By Alex MacDonald
LONDON-- ArcelorMittal, the world's biggest steelmaker, said it
needs to raise health-care premiums for its U.S. workers and
retirees and freeze or cut pay for some employees.
"We should not have a condition of employment worse than our
competition, " ArcelorMittal Chief Executive Lakshmi Mittal said in
an interview. "We should not be in an unfair position."
For instance, the current health plan doesn't require workers to
pay any premiums, while at similar companies employees may pay 22%
of their medical benefits package, according to the company.
With a Sept. 1 deadline to conclude a new three-year labor pact,
Mr. Mittal has met four times this year with Leo Gerard, president
of the United Steelworkers union, which represents most of the
company's more than 20,000 American workers. The USW is also
negotiating a new deal with U.S. Steel Corp.
ArcelorMittal officials say the current contract, which includes
blue-collar salaries that sometimes top $100,000 a year, doesn't
reflect economic realities because it is based on a deal signed in
August 2008, before the global financial crisis.
The company, which makes 6% of the world's steel, on Friday
posted a net profit of $179 million in the second quarter, up from
$52 million a year ago, thanks in part to favorable exchange
rates.
These days, Mr. Mittal said, the company is under pressure from
the aluminum sector in the auto market, a global oversupply of
steel, and record Chinese steel exports. He said 43% of Chinese
steelmakers are unprofitable, demonstrating that the industry there
receives unfair state subsidies.
ArcelorMittal has proposed freezing pay, cutting total
compensation for some workers, and requiring monthly health-care
premiums of $150 for individuals and $250 for families, according
to a note the union leaders sent to workers.
"We are committed to negotiating a fair agreement that doesn't
include drastic reductions in compensation for active and retired
employees," union leaders wrote to their members. A union spokesman
declined to comment on the labor talks.
The proposal to reduce compensation would affect only workers in
entry-level jobs, such as cleaning, maintenance, and driving, who
currently earn $20.45 an hour, plus bonus incentives, a company
spokesman said.
He declined to say if the number of workers would be reduced.
ArcelorMittal's U.S. operations have a higher number of older
workers than in Europe, which would allow it to reduce head count
without layoffs.
"Clearly people are [going to be] affected," Chief Financial
Officer Aditya Mittal said
ArcelorMittal employs more than 20,000 employees at 28
operations in the U.S. with an additional 1,200 employees in
research, development, sales and company offices.
Things are brighter in Europe, ArcelorMittal said, as operating
profit there increased to $386 million in the quarter from $269
million a year ago. The company endured several years of losses
there amid restructuring that included layoffs and the closure of
unprofitable blast furnaces.
ArcelorMittal wants to implement a version of that restructuring
plan in the U.S. but focused on its steel-finishing operations
rather than blast furnaces. Also, the U.S.'s expensive, private
health-care system is a burden it didn't face in Europe, company
officials say.
The U.S. steel market hasn't suffered as badly as in Europe in,
where shipments are still below 2008 levels as demand is down.
"Europe required primary capacity changes," said Aditya Mittal. "In
the U.S., it is more how do we further improve the productivity and
cost performance of our finishing operations."
U.S. steelmakers have been hit by wave of steel imports,
particularly from China as the Asian economy cools, prompting the
industry to file requests for trade protection.
U.S. steel demand is forecast to grow 2.3% this year, the
highest out of all the regions in which ArcelorMittal operates, due
to strong demand for construction and automobiles.
In South Africa, ArcelorMittal is considering closing
Vereeniging Steel, a minimill that produces around 400,000 tons of
crude steel annually and employs 1,200. Aditya Mittal said a final
decision will depend on whether steel import pressures abate.
ArcelorMittal directly employed 8,825 people in South Africa last
year.
The second half is forecast to be better than the first half
because of increased steel shipments from Europe and Brazil, where
weakening currencies are making it easier to export steel, and an
expected rise in U.S. demand.
Write to Alex MacDonald at alex.macdonald@wsj.com