Bethlehem Steel Corp., struggling to trim its losses, announced yesterday that it was eliminating all automatic wage increases, reducing holidays and vacations, and cutting health and pension benefits for all 22,000 of its salaried employes.
Bethlehem, the nation's second-largest steel maker, said it expected the annual saving from the cutbacks to be "in excess of $30 million." The company, beset by the declining demand for steel that has afflicted the entire industry, reported a loss of $113.8 million in the first six months of this year.
Other major steel companies, facing the same dismal earnings picture, already have announced similar packages of reductions. U.S. Steel, the industry leader, has cut about 4,000 salaried workers from its payroll and reduced compensation for those still working.
Donald H. Trautlein, Bethlehem's chairman, told the white-collar workers that cutbacks in their compensation and benefits were necessary because the company had been unable to win any wage or benefit concessions from the United Steelworkers Union, which represents the production workers. The union last month rejected a request to renegotiate its contract.
"We believe that reductions in both salaries and hourly employment costs are critical to our company's well-being," Trautlein said in a letter to the salaried workers. "Regrettably, however, recent industry discussions with the United Steelworkers Union have not resulted in any changes in hourly employment costs. Nevertheless we are proceeding with some necessary changes that will affect salaried employes."
The reductions announced yesterday followed cutbacks in the compensation of senior executives and in cost-of-living increases. The salaried, or nonproduction, employes are not represented by a union, and the company had the right to impose the cutbacks, a spokesman said.
For the workers, the reductions may be painful, but they may be preferable to such alternatives as layoffs and plant closings, industry analysts said. "I bet if you polled the employes, you'd find that they think this kind is preferable to the other choices the company might have made," one expert in corporate compensation plans said.
Bethlehem, a major employer in Baltimore at its Sparrows Point works, said the cutbacks would affect all nonproduction workers, from the lowest mail room clerk to senior management.
In the cutbacks, all cost-of-living and other automatic pay increases were eliminated in favor of raises to be distributed based on performance. Paid holidays were reduced from 12 per year to 10. Deductible amounts on health insurance were raised. Extra vacation time based on seniority was eliminated.
In addition, Bethlehem said it would reduce the pensions of employes who retire before the age of 62. This move, which runs counter to a nationwide trend to encourage early retirement, baffled independent pension experts and industry analysts, who said it would discourage high-salaried senior workers from going off the payroll.
A Bethlehem spokesman said this step was taken to "encourage full careers" with the company.