OHIO AK Steel considers cuts to become competitive

High raw material and energy costs force the steelmaker to look at cuts.
MIDDLETOWN, Ohio (AP) -- AK Steel Corp. could lay off more workers as it tries to reduce labor costs to become more competitive, a company spokesman said Wednesday.
Management is closely monitoring operating expenses at all plants and won't say where layoffs might occur beyond the 15 jobs that were cut last week at the Middletown Works, company spokesman Alan McCoy said.
"There's not a predetermined schedule, but it is an issue that is very prominent with us. We are continually looking at our staffing everywhere and would not limit it to Middletown," McCoy said.
The Middletown layoffs trimmed the mill's hourly work force to about 2,940. The 15 workers each had less than two years of company service, meaning they were not contractually entitled to job security protection. About 250 of the Middletown mill's remaining workers are also in that category and potentially could be laid off, McCoy said.
With raw materials and energy prices running high because of increased demand and contracts locking in the prices the company charges most customers, AK Steel's alternative is to reduce labor costs if it is to become more competitive with Richfield-based International Steel Group and U.S. Steel Corp. in Pittsburgh, McCoy said.
"That's where you have to look. You can't change the raw material costs," said Charles Bradford, an analyst with Bradford Research/Soleil Securities in New York. "The only place you can look, really, is number of bodies."
James Wainscott, AK Steel's chief executive, says the company has a $30-per-ton price disadvantage with competitors because of retiree pension and health care expenses and employee wages and benefits.
Last week, AK Steel -- which recently ended a two-year streak of multimillion-dollar losses -- reported a second-quarter profit of $92.7 million. That included an operating profit per ton of $36. But competitors have reported fatter profits, plus operating profits per ton that approach $150, McCoy said.
AK Steel says it wants to maintain its commitment to retiree pensions and benefits.
Contract
The company has asked its unions to enter into discussions about how to make AK Steel more competitive. In April, the company said it had reached agreement with the United Auto Workers union on a new three-year contract covering 460 hourly employees at its stainless steel finishing plant in Coshocton.
AK Steel declined to release specific details of that contract, but said it limits the workers' benefits to terms more comparable to those of contracts offered by competitors.
The Middletown-based company also has operations in Pennsylvania, Kentucky and Indiana.