Joe Soptic forgot to mention the 10 week strike at GST Steel

Barack Obama is taking some heat these days for an ad featuring Joe Soptic, a former steel worker that blames Mitt Romney for his wife’s death.  It seems Joe lost his job when Bain Capital bought his company and then laid off workers.  His wife got cancer and sadly died, leaving Joe with a mountain of medical debt.

Some recent fact checking has revealed that Joe failed to mention that a period of 5 years went by between the time he lost his job and when his wife died.  He also failed to mention that during that period his wife had health insurance from her employer that covered her medical expenses.

The organization that ran the ad is known as Priorities USA and they run a website that you can read here.  The video can be seen here.

Here is a quote from their website giving details of the period from 1997 to 1999, which happened to be the year Romney left Bain Capital.  

In 1995, Romney’s Bain had GS acquire another firm, adding over a hundred million in new debt. By then, Bain had forced the company to hold $378 million in debt, which was ten times the annual income of the company and “the company was not on a sustainable course.”

At the same time, Romney’s firm was ordering changes that undermined safety and productivity at the company and installing people who knew little about the steel industry. A worker remarked, “When Romney and Bain came in, it was painfully obvious that they didn’t have a clue about anything to do with a steel mill.”

From 1997 to 1999, losses at the company increased by 300% and it was clear the company could not survive.

By the time the company legally filed for bankruptcy, Romney and his firm had made at least $9 million in profit. Former company officials said the mill, which had been operating since 1888, could have dealt better with market fluctuations if Bain had not forced the company to take on unsustainable debt. A finance professor remarked that using debt to pay large dividends to Bain left the company less prepared for a downturn.

Please note that no where in the summary is it mentioned that in 1997 the union workers at GST Steel staged a destructive 10 week strike bringing the company production to a stop.  In fact, many of the union wokers had loaded up on overtime in the weeks prior to the strike in order to build up a nest-egg to carry them thru the strike.  

This report from the Kansas City Business Journal recounts some of the reactions to the strike’s ending:

The strike ended June 13 when union members and management agreed to a five-and-a-half-year operating contract that complied with union demands to improve pensions and eliminate wage inequities between old and new workers.

Officials for GST Steel’s parent company, GS Industries, estimate the strike cost them $22 million in lost business.

Hourly and salaried workers have pulled together, but an undercurrent of distrust lingers on the union side.

Perhaps, just perhaps, the underfunded pensions Soptic claims were a result of Romney were instead a direct result of the union strike that shut down a company costing them $22 million.  The unions got what they wanted – increased wages and increased pensions.  So how bad could the leadership of GST Steel (supposedly Bain Capital) have been?  

In 1998, the CEO of GST Steel named Bud Rossi left the company for a competitor.  Rossi was known as a turnaround expert in the steel industry, but left in part because of the labor situation.  Rossi and the labor union did not get along well.

A known turnaround specialist within the steel industry, Rossi arrived at GST in May 1998, promising to transform the money-losing steel mill into a profitable, world-class operation. During his 11-month tenure, he introduced safety and quality control programs to bring the plant up to industry standards.

Essig said he was pleased with the progress Rossi made at GST during a time when the steel industry was battling record levels of steel imports brought on by the Asian economic crisis.

“Bud came at a critical point and made an impact, and the plant is better off for having him for the year,” said Essig, who hired Rossi away from City Steel in Claymont, Del., in 1998.

Rossi sometimes butted heads with a GST labor force that has been leery of management since a 10-week strike in 1997.

To me, it sounds like the company was well managed, but had a problem with a powerful labor union that demanded too much from a company facing stiff competition from China.  This is a complete contradition to what the union claimed about Romney undermining safety and productivity.  It also contradicts the union’s claim that they didn’t know what they were doing as an industry expert was placed in charge to turnaround the company.  I am truly not sure what else positive could have been done to help the company

Perhaps the most telling quote is this:

Company officials are also concerned the plant will spend millions of dollars more on utilities this summer due to an expected energy crunch. GST’s power contract with Kansas City Power & Light allows the steel plant to save money during cool weather when energy costs are down, but the plant pays more on summer days when the electrical supply is tight. Essig anticipates the plant may have to pay more to compensate power lost from the Hawthorn plant, which exploded in February.

“Our biggest problem is power,” Essig said. “That’s what’s threatening the existence of the plant above all else.”

If anyone is expecting American businesses to find some kind of new advantage thru Barack Obama by getting less expensive energy – they can forget it!  Energy under Obama has risen to an all time high and threatens not only the steel industry, but countless others.  I guess Joe Soptic forgot to say that as well…

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