Arcelor closures in Wallonia examined

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In late April 2003, the management of the Arcelor steel group and trade unions at Cockerill Sambre, its subsidiary in Wallonia, Belgium, reached agreement on the gradual closure of the company's blast furnaces in Liège. This feature examines the changing objectives and strategies of management, the unions and the Walloon regional government during the affair, and outlines Arcelor's latest investment project in Wallonia along with a number of unresolved problems.

Arcelor, the world's largest steel producer, was created in early 2002 by the merger of Arbed (Luxembourg), Usinor (France) and Aceralia (Spain) (LU0201191F). When the merger was announced in February 2001, management had stated that an objective of the new group was to achieve an optimum distribution of flat carbon steel production among its better-performing 'upstream' hot-phase (the transformation of ore into cast iron and then into steel, and hot rolling) sites - which meant favouring the group's coastal sites (Sidmar, Dunkirk, Fos and Avilès) over its inland sites (Liège, Florange, Brême and Eko Stahl). Subsequently on 24 January 2003, the Arcelor board of directors decided to stop investing in hot-phase equipment at inland sites, thus leading to their full or partial closure between 2005 and 2010, given their higher costs and low or negative profitability in comparison with the coastal sites. This was in the light of a profitability objective of 10%-15%, and the existence of unprofitable and superfluous production capacity, not to mention a requirement to reduce debt.

The inland sites affected included two furnaces belonging to the Arcelor subsidiary Cockerill Sambre in Liège, eastern Wallonia (BE0302301N). It was planned that Liège's two blast furnaces - which employ about 1,700 workers out of a total Cockerill Sambre workforce of 5,800 - would be closed down over 2005-6. This decision caused a major political and industrial relations furore, with criticism and threats of legal action from the Walloon regional government (which holds a 4.25% stake in Arcelor) and protests from trade unions, which formed a common front to oppose the closures.

Company position

Arcelor management persisted with the planned closure date of 2005-6 for the Liège furnaces up until early April 2003. Several factors then made it decide to enter into negotiations with the joint trade union front regarding the date of closure. On the one hand, it appears that the level of resistance had been underestimated, not only from the Cockerill Sambre Liège workforce, but also from other parties affected by the closure - such as subcontractors, traders and local authorities - which culminated in a major demonstration on 12 March 2003. On the other hand, the Walloon public authorities opposed the closure and supported the unions, threatening both to: take legal action in both the Lausanne arbitration tribunal and the Liège Commercial Court for the non-observance of undertakings and discriminatory measures towards Cockerill Sambre Liège; and use the Déminor company (specialists in shareholder disputes involving defence of minority interests) to question Arcelor at its shareholders' general meeting on 25 April.

In this context, on 24 April 2003, Arcelor and the unions reached an agreement providing for the closure of one blast furnace in Liège on 1 July 2005 and of the hot phase 'at the earliest on 1 January 2009, and at the latest on 31 December' of the same year (BE0305301N). A study will then be carried out on the plant’s technical reliability. The outcome of this study will determine whether the second Liège blast furnace can continue to operate until 31 December 2009. An accompanying social plan should avoid any compulsory redundancies . The workforce will be reduced through early retirement arrangements.

It thus appears that, in view of the risk of seeing its name tarnished by long industrial disputes, court cases, and possibly difficult questions from Déminor regarding the value of Arcelor shares and its debt levels, the group's management has gradually spread the Liège closure over time, although the closure is still regarded as unavoidable. In so doing, the group has avoided any compulsory redundancies and shown that it wants to participate in regional industrial reconversion efforts to offset the lost jobs.

Trade union strategy

The joint trade union front for a long time defended integrated steelmaking, and thus employment, in Liège. However, faced with initial determination and then a somewhat softening attitude on the part of management, the unions adapted their objectives by accepting the closure, though not before a certain date - initially 2015 and later 2010 - so as to enable a start to the reconversion of the site, and also to avoid any damaging rupture in relations (in particular in the light of the future of cold steelmaking and research in Liège). The developing union strategy had three main elements:

• the gradual mobilisation of workers, with information, meetings, demonstrations and contacts with other threatened sites;

• the 'channelling' of this mobilisation, with only two days of strikes and the limitation of incidents at demonstrations held in Luxembourg; and

• concertation with the Walloon public authorities over the defence of common interests, along with the support of the population and local public authorities.

This strategy, regarded by observers as firm but reasonable, enabled long and difficult negotiations to start which ultimately led to a deal which partially met the unions' demands - although they were not entirely satisfied with the agreement on the timetable to close the hot phase in Liège, they did succeed in changing the initial position of management. However, European trade union action against the Arcelor closures apparently left something to be desired: a demonstration organised in Luxembourg by the European Metalworkers' Federation (EMF) on 25 April essentially involved Belgian and French unions, fewer German and Spanish participants, and none at all from Luxembourg.

Walloon government approach

For its part, the Walloon government - under the impetus of Jean-Claude Van Cauwenberghe, the region's Minister-President, and Serge Kubla, the Minister of the Economy - wanted to keep a balance between two interests:

• resolute opposition to Arcelor's plans, through cooperation with the joint trade union front, attempts to get Arcelor to observe its commitments, and the defence of its interests as a minority shareholder; and

• a desire to avoid any rupture in relations with Arcelor, with a view to the maintenance of the group’s steelmaking operations in Wallonia.

To this end, the Walloon government endeavoured to maintain relations between the joint trade front and Arcelor. These efforts paid off, as in addition to the agreement reached on 24 April, Arcelor later confirmed its Carinox project in Charleroi, Wallonia.

New project and unresolved problems

On 15 May, the Arcelor board of directors asked its management to prepare the implementation of the Carinox project, which involves the construction of a new electrical, continuous-casting steelworks 'upstream' from the wide-sheet mill in Carlam. It represents an investment of EUR 230 million, creating 400 jobs, and the plant's production of 1 million tonnes of stainless steel should start in the second half of 2005, reaching its maximum capacity in 2007.

This positive news (which nevertheless involves redundancies at the French sites at L’Ardoise and Isbergues) should not, however, mask a number of unresolved problems. First, the talks on the social aspects of the closure of the hot phase in Liège, which relate to early retirement, pay guarantees and redeployment, have not been completed. Second, the economic reconversion to offset the lost jobs resulting from the Liège hot phase closure remains a disputed subject: management estimates some 2,500 job losses at Cockerill Sambre and its subcontractors; while the unions add to the figure more than 5,000 indirect job losses among suppliers and local traders.

Moreover, Arcelor has started two studies, one on the rationalisation of research and development, which does not affect the Liège research centres, and the other concerning the cold-phase units in Liège that Arcelor has promised to reinforce. Under threat could be the Ferblatil site in Tilleur, Wallonia because of the rationalisation of Arcelor's sheet iron division (Usinor Packaging). Finally, while the future of Carlam is assured in Charleroi, the fate of Fafer Industeel (1,000 workers) should be decided at the end of June 2003, along with Décaperie (170 workers) downstream from Carlam, which is waiting to be modified to process stainless steel. Finally, the repair of a blast furnace at Carsid (in which Arcelor holds 40% of the capital) has still not been decided on.

Commentary

The joint trade union front of steelworkers in Liège and Charleroi has reason to remain vigilant regarding the future options resulting from Arcelor's strategy in Wallonia. (Michel Capron, FOPES, UCL)