By Mike Boyer
Enquirer staff writer

The union representing about 3,000 hourly workers at AK Steel's Middletown plant said Friday it won't negotiate labor contract changes the ckmpany says it needs for long-term survival.

In a statement, the executive committee of the Armco Employees Independent Federation said it won't reopen the contract expiring Feb. 28, 2006, to negotiate concessions the company wants.

CEO James Wainscott, who says AK Steel faces a $30-a-ton cost disadvantage against its largest rivals, complained last week that some of the company's largest unions, including the federation, hadn't responded to its repeated calls to reopen negotiations.

Unions at three of the company's seven plants have agreed to modify their contracts. The union at a fourth, in Zanesville, Ohio, has agreed to talk.

But the Middletown union's executive committee said the company hasn't demonstrated it has a long-term plan for survival.

"The company has failed to show us sufficient evidence of any such plan that would lead us to believe retirees and our members would truly benefit from interim talks,'' the union said.

The union also said the company, which wants to cut hourly staffing at the Middletown Works by about 20 percent, or 600 jobs, has failed to show how the plant can be operated with fewer workers.

AK Steel spokesman Alan McCoy said the company has shared all the information it has about its cost disadvantage with the union and its financial advisers.

"There's no doubt we're at a significant disadvantage in employee costs,'' he said. "We remain hopeful the (union) will change its mind and agree to discussions.''

In the meantime, he said, the company will continue to reduce labor costs through layoffs and attrition.

The company has laid off 30 younger employees in the last two weeks and left unfilled another 150 jobs vacated by attrition since suspending a minimum staffing provision in the union contract in January. An arbitrator recently upheld the company's right to suspend the provision.

Independent steel analyst Charles Bradford said the union response is a setback in the company's effort to sustain its recent return to profitability, but not immediately.

"Right now it's not a problem because everybody's making money in the steel business,'' he said. "But the next time there is a downtown in the steel market, they won't be competitive.''

Bradford, who thinks AK's cost disadvantage is close to $50 a ton, says the next downturn in the steel market could be closer than many think.

He said foreign steel is about $150 a ton cheaper than domestic steel. Any economic slowdown overseas could mean another big increase in foreign imports, he said.

Last week, AK Steel, which has lost $1 billion over three years, reported a second-quarter net profit of $92.7 million, or 95 cents a share, including operating earnings of $56.4 million, its largest operating profit in two years.

But the company says the operating profit, amounting to 18 cents a share, isn't enough to sustain the flat-rolled carbon, stainless and electrical steel maker over the long term.

Since last fall, the company has cut its salaried ranks by 20 percent and is implementing $200 million in other cost cuts.

The AEIF said the company is trying to make the union the scapegoat for the high retiree health and pension costs negotiated by management.

"There's no hidden agenda here.'' McCoy said. "We believe the company can't achieve sustainable profitability without significant employee cost reductions.''

He said the company has been asking the AEIF for more than a year to discuss how to achieve them. He said the company wants to achieve the cuts without resorting to bankruptcy reorganization, which has left retirees at some of its competitors with sharply reduced pension and health-care benefits.

Shares in AK closed Friday at $6.63, up 11 cents.

E-mail mboyer@enquirer.com