July 29, 2010 - No. 142

U.S. Steel

Law of the Jungle

U.S. Steel
• Law of the Jungle
• Negotiations at Hamilton Works: What's Going On? - Letter to Members and Retirees, USW Local 1005
• U.S. Steel's Second Quarter Report -- Details and Comments - K.C. Adams

Film Review
• Murder on the Orient Express -- Promotion of Revenge-Seeking to Disinform

U.S. Steel

Law of the Jungle

U.S. Steel says the downturn in the business cycle forced it to break its contract with the government of Canada on employment and production levels. It also says the crisis forced it to break its sworn word that it would protect and not harm pensions of Canadian steelworkers. What kind of gangster logic is this? If business contracts and collective agreements and the word of people in authority are to be dependent on the business cycle always going up and never going down, then not a single business contract under commercial law would be valid and worthy of the paper is was printed on. Commercial law itself would be meaningless as every agreement would be declared invalid as it could be broken as soon as the business cycle begins its inevitable dip.

No one could ever again believe the word and signature of business people in authority. It would be the law of the Chicago jungle with gangsters in control through guns and intimidation and the rule of crooked politicians. Clearly, this is the world that global monopolies such as U.S. Steel and Vale Inco want to bring into Canada. Canadians don't like or want it!

A modern society cannot permit gangsters and liars to break business contracts or renege on their word on the basis of invoking their own egocentric "law of the downturn." Their "law of the downturn" in the business cycle cannot be permitted to override contracts with the federal government, the sworn public law and established Canadian norms, standard of living and workers' collective agreements negotiated over decades during which time the workers did their duty toward society by producing its social wealth.

This is unacceptable behaviour. Canadians have not built this country to be torn apart by global monopolies that bring their gangster logic into Canada, or that of their apologists who declare that workers have to accept their dictate because today "economies have no borders." Such criminal disregard for Canadian law cannot be permitted. It is time that governments at all levels settle scores with this gangster logic before its infects the entire body politic with its diseased way of doing business and its corrupt and dishonest morality. Workers are doing their part through active resistance. Where are the Canadian governments and politicians that are supposed to defend the well-being and security of Canadians by enforcing public right?

Negotiations at Hamilton Works

What's Going On?

- Letter to Members and Retirees, USW Local 1005 -

U.S. Steel has asked its Canadian workers to give up a defined benefit pension plan for new hires and give up indexing on the current plan. It says times have changed and it requires relief in the form of concessions on benefits and pensions that have been part of Hamilton workers' culture for over fifty years. What's this all about?

When U.S. Steel bought Stelco on October 31, 2007, it was fully aware of its obligations toward the over 8000 pensioners and the pension fund. It signed a contract with the federal government guaranteeing employment and production levels and declared in press releases that its takeover would be no problem for Canadians and even a "net benefit," swearing up and down that Hamilton workers and community businesses were safe with them. Fully aware that the business climate is sometimes fair and sometimes foul it did its due diligence by looking into the viability of the Stelco plants and made public and contractual commitments to the people of Canada that its seizure would not harm us and our communities.

Since U.S. Steel purchased Stelco, nothing has changed as far as its present obligations to the pension plan, its contract with the government on production and employment levels or the business cycle that went down and is now trending upwards. But today, U.S. Steel is singing a different tune. Why is this? Why should Hamilton Steelworkers give up their defined benefit pension plan and indexing just because it suits U.S. Steel to sing another tune?

We are reproducing below a letter published by a representative of U.S. Steel in the Hamilton Spectator on October 5, 2007 which shows that it is not us who are not in tune with the times. It is U.S. Steel. Our commitment to our pensioners and new hires is not a PR job and is not for sale.

