Donbas in Talks with Huta Częstochowa

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The 13 of May marked the deadline for completing the negotiations between Mittal Steel group and the trade unions of Częstochowa Steelworks (Huta Częstochowa) mill. Mittal Steel is the biggest enterprise in steel industry in Poland. Its estimated stake in the market is 70 %. As for Częstochowa Steelworks, this is the only important producer of naval steel in Poland. It is also the biggest employer in the region, and up to its teeth in debts. For this reason mainly, the State Treasury Ministry (Ministerstwo Skarbu Państwa, MSP) has put up the steelworks for sale.

Two companies went for the bid: one was Mittal Steel Poland S.A.-, the other was the Ukrainian Industrial Enterprise Donbas. The Silesia Financial Company (Towarzystwo Finansowe Silesia, TF Silesia), the company created by the government, which is formally responsible for carrying out the bid, decided to grant priority to Mittal, due to the higher price it offered for the Częstochowa Steelworks shares. The only thing missing to finalise the operation was the consent of trade unions. That consent was an unofficial, but crucial, condition made by the State Treasury. During three months of negotiations Mittal did not manage to persuade the unions or the staff of Częstochowa Steelworks to accept it as an investor. Its image got tarnished by information that Mittal had failed to deliver its privatisation obligations in previously acquired Polish Steelworks steel mill. The last day of talks was very hectic. Several hundreds of workers protested as a sign of hostility against the potential investor. As a result five trade union organisations within Częstochowa Steelworks said no to Mittal, the other unions, which conceded, were called traitors by the protesters.

The events described above were accompanied by a publicity campaign of Donbas. The Ukrainian enterprise’s representatives emphasised that although they offered less money for the corporate share (its offer was some 10 % lower than Mittal’s), its bid was still stronger, because it implied better social package and higher investments. It is likely that this publicity greatly helped the unions to refuse Mittal.

In any way, a few days after the Mittal negotiations failed, The TF Silesia gave Donbas four weeks to negotiate an agreement with the unions and meet the other terms of the bid. On he very next day a meeting was held in Częstochowa by representatives of Donbas and trade unions. The talks brought many interesting resolutions.

First one was that the workers would obtain pay raise higher than that offered by Mittal. All employees of the mill and its subsidiaries would be entitled to seven years’ guarantees of employment. Women older than 50 years of age and men older than 55, who are employed by the mill, would obtain longer, ten years’ employment guarantees, so they can be sure not to lose their jobs before retirement. Similar guarantees were offered by Mittal. An important advantage of Donbas’ bid was a 40 % higher offer of privatisation bonus.

The trade unions seem satisfied. However, both sides are anxious about the short deadline set by TF Silesia. The statements issued by the head of the Trade Unions of the Perpetual Movement Workers (Związek Zawodowy Pracowników Ruchu Ciągłego, ZZPRC), published in one of the papers, point that the terms presented to Donbas indicate the party responsible for the process procedure would rather go back to the talks with Mittal. 'We shall not allow this, we shall protest', he says further, quoted by the same paper. For this reason Donbas wants to have 'an objective witness supported by government authority' to assist in the negotiations aside the TF Silesia and the managing board of the Częstochowa Steelworks mill.

The newest point in the Donbas offer comes as a confirmation of the bidder’s determination. The Ukrainians have offered one million zlotys more than Mittal. Therefore it should be expected that it will be Donbas who wins the bid and becomes the new owner of Częstochowa Steelworks. Mittal for its part will be interested in buying the mill to the last minute. In the meantime it demanded explanations from the government as regards the terms of the bid and the present position of Donbas as well as the price it has lately offered for the acquisition.

Commentary

The privatisation of Częstochowa Steelworks shows that, contrarily to what has been commonly believed, the are still large areas of economy, in which trade unions have a great say. If Donbas meets all the requirements, the union leaders are likely to become local heroes, as the ones who managed to negotiate the best possible terms for the staff in the entire history of Poland’s steelworks and ironworks’ privatisation. (Rafał Towalski, Institute of Public Affairs (Instytut Spraw Publicznych, ISP) and Warsaw School of Economics (Szkoła Główna Handlowa, SGH))

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