest expense. Therefore, a significant portion of the expense in IFRS is outside the Operating Profit. This doesn’t mean that costs are lower under IFRS. It is a matter of which cost line item captures the financing portion of our cost.
• The final difference relates to exclusive use assets. When a company takes the entire output of an asset (like a raw material supplier plant) and makes fixed payments that do not vary with that output, the transaction is treated as if the company had purchased the asset. Several years ago, the accounting rules where unclear as to what types of assets should be accounted for in this manner. Both U.S. GAAP and IFRS have now clarified the rules, but they differed on how to handle transactions that had already occurred. Under U.S. GAAP, any existing arrangements were grandfathered and any existing accounting did not need to be changed. Under IFRS, all previous arrangements needed to be recorded under the new rules. Again, this doesn’t impact total cost or cash. It is just a matter of what cost is included inside Operating Profit and what cost is below the Operating Profit line.
In conclusion, ArcelorMittal USA will use U.S. GAAP financial statements in the U.S. because: we are required to as part of our financing arrangements; we agreed to provide them in our labor agreement; and it makes it easier to compare our financial results to that of our competitors. Because we are also owned by a European company, we must also report under IFRS. Our cash flow is the same under either standard, and both standards will match this cash flow over the long run.
Q: In the 2008 Basic Labor Agreement, ArcelorMittal and the USW made mutual commitments to improve job security through a financially successful business, including capital investment and world class performance. What happened to those commitments?
A: In 2008, when the last BLA was signed, ArcelorMittal USA and USW discussed a business strategy for industry growth which envisioned 18 million tons of annual steel production in a very robust market, with investment averaging about $33/ton.
As we all know, just weeks after the agreement was signed, the U.S. economy entered the worst recession since the Great Depression. The Company sustained losses and negative cash flow, and both the Company and the USW recognize we have not been at world class levels of performance in all units. In 2009, ArcelorMittal USA’s production fell to about 8.5 million tons of raw steel, less than 50 percent of production envisioned in the 2008 business strategy. The 2008 BLA included making changes in investment to take into account changing business levels. While we are experiencing a slow and progressive recovery, and remain optimistic about the future, annual steel production is still below that of 2008.
Despite these challenges, capital expenditure has remained relatively strong. Since 2008, ArcelorMittal USA has invested an average of $22.53 per ton of steel produced domestically to improve the overall capabilities of its U.S. facilities and to extend the life of its assets. Currently, our capital expenditure is flexing with conditions, in line with the tonnage we are producing. Please see page 22 of the Fact Book for more information about ArcelorMittal USA’s capital investments since 2008.
Q: There is a lot of information on the website. Has this type of information been shared with the USW?
A: The Company has been communicating regularly on the state of the business with union representatives at all levels and to employees. Since Q4 2008, the state of the business has been discussed thoroughly at partnership meetings, quarterly profit sharing communications detailing business performance, monthly plant business reviews which include USW representatives, weekly updates with union leadership, and special meetings with senior company and union leadership. In addition, the union has full audit rights to business information. For more information, visit www.TransformingArcelorMittalUSA.com or email USAlaborinfo@arcelormittal.com.
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