We would like to clear up any confusion and relieve any concerns Stelco's employees and pensioners may have about the security of their pensions on the closing of our transaction to buy Stelco. U.S. Steel has agreed to significantly improve the security of the Stelco pension plans. We did so in two ways. First, we agreed to unconditionally guarantee pension funding obligations at the corporate (as opposed to Canadian subsidiary) level. Thus, instead of having to rely solely upon Stelco's ability as a stand-alone enterprise to generate the cash necessary to meet pension funding obligations, Stelco's employees and pensioners can now look to the strength of our entire company to do so. Second, we agreed to make an extraordinary payment of $32.5 million into the plans up front at closing. This is in addition to the pension payment schedule agreed upon by the Ontario pension regulator and Stelco.

In order to make our purchase offer, we asked that two provisions of the Stelco pension agreement be changed: The dividend restriction and free cash sweep.

These provisions made sense for Stelco as a stand-alone enterprise, but do not make sense if Stelco is part of an integrated company with a large and diverse shareholder base.

Moreover, given Stelco's limited financial means as a stand-alone company, it was clear neither of these provisions would likely result in any meaningful contributions to the Stelco pension plans. By agreeing to amend these two provisions, the province of Ontario was able to require significant improvements to the security of the plans for Stelco's employees and pensioners.

Of course, all laws that presently apply to Stelco will continue to apply, as will all other provisions of the Stelco pension agreement, including those provisions requiring pension contributions to fully fund Stelco's pension plans by 2015.

We want Stelco's employees and retirees to know that we understand the fundamental importance of sound pension funding. We have a large defined benefit pension plan for decades. We take our obligations very seriously and are proud of the fact that today that plan is fully funded. In fact, over the last four years, we have made over $700 million in voluntary contributions to that plan. We will honour our commitment to the Stelco pension plans. That is our history and track record.

We look forward to closing the transaction, and to Stelco's employees becoming part of U.S. Steel.

U.S. Steel's Second Quarter Report --
Details and Comments

- K.C. Adams -

U.S. Steel's report is a minefield of capital-centred dogma. Everything is carefully construed not to enlighten readers of the political economy of the steel industry but to obfuscate and disinform. Walking through it requires the utmost caution.

First, revenue is confused with gross income from sales and other business activity. By doing so, U.S. Steel conceals the actual revenue, which approximates the realized added-value. Realized added-value is the amount of social product produced by steelworkers that has been sold. Revenue is realized added-value plus revenue from other sources such as the sale of real estate and borrowings; although borrowings (loans) are not included as revenue but within "cash flow." Likewise, when borrowings (the principal of loans) are repaid it is not accounted as a claim on revenue but as a reduction of cash in hand. (This amounts to something similar except that the revenue is from previous quarters and the accounts should reveal this fact.) This practice conceals interest and borrowing fees as a claim on revenue and turns them into a phoney cost of production paid by a mythical U.S. Steel rather than another capitalist force with the unequal relations of production sucking dry the added-value produced by steelworkers.

By confusing revenue with gross income, U.S. Steel is then able to misstate those social forces that claim the revenue. The major social force is the U.S. Steel working class, which instead of exercising its legitimate first claim on the revenue it produced is ridiculed as a cost of production.

Gross income for the 2nd qt. appears as "net sales" of $4.681 billion. This is followed immediately with "operating expenses" of $4.184 billion and additional other expenditures such as depreciation making "total operating expenses" of $4.483 billion. This leaves $198 million for what is called "income from operations." But that is not the end of the "costs." Next comes "net interest and other financial costs" of $150 million, an "income tax provision" of $72 million and another $1 million cost from "noncontrolling interests." This parade of "costs" on "net sales" leaves the global empire with an apparent 2nd quarter enterprise "loss" of $25 million.

For this to pass as an economic report of a major enterprise operating across many borders is a crime against enlightenment and against steelworkers in Canada, Mexico, the United States, Serbia and Slovakia.

Within this report the legitimate claims of the working class on the steel it produces does not even merit a category.

Except the claim of U.S. Steel owners of enterprise through ownership of shares, all claims on newly added-value, which is steel that has been sold and turned into revenue, are considered a cost to this mythical beast called U.S. Steel. In fact, U.S. Steel is an unequal social relation made up of contending class forces, mainly the working class and owners of capital. Within this social relation called U.S. Steel are other contradictions as well such as those among different categories of owners of capital (owners of debt and land and executive managers) and with governments.

