Rouge Steel and its workers, used up and junked

Dec 1, 2003

In October, Rouge Industries, Inc. of Dearborn, Michigan added itself to the long list of steel companies using the bankruptcy courts to cut workers' wages and nearly to eliminate the pensions and benefits of those who are already retired.

When Rouge Steel filed for bankruptcy, it claimed that it had reached agreement with a Russian steel company, OAO Severstal, to sell its assets. The very same day, the chairman of U.S. Steel said his company was still interested in buying Rouge – at fire-sale prices, to be sure, and under the condition that the new buyer would not be responsible for any payments whatsoever to retirees.

This means that Rouge simply becomes the latest in a string of steel companies that have used bankruptcy to shuffle ownership in such a way as to leave workers out in the cold. By going through bankruptcy, companies can legally stop paying for retirees' pensions and benefits. Regardless of previous commitments, Rouge Steel is allowed to get away with cutting off retirees' health care plans. For the retirees' monthly pensions, they are left at the mercy of the government's Pension Benefit Guaranty Corporation.

Changing owners through bankruptcy also allows companies to evade whatever union contracts they have signed. And this is actually the heart of the matter: the big companies want to inflate their profits by drastically cutting workers' wages and benefits. At the same time, they expect to benefit by dumping onto others the costs of upgrading obsolete plant and equipment.

What is today called Rouge Industries, Inc. was for 65 years an integral part of Ford Motor Company. In those years, Ford recouped its steel-making investment many times over, and did so partly by running the place into the ground. When it judged that the steel works were squeezed dry, Ford turned it into a separate company and sold it off in 1989, using the sale to swindle the workers into a lower level of wages and benefits.

The present owners are simply following suit. If bankruptcy threatens to have more severe consequences for the workers who are caught up in these manipulations, Ford paved the way into bankruptcy court.