ArcelorMittal made $5.4 billion last year, including $1.8 billion in the fourth quarter, but it wasn’t quite enough to trigger profit-sharing for the steelmaker’s 10,000 employees in Northwest Indiana.
That’s because profit-sharing is tied to net earnings in the United States under the contract that was agreed to with the United Steelworkers union three years ago. And ArcelorMittal said it lost more than $38 million in the United States last quarter.
“ArcelorMittal USA’s profitability is based on earnings before interest and taxes and communicated through the hourly profit sharing letter,” ArcelorMittal USA Chief Executive Officer John Brett said. “EBIT is a metric within ArcelorMittal’s audited financials that was identified and agreed upon in the Basic Labor Agreement with the United Steelworkers. Based on EBIT, ArcelorMittal’s USA business has not been profitable in five of the last six quarters and has not made a profit-sharing payout since Q3 2016. Our Q4 2017 EBIT was a loss of approximately $38.9 million. Therefore, our USA performance did not trigger a profit sharing payout for hourly or salaried employees.”
The multinational Luxembourg-based company, which operates steelmaking and mining operations in more than 20 countries across the globe, said its profits are coming from overseas, not the United States.
“I understand this is hard to digest, especially when our parent company announces a positive outcome for the global business,” Brett said. “Recent corporate earnings announcements reflect a much improved performance for the global business as a whole, but it does not reflect the challenges we are working to overcome here in the USA.
"These challenges include increased imports, despite the recent trade tariffs that have been put in place, as well as new domestic competition that reflects our dynamic and evolving marketplace, and various production and logistical issues."
ArcelorMittal also failed to share profits with workers after a $6.7 million loss in the third quarter. The U.S. steel industry as a whole has been struggling at a time when imports totaled a near-record 28 percent of the market share.
“In order to understand where we are going, we must not lose sight of where we’ve been. Since the latter part of 2008, ArcelorMittal has weathered the most challenging economic times to face our industry in years,” Brett said. “Our team worked diligently to ensure our business is resilient, agile, lean and positioned for success in the future.
"Starting in 2016, ArcelorMittal USA has undergone significant transformation under the Action 2020 framework, setting our business on course for a stronger future, regardless of the cyclicality of our industry. The work completed thus far has shown signs of positive impact and realized financial improvement. That said, we haven’t yet witnessed the fruits of our labor.”
In recent years, ArcelorMittal has tried to become more profitable in the United States by shuttering many blast furnaces and finishing lines at the the more than century-old ArcelorMittal Indiana Harbor steel mill in East Chicago, which encompasses both the former Inland and LTV steel mills.
The goal was to streamline operations, get costs under control and operate at a higher level of capacity utilization.
“Like many of our colleagues, our leadership team isn’t satisfied by our current level of profitability, but we are encouraged by the forward progress we’ve seen in recent months,” Brett said. “ArcelorMittal USA is on track to achieve our Action 2020 savings goal of $230 million one full year ahead of schedule.
"But frankly, we started this process from a significant deficit. Results show that we are close to achieving profitability, and we will continue to look for additional ways to achieve more cost-effective operations. In order to maintain this momentum, we must capitalize on a strong market and pricing environment, improve operational reliability and enhance our delivery process. Initiatives are in place to accomplish all three.
"Our journey continues, and I look forward to achieving both sustainability and profitability for our company and our deserving employees.”