At any rate, let us try to glean who made claims on the realized added-value (revenue) produced by steelworkers of many countries. None of these claims is a cost of production. All of these claims are paid from revenue that steelworkers have produced during the quarter or saved from previous quarters.

Claim by workers is not reported but rather included in an amorphous hodgepodge of claims and costs of production called "operating expenses."

Claim by owners of debt on revenue = $54 million. This is in the form of interest and fees. This claim also should include repayment of principal of borrowings but this aspect is accounted for under statement of cash flows for first six months (two quarters) as, "Repayment of borrowings under revolving credit facilities ($270 million) and Repayment of long-term debt ($103 million)."

Claim of $96 million by currency traders on intercompany loan of $1.4 billion from U.S. Steel headquarters to a European subsidiary. The loan was made just prior to a dramatic fall in the exchange value of the Euro. Currency traders that bought US dollars from U.S. Steel in exchange for Euros, within months made a net gain of $96 million to the detriment of U.S. Steel's accounts. Another $22 million is listed as being claimed by currency traders over six months due to the "Effect of exchange rate changes on cash." This amount appears to be separate from the intercompany loan but it is not clear.

Claim by governments on revenue = $72 million. The governments making the claim are not identified, which is common practice of global monopolies that operate "without borders." This tax claim does not include individual taxes paid by workers of U.S. Steel such as income tax, sales taxes and government fees. These individual taxes could and should be estimated as a claim on U.S. Steel realized added-value (revenue) because that is from where it originates. A refusal to identify clearly the origin of value and its transformation into a money equivalent perpetuates the fiction that workers are a cost of production and not the producers of wealth, producers who give rise to value as they transform the bounty of Mother Earth with their work time.

Claim by executive managers for the quarter is not itemized even though this claim has become increasingly significant in the past decades amounting to millions of dollars per quarter in salaries and bonuses.

Claim by owners of land, usually as rent, is not identified and categorized.

Claim by owners of enterprise (shares) for second quarter was announced at 5 cents per share. The 143,504,000 outstanding shares will receive 5 cents per share claim of enterprise profit for the quarter. This claim of enterprise profit equals $7,175,200 for the quarter. Even though the 2nd qt. report speaks of an enterprise loss of $25 million, the company still paid a claim for enterprise profit of over $7 million. This claim would have to come from cash on hand saved from previous revenue or further borrowing, as there was not enough new revenue to meet all claims. (Note: 98.3 percent of all U.S. Steel shares are owned by institutions.)

Claim by enterprise or means of production for extended reproduction or to save as cash on hand is not itemized. This claim would be for emergencies or to enhance the productivity of the means of production, refurbish them beyond their original level of capacity or performance or buy new equipment. For example at Hamilton Works, a necessity has been recognized for a hot strip mill. To fulfil this necessity, a claim on revenue is required.

Claims on revenue, which are invested into the means of production are not categorized in the U.S. Steel report in any meaningful way. The only mention is within the statement of cash flow under "Cash used in investing activities" (over six months). This includes "Capital expenditures" of $242 million, which would be a claim on revenue, "Disposal of assets" of $80 million, which increases revenue by that amount and a further claim on revenue of $23 million for unidentified "Other investing activities." None of these claims is identified.

Liquidity fell compared to the first quarter. The report says, "As of June 30, 2010, U. S. Steel had $947 million of cash and $2.5 billion of total liquidity as compared to $1.4 billion of cash and $2.9 billion of total liquidity at March 31, 2010."

Ownership of long-term debt stands at $3.639 billion. There are also millions in short-term debt and revolving credit.

Ownership of debt compares with ownership of enterprise equity: "United States Steel Corporation stockholders' equity" of $4.449 billion.

