By Mike Boyer
The Cincinnati Enquirer

AK Steel, struggling to restore profitability, has reopened discussions with the United Steelworkers of America, a move that could lead to a labor agreement, which, analysts say, is necessary for the company's survival.

In the latest in a series of about-faces by the Middletown steel maker, acting CEO James L. Wainscott met with Steelworkers president Leo W. Gerard in the last week and agreed to continue high-level talks on issues of mutual interest.

"We are hopeful that together we can forge a new relationship that recognizes the realities of our business,'' Wainscott said in a statement.

Gerard, who was cool towards AK's failed attempt to acquire National Steel Corp. earlier this year, said the meeting encouraged him.

"We're optimistic that Mr. Wainscott is sincere about guiding AK toward a new era of constructive relations with our union.''

Both the company and the union said they agreed to keep the content of their discussions private for now. The union said high-level teams from both sides would attempt to resolve issues remaining from the bitter 39-month union lockout at AK's Mansfield, Ohio stainless steel plant, which ended last December.

Brian Rayle, analyst with Midwest Research in Cleveland, called the rapprochement with the Steelworkers "a big deal.''

If the talks with the union are successful, he said, it could lay the groundwork for a broader agreement limiting pension and health care costs, similar to what the Steelworkers already have with U.S. Steel Corp. and International Steel Group, AK's biggest competitors.

Analysts agree AK can only stay competitive in the midst of industry consolidation if its labor costs are on par with those of its bigger rivals.

Wainscott, AK's former CFO, was named acting CEO on Sept. 18 with the resignation of former chairman and CEO Richard Wardrop, who had a contentious relationship with environmental groups, state officials, customers and unions.

AK's board of directors said it wanted a new perspective to restore profitability in the facing of rising costs and weaker demand for its steel.

In another indication of the company's new perspective - and a possible concession to the Steelworkers - AK Steel has modified its position on renewal of President Bush's Section 201 steel tariffs.

In the past, AK Steel has opposed the tariffs - backed by other steel companies and the Steelworkers - arguing they weren't effective.

But in letters to U.S. Trade Representative Robert Zoellick and Commerce Secretary Donald Evans, Wainscott said while AK still opposes tariffs on imported slabs, it believes tariffs on finished steel imports have been useful.

"We now believe that the 201 steel tariffs must remain in place in order for the domestic steel industry to finish the job of remaking itself into a world-class competitor,'' Wainscott said in a Sept. 30 letter to Zoellick.

Since taking over, Wainscott also has met with officials of the independent union representing hourly workers at the Middletown Works and Ohio Citizen Action, one of the environmental groups at odds with the company over pollution from the Middletown plant.

Friday, AK's shares closed up 5 percent at $2.01, a day after the company said it will report a wider than expected loss for the just-completed third quarter.

The company also said it had no plans to seek bankruptcy protection and was weighing sale of some non-core assets to reduce debt.

Union keeps president

Ed Shelley, long-time president of the independent union at AK Steel in Middletown, has won re-election to a two-year term.

Shelley received 926 votes versus 861 for challenger Scott Rich.

Trustees elected Bailey, A.C. Combs, Edward L. DeVault and Gregory Wells. Jeff Bridges won re-election for the one vice president's post on the ballot. The Armco Employees Independent Federation represents about 3,000 of AK Steel's 4,100 Middletown employees.

E-mail mboyer@enquirer.com