AK Steel to cut salaries by 5 percent next year

Steel producer AK Steel Holding Corp. said Wednesday it will cut pay for salaried employees by 5 percent starting next year and implement other cost-cutting measures, including offering retirement incentives, to save on costs.

The company said the moves, presented to employees in a letter on Monday, are in response to the slumping economy, which has lessened demand for its products.

The 5 percent pay reduction will start Jan. 1 and last indefinitely. It will affect AK Steel's chief executive officer and all executives. The company has 1,500 salaried employees, who are located at the company's headquarters, a research center in Middletown, field sales offices and at seven steel operations in four states.

AK Steel said it also plans to freeze the defined benefit plan for salaried employees and replace it with a defined contribution retirement benefit. It also plans to offer temporary incentives for voluntary retirements through Feb. 6. AK Steel said there are about 350 salaried employees currently eligible for a company-provided retirement benefit.

It said that it may have to implement involuntary cut to salaried jobs if the pay reduction and voluntary retirements do not yield enough savings.

On Tuesday U.S. Steel Corp., the largest U.S.-based steelmaker, said it will temporarily idle three plants and lay off 3,500 union and nonunion workers in its latest bid to cut production amid falling demand for steel products.

Last month, the company said it was laying off 675 workers in the U.S. and Canada because of lower demand. U.S. Steel has 26,840 employees in North America.

AK Steel has about 6,500 employees.

Prices of steel have dropped sharply this year and demand is slumping as the global economy slumps. Analysts have called the steel industry bleak and regions that were once sources of strong demand for steel are pulling back on their spending.

RBC Capital Markets analyst H. Fraser Phillips wrote in a note to clients Wednesday that weaker-than-expected demand growth from China "adds up to a tough year for metals and bulk commodities in 2009."