Capacity utilization of mills has climbed to above eighty percent. This compares with the disastrous mid-thirty percent range in 2nd quarter 2009 during the depth of the economic crisis, when workers were reeling from layoffs and shutdowns. The increased capacity utilization was reflected in shipments of steel of 5.9 million tons, an increase of 9 percent from first quarter 2010. This steel tonnage was valued in US dollars at "$4.7 billion, an increase of 20 percent from first quarter 2010. This more than doubles the dollar denominated sales from 2nd quarter 2009."

Note the discrepancy between the increase in shipments of steel in tons and the increase in its value in dollars. This discrepancy is a big problem and source of crisis. Steel prices as always are a concern as inter-monopoly conflict over market prices between steel producers and the big consumers such as the auto monopolies and construction industry and with the monopoly producers of raw material seems to be intensifying. Market prices under monopoly capitalism are a continual source of crisis. Every economic report of U.S. Steel reflects the fluctuating variance between shipments in steel tonnage and its valuation in U.S. dollars. For example this report states, "Operating results were substantially higher than the second quarter of 2009 as net sales increased by 120 percent to $4.7 billion and shipments increased 100 percent to 5.9 million tons."

The economic crisis at its worst in 2009 caused not only a slowdown in production and shipments but also an even more dramatic lowering of the dollar value of those shipments.

The fluctuation and variance between shipments calculated in quantity and quality of social product versus money are caused in part by monopoly control of prices of steel and material inputs, and by the fluctuating value of the U,S, dollar both its exchange value against other currencies and its value in relation to the quantity and quality of social product a dollar can buy.

Stelco steelworkers are well aware of this cause of crises from their experience with the "liquidity" crisis in 2003-04 when steel market prices fell dramatically and then rose just before Stelco went into bankruptcy protection. This problem of fluctuating and monopoly manipulated market prices of basic commodities and the contradiction between value and prices under monopoly capitalism, is one that worker must address in their program for a People's Canada.

The report speaks of these problems of low capacity utilization rates and price fluctuations only as things in themselves and not in their relationship as features of a modern economy that need to be taken up and resolved as they are damaging to the socialized economy both generally and within particular sectors and enterprises. The report says, "The raw steel capability utilization rate for the Flat-rolled segment increased from 73 percent to 82 percent as we operated all of our steelmaking facilities throughout the quarter with the exception of Lake Erie Works. Adjusting for Lake Erie Works, which restarted steel production late in the second quarter, Flat-rolled operated at 91 percent of available raw steel capability in the second quarter of 2010. Shipments increased by 14 percent to 4.1 million tons and average realized prices increased by $46 per ton from the first quarter of 2010 to $700 per ton. The higher average realized prices were driven by increases in both spot and index-based contract prices, which more than offset the mix impact of increased semi-finished shipments. Reported spot market prices increased each month this year before moving lower in June."

The report mentions in passing the "Costs associated with lockout of Lake Erie Works steelworkers." The report does not mention the added costs of security or the terrible costs borne by steelworkers. The report says, "Facility repair and maintenance costs [were paid] related to approximately $60 million of repair and maintenance costs at Lake Erie Works, where we performed extensive work on the major operating units in connection with a restart of the facility."

With U.S. Steel now demanding concessions from active and retired members of Local 1005 at Hamilton Works, it is useful to examine the outlook of executive managers with regard to the near future.

In the report CEO Surma is quoted as saying, "Operating results [for third quarter 2010] are expected to be below the second quarter largely due to a decrease in shipping and production volumes for our Flat-rolled segment, reflecting slower order rates, primarily from spot market customers thus far in the quarter, which likely includes some normal seasonal variations and the impact of shorter lead times; however, reported carbon flat-rolled inventory levels on a months-of-supply basis at North American service centers remain below historical averages and end user demand appears stable.

"Third quarter 2010 results for Flat-rolled are expected to be near break-even levels due to lower trade and intersegment shipments and production volumes, and increased costs for raw materials and energy. The favorable effect due to the absence of Lake Erie Works repair and maintenance costs is expected to be offset by increased costs related primarily to planned maintenance work on several blast furnaces and repairs of the transportation system used to deliver raw materials to Gary Works' blast furnaces. [These 'repairs of the transportation system' have been continuously delayed and the local union says that this delay caused a serious accident at Gary Works that injured one worker when a train left the track. Also, Surma does not mention the millions that will be required to repair the coke ovens at Clairton Works near Pittsburgh that exploded recently sending twenty steelworkers to hospital, some with terrible burns. TML Ed.]

