MARCH 15 UPDATE: Local 9477 today provided members with highlights of the heretofore “mysterious” contract that the United Steelworkers reached with RG Steel. The material confirms the $1-an-hour wage increase and other terms reported by this blog. We have added information about the redesigned incentive pay and lower wages for new hires at the end of this post.

The contract approved by the United Steelworkers (USW) negotiating committee Friday will keep base pay at Sparrows Point about $1.80 an hour below other USW-represented steel companies. Incentive pay is also expected to drop under the new contract, while working hours in some departments may be extended to 12-hour shifts.

Those are some of the highlights of the contract, a summary of which was obtained by The Brew. The contract summary is expected to be distributed shortly to the 1,800 USW-represented employees at Sparrows Point.

If approved by union members, the contract will go into effect once RG Steel completes its purchase of the Sparrows Point, Warren and Wheeling steel operations from Severstal. The contract would expire in September 2014.

Given the expectations fanned by union officials, the contract is sure to disappoint many employees. Already discussion of the contract has sparked scores of comments, many of them scathing, in The Brew.

For more than a year, John Cirri, president of Sparrows Point Local 9477, has suggested that a new contract would include a signing bonus and wages that would match the national “pattern” contract.

Asked for comment, Cirri responded with this e-mail tonight:

“Mark, as I stated before, many of your articles are not factual, unless it deals with background checks on companies, and sources close to The Brew are misleading you and the people they represent or hope to represent one day. So, to answer your question respectfully, I cannot allow myself to engage in your style of reporting at this time.”

On the other hand, RG Steel has indicated it plans to restart steelmaking that stopped in July at Sparrows Point. This may permit many of the 850 steelworkers now on layoff to return to work – and increase pressure on members to ratify the contract.

Job Losses Feared

“We’re caught between a rock and a hard place,” a union source said today. “Under Severstal, we were dying and now it looks like under RG Steel we’ll be making iron in about a month. But we’re going to have to make sacrifices.”

Said another employee, “In all but name this is a concessionary contract. And it looks like we’re about to lose a lot of jobs.”

In a statement Friday, chief USW negotiator Dave McCall defended the new contract as the best way to revive the three mills, which have been largely mothballed by Severstal.

“We are driving the change that needs to take place company-wide to ensure these facilities remain viable for the long term,” McCall said. “This is about the future of our jobs and our communities.”

Wage Gap

The RG Steel contract is different from the pattern agreement that the USW signed with ArcelorMittal, U.S. Steel and other major companies in 2008. That contract gave union workers a $6,000 signing bonus and yearly wage increases of 4 percent, beginning Sept. 1, 2008.

Severstal refused to sign the contract. As a result, workers at Sparrows, Warren and Wheeling have fallen behind their peers at those companies.

Currently, Sparrows Point pays $16.39 to $22.40 per hour depending on the labor classification. At ArcelorMittal and other companies, base wages are nearly $3 higher – between $18.18 and $25.31.

Key Contract Terms

The contract with RG Steel has the following highlights:

•  no signing bonus and no back pay for the 31 months employees were on contract extensions with Severstal.

•  $1-an-hour wage increase, effective immediately, followed by a 4 percent increase for each of the next three years. This will still keep base wages about $1.80 an hour below those of other USW-represented mills.

•  revised incentive pay to be determined by RG Steel. Incentive pay typically adds $4-5 an hour to steelworker pay.

•  restructuring of production jobs to replace operating techs with maintenance techs, which may lead to the eventual elimination of several hundred jobs at Sparrows Point.

•  alternative work schedules that will permit the company to establish 10- and 12-hour shifts without employee consent.

•  joint ventures with subcontractors to remove jobs from the RG Steel payroll. Subcontractors are scheduled to take over the machine shop, warehouse, mobile equipment and other departments. Such jobs would stay in union ranks until the employee retires.

Steelworkers interviewed tonight by The Brew placed special emphasis on the pending changes to incentive pay. In some departments, employees can hike their base pay by as much as 60 percent if they beat production quotas set by the company.

The new contract will allow RG Steel to set up an incentive system “with a performance [or incentive pay] of 20% above the base rates of pay.”

Pension and Health Benefits Improved

The contract includes some pension and health benefit improvements. Most importantly, if a union employee is not recalled to work by RG Steel and runs out of benefits, an additional year of employer-financed pension and health care benefits will be granted.

This provision is expected to help employees at Wheeling-Pitt, whose operations have been suspended for nearly two years.

Sources tell The Brew that while John Goodwin, president of RG Steel, has told union officials that he wants to reopen the furnaces at Wheeling’s Mingo Junction mill, they may remain closed for many more months.

Controlled by billionaire New York financier Ira Rennert, RG Steel is banking on the rising price of steel to generate cash flow for its new operations.

A number of analysts believe that demand for steel from China, India and other industrializing countries will create a shortage of steel in the coming year, leading to higher prices.

A weakened American dollar is expected to give domestic steelmakers a competitive edge in overseas orders and could improve their profit position in the U.S. market.

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NEW INFORMATION

INCENTIVE PAY:

Local 9477 issued today (3/15) part of a signed agreement between David McCall, chief USW negotiator, and Ari Rennert, president of RS Steel/Renco, regarding changes in the incentive plan. The signed agreement says:

“The parties have agreed to the replacement, redesign and restructuring of all Incentive Plans including Key Performance Targets (KPT). On the Effective Date [of the agreement], all Incentive Plans will be eliminated. Within six (6) months of the Effective Date, the parties will implement new incentive plans at all plants. Each plan will have four (4) incentive plans; one plan each for Steel Producing, Hot Rolling, Finishing and Services (an average of the other 3). Such plans will be mutually developed and designed by the parties using the basic principles of the industry standards with Key Performance Targets (KPT) regarding yield, quality, customer satisfaction and controllable conversion costs. Such plans shall be designed to provide a performance of 20% above the Base Rates of Pay.”

(NOTE: The agreement is listed as signed on “January 3, 2010.” We assume this is a typo and the agreement was actually signed on Jan. 3, 2011.)

LOWER HIRE PAY:

New hires will receive 80% of the base rate of pay. This pay will be increased by 5% every six months until they attain the base rate after two years of service.