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Tim Steller's opinion: Asarco strike inevitable result of Grupo ownership

Tim Steller's opinion: Asarco strike inevitable result of Grupo ownership

Ten years ago, everyone knew a strike would happen if Grupo Mexico got Asarco back out of bankruptcy.

Once they did, the only surprise was that it took this long.

The unions representing around 1,800 Asarco workers in Arizona and Texas went on strike Oct. 13. It’s been nine weeks, and there are no signs of progress. The company made its “last, best and final offer” Dec. 2; in response, the unions filed charges of unfair labor practices.

As Christmas approaches, the strike marches on. Workers are scrimping and getting side jobs; the company is doing little at the three mines and one smelter in Southern Arizona that it owns. Security guards monitor the picketers at Asarco facilities, while contractors and strikebreakers buzz by.

A striker, Jack James, told me Friday, on the picket line near the Mission Mine, that the conflict between the company and its unions seems “personal.”

“I’ve only been here two years, but I feel like I walked into a feud,” he said.

He more or less did. But it could have gone so differently — and almost did, a couple of times.

Asarco had preliminarily accepted an offer to be purchased by Phelps Dodge Corp. in 1999 when Grupo Mexico, a conglomerate run by Mexican oligarchs of the Larrea family, swept in with a cash offer. Asarco accepted.

The buyer’s reputation was so entrenched already that on the day the deal was announced, the Star ran a sidebar with the headline “Grupo Mexico’s relations with labor are troubled.” (Of course, Phelps Dodge would have been trouble for the unions, too.)

Grupo, as the company is known in Southern Arizona, seemed principally interested in Asarco because of its South American property, a company called Southern Peru Copper. As quickly as it could, Grupo Mexico split Southern Peru from Asarco, as it spent the early years of this century stripping Asarco for parts.

Then, in 2005, the first strike against Grupo-owned Asarco took place. Before that strike was 6 weeks old, Asarco filed for bankruptcy protection, which turned out to be a boon for the union workers.

Management and labor came to a deal in November 2005, then in December, the bankruptcy judge put management of the company in the hands of the creditors. Interim CEO Doug McAllister called Dec. 15, 2005, “independence day” because Grupo Mexico no longer had any sway.

It almost stayed that way forever. The bankruptcy court put Asarco up for sale, and Grupo Mexico was just one of the bidders, without any advantages as the incumbent owner.

In fact, in 2008 an Indian company, Sterlite, temporarily won the right to take ownership of Asarco out of bankruptcy, in a bid supported by the company’s unions, the independent management of Asarco, the U.S. government and the states of Washington, Montana, Texas and Arizona. (The federal and state governments had an interest because of the company’s environmental liabilities.)

Sterlite even negotiated a contract with the United Steelworkers and other unions that would take effect once it took the company over, from 2010 through 2013.

In union ranks and across Southern Arizona, feelings were good that the area’s Grupo nightmare was ending. But the financial crisis intervened, forcing Sterlite to alter its bid. That gave Grupo Mexico an opportunity to sweeten its offer — and it won.

Longtime United Steelworkers negotiator Manny Armenta was there at the court in Brownsville, Texas, when the company’s new offer to settle its bankruptcy case and take Asarco back occurred.

“In the end, they settled the bankruptcy by offering all the creditors 100% plus interest. Everybody who was owed money was obviously delighted,” Armenta told me last week.

But it raised obvious questions about the filing of the case in the first place: “How can a company file for one of the biggest bankruptcy cases in the U.S., then say we’re going to settle for 100% plus interest?”

In 2009, as the bankruptcy case rolled toward its conclusion, the independent management of Asarco negotiated one more contract with the unions. It took effect in June 2009 and was to last for one year. That was the last union contract with pay increases. At the same time, the unions approved a strike if Grupo Mexico got the company back.

“When we got the last contract, the guys calling the shots were the creditors’ appointees,” Armenta said. “Since it’s been in control of Asarco, Grupo Mexico has not wanted to pay any wage increases.”

Not only that, Asarco fought in the courts to cheat its recent hires of copper-price bonuses that were included in the raise-free contracts that the company and unions did agree to since bankruptcy. Asarco lost in every court up until the U.S. Supreme Court refused to take the case this year, and the company finally paid out the overdue bonuses just after the strike began this October. That must have really hurt Grupo Mexico CEO German Larrea, a billionaire thought to be Mexico’s second richest man after Carlos Slim.

In short, Asarco is no great prize anymore. A financial analyst I spoke with in Sao Paulo, Ricardo Monegaglia, estimated Asarco’s value at just $200 million. The main problem is the comparatively poor quality of the mine properties Asarco owns, not so much labor costs, he said.

“As of today, Asarco doesn’t have much value,” Monegaglia said. “The grades of copper aren’t that good.”

By comparison, Southern Copper — the company that was formed when Grupo Mexico split Southern Peru from Asarco, then added its Mexican mines — had a market capitalization Friday of $31.9 billion.

Even Asarco’s Tucson presence has been hollowed out. The company moved in 2008 from its longtime corporate headquarters at 1150 N. Seventh Ave., to Williams Centre, 5285 E. Williams Circle. Now those offices, too, are nearly empty — I visited Thursday afternoon and could find no one to talk to, nor to answer any calls.

So it could be a long, hard slog for striking workers of this once-proud Southern Arizona mining company, owned by Mexican oligarchs who pay it little heed now that they’ve stripped its most valuable asset. They were willing to dig deep to pay off creditors and get the company back, but are unwilling to make any financial considerations for their workers. Of course, we already knew that.

Tim Steller is the Star’s metro columnist. A veteran of reporting and editing, he digs into issues and stories that matter in the Tucson area, reports the results and tells you his opinion on it all. Contact: or 807-7789.

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