"We expect average realized prices for the third quarter to be in line with the second quarter as the benefits of a higher value-added mix of shipments and increased prices for both index-based contracts and recently negotiated contracts offset decreases in spot market prices.

"We expect slightly lower shipments [in Europe] due to reduced order rates from our spot market customers and normal seasonal variations. In response to these lower order rates, we have idled a blast furnace at U. S. Steel Serbia. We also have begun planned maintenance work on a blast furnace at U. S. Steel Kosice (Slovak Republic)." [Note that U.S. Steel has also idled for maintenance one of its four blast furnaces at Gary Works. TML Ed.]

This review of U.S. Steel's report is made without comment on the fact that the global monopoly has seized Canada's largest integrated steel producer thus effectively alienating the vast majority of steelmaking in Canada from Canadians. This is reflected in the report, which provides no production or other details of the two Canadian mills, simply lumping them in with either its global operations or its flat-rolled segment. Also, the Canadian steel order book that U.S. Steel acquired when it seized Stelco has been merged into its North American order book, which any of its mills may fill. U.S. Steel shut down both Canadian mills during the crisis and filled its Canadian order book with steel from its U.S. mills. Workers and their politicians must take up for solution this major problem of a steel industry dominated by global monopolies that do not consider Canada an independent country with its particular demands, needs and social fabric, a country that requires production of basic commodities and other manufacturing and its valuable revenue as vital to sustain the country's infrastructure, social programs and to meet the general interests of society. No country can have a self-reliant economy outside the dictate of the imperialist system of states and its insatiable demand for tribute without an independent steel industry.

(www.ussteel.com)

Film Review

Murder on the Orient Express --
Promotion of Revenge-Seeking to Disinform

More than a gangster was murdered on the Orient Express;
modern principles of justice and the rule of law were sacrificed

As Canadians denounce the lawless fascist police violence during the G20 Summit in Toronto, they should also reflect on the culture presented on TV. Culture in art, literature and the mass media has an enormous effect on the way Canadians view the world and the ideology they use to guide their thinking. A 2010 made-for-TV reprise of the Agatha Christie novel "Murder on the Orient Express" seeks to conciliate and soften opposition to fascism and imperialist war.

The original 1934 novel and 1974 movie with Albert Finney are fairly ordinary versions of liberal conciliation with fascism and with imperialism's return to medieval practices based on privilege and the impunity of the powerful crushing the goal of a rule of law that seeks equal justice for all. This 2010 version with renowned British actor David Suchet is much darker and goes further in replacing justice based on a rule of law with revenge. It depicts torture and execution without trial as justified given the horrific crime and foul nature of the accused murderer. In the final scene, Poirot appears on the verge of a breakdown as he mouths words calling for a rule of law but immediately contradicts himself in deeds. His face darkens as he abandons his principles allowing twelve revenge seekers to escape justice for their orgy of torture and murder. Poirot quickly turns his back on the ugly scene presumably in a hurry to return to the sanctity and comfort of his middle strata position as Britain's greatest detective.

The movie does not characterize the murder on the Orient Express as criminal but rather understandable as revenge-justice for the vicious killing of a little girl. The revenge-murder becomes a metaphor for the U.S. revenge-crimes in retaliation for September 11, 2001 and for the Gestapo police violence in Toronto in retaliation for the actions of certain demonstrators and agents provocateurs.

The similarities of the murder on the Orient Express with state-organized violence and revenge seeking are barely concealed. The crimes are replete with torture, murder and imprisonment without trial. The U.S. undoubtedly has gone further because it is a state with unlimited power to disappear people, wage predatory wars and dismiss with contempt international norms and the rule of law. To this can be added the state-organized lawless actions of the Toronto police in their actions to smash the people's right to conscience and dissent during the G20 Summit.

