The Midnight Cliffhanger in Steel

AFTER more than two months of desultory negotiations, the strike deadline for the troubled steel industry passed last week without a settlement--and without a strike. In a surprise last-minute decision, management and labor agreed to stretch the bargaining for 24 hours past Saturday midnight, the time set for a walkout. United Steel Workers President I.W. Abel, chief labor negotiator in the contract talks involving 350,000 workers, announced the extension and then headed back for another night of talks with R. Heath Larry, who heads the management team for nine big steelmakers. And the nation continued to face the prospect of either a shutdown in steel or another inflationary settlement.

"I'll Belt You." Until close to the deadline, the negotiators had stayed in a sunny mood. In Washington bars, sports-shirted union men downed their boilermakers and joked with management representatives. With outsiders, though, they were quiet and cautious. "This is one time when steel negotiations are not going to be decided by the media," said U.S. Steel Chairman Edwin Gott. Even the location of the meetings (in the Shoreham North Hotel) was a carefully kept secret. Abel was registered in a large Shoreham North suite, his refrigerator stocked with tonic water, Danish pastries and sardines.

While the top negotiators sought accord on a national contract, lower-level company men and local union chiefs met amid relative harmony in as many as 26 hotel rooms to resolve, about 15,000 local issues. Discussions involved items as diverse as the quality of toilet paper in plant lavatories, layoff procedures and safety precautions. At U.S. Steel's Gary plant, for example, workers wanted the water for their showers pumped from city reservoirs instead of from Lake Michigan. "Christ," said one delegate, "now you smell worse after taking a shower than you did before."

As the final week wore on, the tension began to show. Negotiators took on a rumpled look and tempers flared. Union men became impatient with the slow progress of the talks. One of them told a company man at a meeting: "You are a lying bastard, and if you deny it, I'll belt you one."

Dangerous Game. Not until midweek did the bargainers get down to prime issues. Abel presented his demands. One steel executive described them as "somewhere between Venus and Mars." The next day, Larry finally made management's first firm offer. It was promptly rejected. In his debut as management's chief negotiator, Larry irritated union men by his unyielding stand. "Brinkmanship can be a dangerous game," warned union Vice President Joseph Molony.

By week's end management had granted a cost of living clause without a ceiling and moved closer to meeting the union's demands for a 31% increase in wages and benefits over three years. The bargainers also worked out an agreement to speed up the grievance procedures for workers. Many union chiefs felt that local plant grievances had been handled too slowly, and they were pressing for elimination of the no-strike ban in the contract. This would mean that workers could strike individual plants at any time over local complaints. As time ran out, money remained a big sticking point, along with the language of the contract and incentive pay.

Income Down. Both labor and management had persuasive arguments. Abel vowed that he would not settle for less than the 10%-a-year wage-and-benefit boost and unlimited cost of living clause that his union wrenched from the can and aluminum industries earlier this year. Indeed, the union's money demands did not seem unreasonable at a time when wage raises are gobbled up by inflation. From 1965 to 1970, according to the Bureau of Labor Statistics, a basic steel worker's average weekly earnings climbed from $141 to $166, but because of rising taxes and prices, his real spendable income dropped from $132 to $122.

For its part, management could justifiably argue that it was too weak to match the settlements reached in other industries. In the past five years, steelmakers have lavished $11 billion on new plants and equipment. But this increased capacity cannot be used to economic advantage because competition from abroad and from plastics, aluminum and other materials have shrunk steel's markets. Rising costs of labor and materials, especially nickel and coal, have also been draining steel's earnings. Between 1965 and 1970, the entire industry's after-tax profits plummeted from more than $1 billion a year to $513 million.

Banking and Firing. Even as negotiations proceeded, U.S. Steel, Bethlehem, Armco, Inland and other steelmakers began shutting down their mills. Some firms have been laying off workers (more than 20,000 by last week) since early July because of the disappointingly early decline in orders from customers stockpiling as a hedge against a strike. Steelmen had expected to ship 65 million tons in the first seven months of this year, but the total hit only 61 million tons. Demand was depressed by lagging capital spending and a heavy flow of imports--about 10 million tons so far this year. The surge of foreign-car sales pared orders from Detroit.

A steel strike lasting less than two months would be unlikely to have much effect on the economy. Big steel users --General Motors, Ford, International Harvester, Caterpillar Tractor and others --have stockpiled at least an extra 60 days' supply. European and Japanese steelmakers could supply more, though slow delivery would be a problem. In addition, non-union mills and those with later contract-expiration dates will go on turning out about 25% of the industry's normal production. But a long strike could be devastating. Declines in production of autos, appliances and the thousands of other steel items would quickly brake the economy and endanger the already slow recovery.

As for the industry itself, the short-term outlook is bleak. Though hedge buying fattened the first-half earnings of most companies, steelmen are preparing for a lean period ahead. A strike lasting more than two weeks would cause most of their companies to show a loss in this year's third quarter. Industry profits could scrape their lowest levels since 1959, when the last big strike occurred. Even if there is a settlement, steel users will live off their stockpiles for quite a while, and many workers already laid off will remain out because some plants will not immediately reopen. One bright hope: the fact that stockpiling fell short of expectations could mean that demand will pick up late in the year.

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