Steel plant takeover halted due to protests

By Hu Yinan (China Daily)
Updated: 2009-08-17 09:25

ANYANG, Henan: Thousands of workers at a State-owned steel plant in Anyang last Sunday were still waiting for government promises to be delivered after a five-day protest against the takeover of their plant by a private firm.

Henan's vice Party chief Chen Quanguo and Deputy Governor Shi Jichun, who arrived at the trouble-plagued Linzhou Iron and Steel on Friday, promised earlier next morning to suspend the takeover by Fengbao Iron & Steel Co. Ltd and give each worker a monthly subsidy of 550 yuan (US$80) until production resumes.

Fengbao management was unavailable for comment last Sunday.

On July 24, almost a year after local authorities decided to privatize the firm, Linzhou Steel was sold to Fengbao for 258.9 million yuan, or about 64 million yuan less than the initial bid at auction, without the workers' consent.

Workers and their relatives had been pressing for a suspension of the takeover.

They also demanded higher compensation and the resolution of issues concerning unpaid wages during the restructuring.

After they reached a deal with provincial authorities, demonstrators released Dong Zhangyin, a deputy director of the local State-owned assets supervision and administration (SASAC), about 3 am on Saturday, when the protest ended.

Dong had been sent by Puyang city to oversee the takeover and was held hostage by workers during the protest.

But Linzhou Steel's deputy general manager Cai Xinjie said he had "never learned of the 550 yuan subsidy".

It was the second time in less than a month that protests by workers have stopped the privatization of a Chinese steel plant, as the country tries to overhaul the sprawling industry.

Last month, some workers assaulted and killed an executive who was managing the acquisition of State-owned Tonghua Steel in Jilin province in Northeast China.

A group responsible for the restructuring of Linzhou Iron and Steel was reorganized under the leadership of Sheng Guomin, deputy secretary of Puyang City CPC Committee.

Sheng said: "Our work for the time being will be to extensively solicit workers' opinions on restructuring and the future development path of Linzhou Iron and Steel."

Set up in 1969, Linzhou Steel has 5,122 workers and pensioners on the regular payroll and 2,995 workers on the job. The plant is in Anyang, but au-thorities in Puyang, which was formed from part of Anyang, administer its operations.

The company produces 400,000 tons of pig iron and 100,000 tons of cement a year, and has been China's only production base of low-titanium iron.

The workers insisted the July 24 bidding was "illegal", which would cause severe losses of State-owned assets.

But Cai, deputy general manager of Linzhou Steel, told China Daily the bidding was legal.

"The law says any item that nobody bids for can be sold at no more than 20 percent lower than the initial bid," he said.

But no relevant clause exists in China's auction law.

Restructuring of the plant along commercial lines began in August 2008 under the approval of the government of Puyang and the factory suspended all operations in March, sending all employees home.

Workers had tried unsuccessfully to halt the privatization by blocking traffic twice since March.

They said Fengbao, with only 1,500 available job positions, had a bad reputation for unpaid wages and lack of work insurance. They insisted that Fengbao is just an empty shell and has no right to buy a healthy organization such as Linzhou Steel.

The workers said all Linzhou Steel employees were forced to accept compensation of only 1,090 yuan for each year of service before signing a new contract with Fengbao.

Shang Xinkai, a worker in her 20th year at Linzhou Steel, told China Daily that privatization, or "corporate restructuring" in official terms, should aim for the healthier development of the enterprise, not "selling State-owned assets off to private hands and sending workers home like trash".

Dong, the Puyang SASAC official who Shang claimed to have treated during his days as a hostage, reportedly acknowledged that all eight State-owned enterprises he helped privatize in Puyang went bankrupt.

The Puyang SASAC evaluated Linzhou Steel's assets at about 320 million yuan. The workers insist that the enterprise is worth "at least 800 million yuan". They see the SASAC report, which valued a Linzhou Steel-affiliated cement factory with an annual produc-tion capacity of 100,000 tons at no more than 17 yuan, as a joke.

Officials say Linzhou Steel's impending bankruptcy is a core rationale for restructuring. But a senior employee, who has worked at the factory for 39 years, said its management "deliberately screwed up" to le-gitimize Linzhou Steel's privatization, which workers see as a move to "sell them out" to fill the pockets of the rich and the powerful.

"It's a classic model of how State-owned assets are lost in corporate restructuring efforts in China. All 40 years of Linzhou Steel's assets are now in the hands of a single person," said the worker, who refused to give his full name.

Liu Junsheng, Linzhou Steel's board chairman and general manager, reportedly told an earlier inside meeting that "the more we're in the red, the more it benefits Linzhou Steel's restructuring, and the more it benefits our purchase," according to petition letters provided to China Daily by workers.

Puyang's deputy mayor, Wang Xiangling, and police Chief Ruan Jinquan reportedly has promised the workers to take their concerns seriously.

An anonymous Linzhou Steel staff member recalled officials as having said they "wouldn't be able to sleep without dealing with this issue properly".

"But that was the end of it. We never heard anything from them since," the staffer said. Wang, also former chief of Linzhou Steel's restructuring team, was fired after the protest.

On Saturday, the provincial mediation team met with representatives from Linzhou Steel and employees about the privatization. But the workers feel they were still left out of the decision-making process, and demanded future meetings be held with representatives of their own.

The current representatives, they say, are cadres who "can no way" stand for their interests. "We must re-elect workers' representatives," a senior staff said. "Not one among us has ever agreed to privatize or sell off the enterprise."

Xinhua contributed to the story