Steel's New Deal

In the six weeks between St. Valentine's Day and All Fools' Day, negotiators from the eleven biggest U.S. steel companies and the Steelworkers Union hammered out what appears to be their most moderate labor agreement of the postwar era. The two-year contract agreed upon at Pittsburgh last week will raise labor costs per steelworker by a dime an hour during its first year--all of it in fringes rather than wages. But at the end of the first year, the Steelworkers will be free to reopen negotiations and drive once again for higher pay and benefits.

The new contract meets Steelworkers President David J. McDonald's avowed objective of spreading the work and stimulating earlier retirements. It includes longer vacations, and plumper pensions and layoff benefits. An electronic computer figured that this complex deal adds up to roughly a 2 1/2% increase over present labor costs--which is approximately the steel industry's annual productivity gain.

The Nutcracker. McDonald could scarcely have got more, with one in three of his Steelworkers laid off or working only part time and the rest in no temper to repeat the 116-day strike of 1959-60.

Steel management wanted to give only 6-c- an hour instead of 10-c-, but would not take a strike for it. Customers have been warning that a stoppage would only accelerate their drift to competitive materials such as plastics, aluminum, concrete, glass and wood. These were important pressures for settlement on both sides, but even heavier pressure came from the Kennedy Administration, whose powers over tax, labor and antitrust laws make quite a nutcracker. Sighed one union official: "Let's face it--we're going to be living with the Kennedys for a helluva long time." This, according to one insider, is what the Administration did: One day last December, Labor Secretary Arthur Goldberg had as his private lunch guest U.S. Steel Executive Vice President R. Conrad Cooper, who is the steel companies' chief bargainer and was Goldberg's adversary in the 1959-60 steel negotiations. Goldberg impressed upon "Coop" that John Kennedy wanted early bargaining and a quick settlement so as to avoid a surge and subsequent slump in steel buying. Soon after, at the A.F.L.-C.I.O. Convention in Miami's Americana Hotel. Goldberg told the same to Dave McDonald. Though the Administration firmly denies that it dictated terms, it did declare publicly that any increase should approximate the 2% to 3% annual increase in productivity.

Goldberg then opened a telephone barrage to steel leaders across the U.S. After a two-hour discussion in the White House between Kennedy, Goldberg, McDonald and U.S. Steel Chairman Roger Blough, the formal negotiations began--only to break down abruptly, with both sides far apart (TIME, March 9). Several days later, Blough and then McDonald were summoned to Goldberg's office. The President also talked with each of them on the telephone. Just what carrots and sticks were held out, the Administration does not say--but the negotiators promptly got together again and settled down to resolving their differences.

What Lies Ahead. Washington hailed the agreement as noninflationary, and passed word that it might well usher in a new era in labor relations. That is just what many businessmen--and union chiefs--are afraid of. Arthur Goldberg is not a man to let the headlines go by, and the steel negotiators are miffed because he hogged the limelight and made it appear as if the Kennedy Administration alone was responsible for bringing statesmanship to steel. Growled the American Metal Market: "Free collective bargaining, which has been on the way out the window, may have gone all the way." At the Pittsburgh press conference where the tentative agreement was announced, both Cooper and McDonald glowered sullenly until a photographer prodded them into brief, mechanical grins with the comment: "Since this is supposed to be a happy occasion, it might not be a bad idea to smile."

Whatever its long-term impact on collective bargaining patterns, last week's settlement means that the U.S. economy will be spared the distorting effects of a strike in its basic industry, which in 1960 did much to trigger the recession. Some downturn is expected in second-quarter steel production--perhaps as much as 10%--as steel buyers work off the 3,000,000 to 4,000,000 tons of extra inventory that they have piled up in recent weeks as a strike hedge. But inventories are not likely to be cut to the bone so long as the prospect of a wage reopener lies ahead, and most experts predict that steel production for the year will rise about 10%, to roughly 110 million tons.

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