U.S.A.:Rouge fate snarls UAW, Ford talks
Automaker in no hurry to rehire workers if troubled steelmaker is sold or folds
By Mike Hudson / The Detroit News
Robin Buckson / The Detroit News
DEARBORN -- The fate of struggling Rouge Industries Inc., the steel company spun off from Ford Motor Co., is clouding negotiations between the automaker and the United Auto Workers union on a new contract covering wages, benefits and job security.
Under the terms of Rouge's 1989 spin-off, Ford agreed to rehire Rouge workers if the steelmaker was ever sold or discontinued operations -- a real prospect today. But Ford is reluctant to rehire Rouge employees while it undergoes a turnaround plan that will close factories and shed as many as 12,000 jobs in North America.
Battered by slumping steel prices and falling demand, Rouge hasn't made an annual profit since 1998. Even under the protection of federal tariffs on imported steel, Rouge reported a second-quarter loss of $20 million and is seeking a buyer.
Longtime Rouge workers are eager to return to Ford if the steelmaker is sold or closed.
"You hear all sorts of things about what's gonna happen to us, but nothing has yet," said Jonny Anthony, 58, a 35-year Rouge employee from Detroit. "It'd be nice if we could go back (to Ford)."
Based on seniority, 700 of Rouge's 1,900 hourly employees would be eligible to return to Ford.
If jobs were not available, the automaker would still be on the hook to pay salary and benefits to Rouge workers.
Rouge ships 2.5 million tons of steel annually, almost exclusively to Ford, DaimlerChrysler AG and General Motors Corp., making it an attractive target for steelmakers looking to tap new revenues sources.
U.S. Steel Corp., which recently bought bankrupt National Steel Corp., has expressed an interest in buying Rouge to bolster its automotive business.
Ford has helped Rouge Steel before, picking up pension and other benefit costs for workers who retired before 1989. In 2002, the automaker loaned Rouge $75 million but has balked at providing additional financial support.
Still, some UAW officials have pressed Ford to further subsidize the company to prevent a bankruptcy filing or sale.
"It's going to bode very badly if, in the middle of the talks, a UAW steel mill goes down," Stanley King, president of UAW Local 600's Rouge unit, told Bloomberg News earlier this month.
Lower wages feared
The UAW fears a sale to a third party would bring about lower wages and reduced benefits for Rouge workers.
After U.S. Steel's takeover of National Steel, U.S. Steel sought and secured wage and health care concessions from National Steel workers, including employees at Great Lakes Steel in Ecorse. Pension benefits also were reduced and are now being overseen by the federal government's Pension Benefit Guaranty Corp.
UAW Local 600 represents almost 9,000 workers at Ford's sprawling Rouge complex and is traditionally one of the union's most influential locals. It is also carrying a lot of weight on the UAW's national negotiating committee at Ford, with three of 14 bargainers. But it's unclear how hard the union is willing to fight to protect Rouge workers.
For now, Gerald Bantom, the UAW's chief negotiator for Ford, said the union was not pushing the issue during contract talks.
"We're concerned about it, but we're not bringing it up at the table," he said last week.
Wall Street concerned
But Wall Street, eager to see signs of a sustained profit recovery at Ford after losses of $6.4 billion in 2001 and 2002, remains concerned. Analysts estimate the annual cost to rehire Rouge workers at $75 million for Ford.
"There is a chance that if the plant was bought by another company, they would just decide to move all that production somewhere else," said Sean McAlinden, auto analyst at the Center for Automotive Research in Ann Arbor. "They'd be looking to simply buy Rouge's customers and produce those orders elsewhere."
Rouge officials would not comment on the matter.
Ford is also under pressure to rehire hundreds of workers from Visteon Corp., its former parts division. Visteon has 21,260 workers who are still considered Ford employees, and they have the right to return to the automaker.
"Productivity issues are likely to continue to nag Ford with new higher-cost products being launched and potential flowback of workers from possible restructurings at Rouge Steel and Visteon," Stephen Girsky, analyst for Morgan Stanley Equity Research, warned investors in a recent report.
Rouge's future remains a top concern for workers.
Some hope Ford, inspired by historic ties to the plant, will grant more loans or pay more for steel to subsidize the firm. Others worry the plant may just get lost in the bargaining stampede and limp along until a buyer emerges.
Workers like William Ryan, 60, a Rouge employee for 14 years, don't have many options because they aren't eligible to return to Ford. "(Longtime workers) have some loyalty to this plant. I was one of the original Rouge employees to come in after the spin-off, so if this place goes down, I'm probably outta here."
The steel mill has been an integral part of the vast Rouge complex since 1923, when the first load of steel flowed from massive blast furnaces. The mill stood as an important piece of Henry Ford's grand plan to create a one-site auto assembly village where raw materials could be shipped in and finished cars could be shipped out. Ford is now spending $2 billion to refurbish the 2,100-acre Rouge complex.
Today, Ryan and other workers toil along, openly wondering what the future holds for the historic mill.
"The rumors have died down ... and we've got more orders now than ever before," he said. "That's a good sign and it helps you calm down a bit. I'm tired of coming home nervous about what's going to happen to my job."
Rouge Steel at a glance
Parent company: Rouge Industries Inc.
Annual steel output: 2.5 million tons
Major customers: Ford Motor Co., General Motors Corp., DaimlerChrysler AG
Employees: 2,600; 1,900 unionized
Annual sales: $1.13 billion
2002 loss: $52.3 million
2001 loss: $111.5 million
History: Built in 1923, spun off from Ford Motor Co. in 1989.
(Photo)Jonny Anthony arrives for work Wednesday at the Rouge Steel plant. The struggling firm's future is an issue in contract talks.
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My next Ford.....