USX Corp., in an unprecedented breakthrough for organized labor, has agreed to guarantee the lifetime health and pension benefits of senior union workers even when the plants they work in are sold to another company.
The guarantee was part of a tentative three-year contract, announced early yesterday, between the Pittsburgh-based company and the United Steelworkers of America. The union represents 20,000 workers in seven states.
In addition to benefits guarantees, USX agreed to give the union an opportunity to purchase any part of the steel operations the company might want to sell. But the new contract falls short of guaranteeing the union the right to make the first bid on the sale of any company operations, a provision the union had sought.
"No one else has put together this kind of protection," union president Lynn Williams said yesterday. "I think the whole contract plows new ground."
The contract must be ratified by union workers. If approved, the contract will be retroactive to Feb. 1, when the previous contract was to have expired. There were two 24-hour extensions of the original strike deadline.
Security for jobs and benefits has become a major issue for organized labor over the last decade, particularly in the manufacturing industries, which have been buffeted by mergers, takeovers and foreign competition. Under these pressures, many large manufacturers in the steel and auto industries have cut their work forces by half, leaving hundreds of thousands of workers without pensions or health care.
Because the manufacturing sector has been heavily unionized, layoffs are conducted on a seniority basis, leaving most corporations with work forces with an average age of 40 or older and 20 or more years of service.
A USX source said yesterday that a third to half of the steelworkers employed by USX would be eligible for the senior worker benefits guarantees.
Thomas Sterling, chief negotiator for USX, called the contract fair and said it served the interests of both the company and the union "in a tough global steel market."
A union source closely involved in the negotiations said the benefits guarantees and the right to bid on company operations were the last contract items to be settled. Agreement on the job security issues were worked out after Williams called USX Chairman Charles Corry to discuss the union's position.
"This is an extraordinary breakthrough," the source said. "This goes to the basic issue of corporate responsibility." He said it could set a pattern that shows "when a large company wants to go into other businesses, it's on the hook for its employees."
United States Steel changed its name to USX in the early 1980s after buying Marathon Oil. Since then, as the steel market has dwindled, USX has concentrated much of its attention on its energy operations and has been selling off parts of its steel operations. Late last week, the company announced its was dividing its common stock into separate steel and energy issues. Many analysts believe this was the final step toward the sale of the steel subsidiary, as a whole unit or in pieces.
Investor Carl Icahn, who owns more than 13 percent of USX, had been urging the stock move for more than a year. In exchange for the new stock issues, Icahn agreed to buy no more shares of USX and to stop mounting stockholder proxy fights against company management.
Company and union officials said they believed the separate stocks will take some of the pressure off USX to sell the steel business as Icahn had demanded. But union officials said they were unwilling to take any chances, particularly with Icahn still around, and insisted on the benefits guarantees and the opportunity to buy any assets USX might put up for sale.
The benefits guarantee worked out for senior workers applies to any union member with 30 years of service regardless of age or anyone who is age 60 and has at least 15 years service. The contract says these workers will receive the health and pension benefits promised by USX even when their plant is sold and the successor company fails.
The company also has agreed to pay the full severance, pension and health benefits a USX employee would be eligible to receive up to five years after the worker's plant had been sold. Williams said the provision was a major expansion over similar language from previous contracts regarding successor ownership.
The rest of the contract was basically a catch-up on the four-year contracts agreed to in 1989 by the rest of the major steel companies. The USX agreement provides base-pay increases of $2.50 an hour and $3,250 in bonuses, including $2,500 in cost-of-living payments.
With the issuance of the new steel stock by USX, the pressure may be off the company from Icahn, but now the question is who will ultimately own the steel unit, the nation's largest steel company.
Although it appears unlikely, but not improbable, that the United Steelworkers would make a bid for the company if it was put up for sale, the union is no stranger to employee stock ownership plans (ESOP), which encourage employees to buy stock in their company. To preserve jobs and control the destiny of steel companies that otherwise would have been closed or sold, the union has become involved in more than two dozen ESOPs with ownership ranges from 10 percent to 100 percent.
The union has a good track record in setting up employee buyouts since it has been in a position to recommend to members wage cuts for stock ownership. Weirton Steel Corp., which was bought by employees in 1984 from National Steel Corp., is one of the most visibly successful employee buyouts that has been done in the steel industry, though the buyout of the Weirton, W.Va., company was done by an independent union.