by James C. Sherlock
We don’t see very many industrial strikes in Virginia.
Regular readers know that I have often supported blue collar unions in the private economy.
My family roots are linked to Pennsylvania coal mines. Those miners’ strongest claims were for their own safety. Followed very closely by their demands for living wages.
I started researching the story of the current strike by unions representing some 340 workers at the AdvantSix chemical plant in Hopewell with a bias towards supporting the strike.
Safety. I still do support it to the degree that they are striking for worker and plant safety. They reasonably want the company to prevent excessive overtime of current employees under inherently dangerous conditions that require close attention to detail.
Hopewell employees tell stories of consecutive 18-hour shifts.
They want the company to hire more workers to solve that.
But that workforce is far more skilled — better educated and trained, and higher paid – than I assumed.
AdvanSix has been unable to readily fill the jobs that they already advertise. It is hard to attract skilled workers to Hopewell. The company may need to cut production instead.
Wages. I thought I would also support the union wage increase demands in excess of what the company has offered, but I have found that issue is complicated and the public does not have a clear picture of the differences.
Yes, inflation has taken its toll on the buying power of wages. But it is also true that AdvanSix has to be able to make a profit. To do that it must keep its costs under control in an economic downturn.
The two parties will have to figure it out.
AdvanSix’s ability to pay and remain competitive is a complicating factor.
The company is not an industrial giant. It is a niche specialty chemicals supplier.
Its stock (ASIX) value qualifies it as a microcap — just over $1 billion in enterprise value (sum of stock value and debt).
It is profitable, which is the reason private companies exist, but those profits are not written in stone. Stock analysts’ consensus 2023 earnings estimates for AdvanSix are down 20% in the last sixty days.
And that was before the negotiations with unions representing more than 300 workers at its largest plant — in Hopewell — broke down into a lockout/strike.
As I said, it is a complicated story.
AdvanSix appears exceptionally well managed. I looked at that in depth and will spare you the details, but it objectively is well managed with a strong board.
As one sign, the small company has a diversified and balanced product portfolio that is not exposed to customer demand cycles in a single industry.
The Hopewell complex, which includes the plant in Hopewell and facilities in Chesterfield County, forms AdvanSix’s core asset.
The Hopewell plant is:
- one of the largest producers of ammonium sulfate, an ingredient for fertilizer, in the world; and
- also one of the world’s largest single-site producers of caprolactam — an essential ingredient used in carpet fibers, plastics, and films.
So, while AdvanSix is a small company, its wider impact shows why it is so well covered by stock analysts. It holds a key position in supply chains for far bigger companies.
The process for creating ammonium sulfate, to pick just one, is by treating ammonia with sulfuric acid. It is as much of a science project as an industrial process.
So they have to get that right. Every time.
Thus, the high pay for employees at Hopewell South (the plant in Hopewell) is warranted. It is Hopewell South that is the scene of the strike.
The north unit (Chesterfield) is operated under a separate contract with the United Steelworkers.
From The Progress-Index:
AdvanSix said 51% of the union workforce at its south plant would receive a minimum 6% raise in the contract’s first year while the remaining 49% would get a minimum 3% bump payable either as a raise or one lump sum.
The company offers the following information.
The total cost of Hopewell salaries and benefits in 2022 was $85 million. The average employee made nearly $100,000 in earnings last year.
I don’t know readers’ expectations, but those figures far exceeded mine.
The Unions. Strikers include members of International Chemical Workers Union Local 591C, United Association Local 851, International Brotherhood of Electrical Workers Local 666 and International Association of Machinists Local 10.
Tommy Humphries of the International Chemicals Workers Union has been the public spokesperson for the union. His public statements have focused on the companies offer of different tranches of raises, but he has not offered a union negotiating position.
As related above, some individual union members have publicly objected to the long shifts and mandated overtime.
Other local stakeholders. AdvanSix spent $11 million on goods and services in Hopewell in 2022.
The company paid $5 million in local property and use taxes. To put that in context, that figure represents 40% of the City of Hopewell’s local contribution to the funding of its schools.
Bottom line. Political leaders have called for compromise.
Governor Younkin is quoted as saying:
This is just a moment for them to recognize that not everybody is going to get what they want, but they need to come together and reach a deal.
Democrats in the General Assembly that represent that area have offered the same counsel.
Safety. James Baugus, with Local 851, said:
I think we need … to address the work hours that people are working.
They’re working extreme amounts of hours, 18-hour shifts, day after day.
He attributed the mandatory overtime to worker shortages at the chemical plant.
I believe that the workers and the company both need that to be fixed. One wonders where the state Department of Labor and Industry (DOLI) has been on those issues.
Like the striking workers, I am worried that the company reportedly is trying to maintain production in their absence using salaried and contingent contract employees in an environment that is hazardous per se.
Again, is that OK with DOLI?
Wages. The public has a little wage information from the company’s proposed 5-year contract and virtually none from the union counter-proposal with which to make a judgment.
Without that, and even with it, it is hard to judge the company’s ability to pay in a period of declining earnings forecasts.
But inflation hurt workers. It may even mean that raises are necessary to solve the plant’s own hiring problems.
How much is the question.
Where are we? The disagreements do not seem to have turned bitter yet.
For the company’s positions on negotiations see here.
With those kinds of jobs and production on the line, I feel hopeful that management and labor will come to contract terms soon.
There are more stakeholders than management and labor.
- AdvanSix’s customers are very dependent on Hopewell products their supply chains.
- For the City of Hopewell, a long strike or a threat of plant closure, if things get out of hand, will be a crisis.
- So, it will be for that entire section of Virginia.