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Its 5-percent trimming of salaries, from CEO on down, is part of a broader cost reduction program.
Stephen Taub and Roy Harris, CFO.com | US
December 4, 2008
In the search for creative ways to cut labor costs, flat-rolled steelmaker AK Steel announced a salaried employee cost reduction program that will install a 5-percent pay reduction for salaried workers effective Jan. 1.
The company cited the unanticipated and major downturn in the economy, which has resulted in sharply lower demand for some of the company's products.
It said that the pay reduction will affect all salaried employees, including the company's CEO and all executive officers.
AK Steel said that it plans to implement other salaried workforce cost reductions, including freezing the defined-benefit plan for salaried employees and replacing it with a defined contribution retirement benefit, and offering temporary incentives for voluntary retirements. The temporary retirement incentive program will end on Feb. 6, 2009.
The company also said that it could not rule out the need for involuntary salaried job reductions if the pay reduction and voluntary retirements do not produce adequate cost savings.
AK Steel currently employs about 1,500 salaried employees. The company said that about 350 salaried employees are currently eligible for a company-provided retirement benefit.
Overall, it employs about 6,500 in Middletown, Mansfield, Coshocton and Zanesville, Ohio; Butler, Pennsylvania; Ashland, Kentucky; Rockport, Indiana; and its corporate headquarters in West Chester, Ohio, the company says on its website. Its rolled products included carbon, stainless, and electrical steels, primarily for automotive, appliance, construction, and electrical power generation and distribution markets.
"Unfortunately, this extraordinary global economic downturn requires significant and rapid measures to reduce our costs in light of sharply lower order levels from our customers," said James L. Wainscott, chairman, president, and CEO.
The movement to find ways to reduce layoffs by cutting pay across-the-board is also growing.
In a sign of employee support for some type of pay concessions, Teamsters Union leaders voted Wednesday for union workers at trucking company YRC Worldwide Inc. to take an immediate 10 percent pay cut, according to the Associated Press. And 15 to 20 senior administrators at Stanford University agreed to take a pay cut, according to the website of the Bay Area’s NBC television station.
In the most publicized case, the United Auto Workers Wednesday said it would agree to a number of concessions or give-backs — depending upon one's definition — such as suspending the very controversial job bank. The bank entitles laid-off workers at car companies to receive up to 95 percent of their wages and benefits.
The UAW, which signed many of its labor agreements when there was virtually no competition with Detroit for U.S. car sales, also agreed to defer payments to a new health care trust fund and consider modifying other parts of its 2007 labor agreement, according to the Detroit News.
In another bid to cut costs — this time in the retiree arena — Little Rock-based Windstream Corp. petitioned a federal judge to affirm its authority to reduce retiree benefits even when the people affected retired from other phone companies that Windstream acquired over the years, according to the Associated Press.
The retirees countered argue that Windstream and the companies it acquired — Lincoln, Neb.-based Aliant Communications and its predecessor Lincoln Telephone Company — had promised to maintain retirement benefits unchanged. A U.S. District judge in Lincoln will hear arguments in the case on Dec. 15.