PITTSBURGH (AP) -- U.S. Steel Corp. said it cannot quantify the value of a good relationship with the United Steelworkers of America. A decision this week in U.S. Bankruptcy Court, however, places that value in the neighborhood of $75 million.þþThat is the difference between the lower bid from U.S. Steel that was accepted and the $925 million offered by rival AK Steel Corp. for bankrupt National Steel.þþU.S. Steel's dollar was stretched further largely because of a tentative union contract that has been called ``groundbreaking'' by Thomas Usher, the company's chairman and chief executive.þþThe agreement earned the trust of the Steelworkers who backed U.S. Steel. The union in turn doused any hopes that AK Steel would make a successful bid, promising to strike and predicting the liquidation of National if the court accepted AK Steel's bid.þþ``Labor played a critical role in this transaction and I think it's become clear that labor will play a role in the direction of the industry as a whole,'' said Marick Masters, a professor with the Katz Business School at the University of Pittsburgh. ``In this case, it was the influence of labor and the likelihood of greater stability that tipped the scales.''þþThough details of the contract remain sketchy, steel industry and labor experts agree that companies most likely to survive the ongoing industry consolidation will be those that can deftly handle a new role for labor in steel making.þþU.S. Steel and the Steelworkers will not comment on the contract until it has been ratified.þþSteelworkers President Leo Gerard said the framework of the contract is similar to a recent agreement with International Steel Group Inc., the entity that took over bankrupt LTV Corp.'s mills and will absorb Bethlehem Steel next week.þþThat contract gives the company more leeway in reassigning workers, but also gives workers more say in how steel is made. It allows for significant cuts to the work force to reduce labor costs. The Steelworkers have gone along because cuts to management are even greater.þþWhatever the contract entails, the new relationship between U.S. Steel and the Steelworkers has so far been embraced on Wall Street.þþU.S. Steel's stock price has been on the rise since the tentative labor agreement was announced April 9.þþ``You can't quantify it,'' said Daniel Roling, an analyst with Merrill Lynch. ``The relationship that a company has with its workers is more important than the numbers.''þþU.S. Steel has said the eight-year contract will allow the company to realize productivity improvements of at least 20 percent.þþRoling called that a good start but far from a long-term solution.þþ``The 20 percent is nice, but if it stops there, we're looking at the same situation in five years,'' he said. ``The 20 percent is what you need for the company to survive.''þþYet talks between the United Steelworkers and steel companies already are paying off, according to Mark Parr with McDonald Investments.þþ``There has been a significant shift in the wind and you can see that in the new access to capital,'' Parr said. ``ISG was able to put together $1 billion in revolving credit to purchase Bethlehem. U.S. Steel announced $250 million in convertible preferred (shares) when they start talking to the Steelworkers. These are hints about the viability of these companies.''þþMasters agreed with Roling in that a new working relationship is only a good first step.þþ``The union can be a facilitator in the needed consolidation of the industry,'' he said. ``They can't stymie the basic economic forces that are at play. Foreign competition is intense and the industry as a whole needs to be more responsive and reactive. This is a good start.''þþ
Source: NY Times
