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Steel was the sickest of the smokestack industries. Despite the recovery, steel companies lost $1.668 billion in the first nine months of the year. With 250,000 members on layoff, the United Steelworkers has felt as if it were pinned under an I beam. In March the union took a 9% pay cut, but that did not satisfy management. U.S. Steel threatened this month to shut down five plants, either partially or completely, unless employees accept further contract concessions.
While putting a squeeze on workers, the steel companies continued their campaign in Washington for greater protection from imports, which have captured 19.6% of the American market. Though Western Europe and Japan have curbed their steel exports to the U.S., a new wave of shipments is flowing in from Brazil, South Korea and Mexico. Steel executives argue that these exports are subsidized by foreign governments and that the U.S. should retaliate with import quotas.
In its rhetoric, the Administration rejected protectionism. Declared Reagan: "We and our trading partners are in the same boat. If one partner shoots a hole in the bottom of the boat, does it make sense for the other partner to shoot another hole? There are those who say yes and call it getting tough. I call it getting wet." In practice, however, the White House too often bowed to pressure for import barriers. The Government hiked the tariff on heavyweight motorcycles from 4.4% to 49.4% to shield the last U.S. manufacturer, Harley-Davidson, and imposed tighter import controls on textiles.
The U.S. airline industry went through some of its most turbulent times in 1983. Spawned by the beginning of deregulation in 1978, cut-rate, nonunion carriers like People Express triggered fare wars and shot down the profits of the nine major airlines, which lost $71.8 million in the first nine months of the year. Frank Lorenzo, who was one of the pioneers of discount air travel as head of Texas International and New York Air, came up with a controversial approach to cost cutting after taking over unionized, money-losing Continental Airlines. In September he grounded all domestic flights, filed for reorganization under the bankruptcy laws, put two-thirds of the 12,000 employees on "inactive status," and started up service again with workers willing to accept as little as half the wages that Continental employees had been making. Lorenzo said that his maneuver would give Continental an "opportunity to compete." Some critics called it union busting. After Eastern Airlines Chairman Frank Borman warned that his carrier might follow Continental into bankruptcy proceedings, his major unions agreed to pay reductions and work-rule changes worth $367 million. In return, workers will get 15 million shares of Eastern stock and control two seats on the airline's board.