Liberal conciliators with fascism in the 1930s played a particularly dirty role in Germany, the rest of Europe and the United States paving the way for the wanton crimes of the Nazi Regime in complete disregard for established norms and laws of the day regarding predatory war, torture and the violation of the rights of all. Similar to Suchet's Poirot and many today in the U.S., Canada and Europe, principles expressed in words disappear as they face incessant propaganda and pressure for war and revenge. Principles, the rule of law and international norms are seen as interfering in the ability of the state to deal with "Muslim fanatics," terrorists and "black bloc tactics." Pressure grows to be pragmatic and accept the exigencies of the times in the face of an enemy that has no principles and is medieval in character, especially its misogyny, similar in many ways to Agatha Christie's U.S. gangster who has no scruples.

The contemporary movie cannot resist indulging in gratuitous anti-Muslim hysteria. The movie opens with crude mob violence in Istanbul against a woman accused of adultery. An onlooker, who later turns out to be one of the brutal executioners on the Orient Express, indignantly expresses to Poirot her outrage at the ugly scene, confirming her status as a good soul compared to the barbarians of West Asia. How convenient to present the necessity for modern definitions of justice in a way that justifies the smashing of principles and softens opposition to the Canadian state's participation in the U.S.-led war against Afghanistan. The lamentations of the twelve executioners aboard the Orient Express justifying their participation in cold-blooded murder sound similar to Canadian politicians and military leaders explaining the need to kill Taliban "scumbags" or unleash war on a disobedient Iran or Democratic People's Republic of Korea.

Also notable is the one-nation politics of the Orient Express gang of revenge seekers. Every social class and many nationalities are united in this savage affair. It is one nation united to defend the honour of the United States and little girls, all united in pragmatic policies rooted in revenge and the gratification that comes with success through power. Principles and the rule of law are for the weak and cold-hearted, the revenge-seekers declare, for did not the trial fail to bring justice. Instead of fighting for democratic renewal and modern definitions of justice for all and rooting out all remnants of medievalism, the revenge-seekers yearn for a return to medieval justice where the powerful act swiftly with impunity and do not waste time or tears on the rights of the accused.

The gang of twelve are good souls who all feel terrible and shed countless tears for the suffering of defenceless victims of criminals and would surely do the same for the victims of terrorists and black-clad hooligans, and demand state-organized action to wipe out the accused perpetrators with a firm hand. One-nation politics accuses principled people upholding the rights of all as standing by and doing nothing as terrorists attack our way of life and black-clad hooligans smash windows and burn police cars in downtown Toronto. One-nation politics refuses to accept the weakness and boundaries of a rule of law and apparent frailty of a society that dignifies and upholds the rights of all and their conscience, rights and conscience that more and more seem to be coming into direct conflict with monopoly right and the interests of the natural and hereditary aristocracy. One-nation politics declares itself opposed to mob violence and empowerment of the people and does what is necessary to suppress it. When principles and the rule of law come into conflict with the status quo of class privilege, oppression, exploitation and the waging of predatory war, then one-nation politics unleashes state-organized violence to protect the rich, their monopolies and illegitimate organizations such as the G20.

Before conciliating with the ugly deed of the Orient Express executioners, Poirot in words dutifully lectures them on the necessity of a rule of law and the danger of humanity descending into fascist barbarity. But Suchet-Poirot, when the time arrives to take a stand for his principles in practice, gazes back at the gang of torturers and murderers, swallows his principles of a rule of law and modern norms, dismisses his own words, hands over to the police the button and jacket of a fictitious criminal and walks away under a dark cloud, probably to go crazy unconcerned, as Hardial Bains would say of conciliators with fascism who refuse to lift a finger or take a principled stand in the face of this growing fascism and return to medieval practices.

No conciliation with fascism! No to the criminalization of dissent! Modern rights and principles are inviolable; they are not subject to exceptional circumstances!

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