C2007/3606, Transcript of Proceedings [2007] AIRCTrans 574 (26 October 2007)

TRANSCRIPT OF PROCEEDINGS

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Workplace Relations Act 1996 17634-1

SENIOR DEPUTY PRESIDENT ACTON

C2007/3606

s.170LW - prereform Act - Appl’n for settlement of dispute (certified agreement)
BlueScope Steel Limited
and
The Australian Workers’ Union
(C2007/3606)

MELBOURNE

10.09AM, THURSDAY, 11 OCTOBER 2007

MR G PARMENTER: I seek leave to appear on behalf of BlueScope Steel, together with MR G BATTYE.

MR L BUNTMAN: I seek leave to appear on behalf of the Australian Workers Union, together with MR M BOROWICK, the assistant secretary of the Australian Workers Union and MR R RUDD, a delegate for BlueScope.

THE SENIOR DEPUTY PRESIDENT: Thank you. Mr Parmenter.

MR PARMENTER: Thank you, your Honour. The matter in dispute is the negotiation of a wage increase to apply to a 12 month extension to the BlueScope Steel Westernport Certified Agreement 2004/2007. Essentially the parties are unable to reach agreement around the amount of the wage increase. The AWU seeks a 4.5 per cent wage increase for 12 months and BlueScope Steel believes that a wage increase of up to 4 per cent is more appropriate.

We seek the assistance of the Commission to determine this dispute, as provided for by clause 5 Part B and clause 4 Part C of the agreement. Your Honour I have copies of those clauses which I can hand up, if you like.

THE SENIOR DEPUTY PRESIDENT: Yes, Mr Parmenter.

MR PARMENTER: Your Honour, clause 5 Part B of the current agreement provides that the agreement will expire on 1 November 2007 and that the agreement may be extended for 12 months. Clause 5.1 Part B of the current agreement provides that a negotiation will lead to wages being adjusted for the duration of the extension and that all other terms of the agreement will remain unchanged. It also provides that a survey of customers and within the steel industry will assist determine a pay outcome; and if a pay outcome is not resolved by 1 October then the dispute resolution procedure will be followed.

Clause 4 Part C of the agreement outlines the dispute resolution procedure. Clause 4.1.4B of the dispute resolution procedure provides that a matter in dispute may be referred to the Australian Industrial Relations Commission for determination, and we are seeking that the Commission determines this dispute.

BlueScope Steel and the AWU have met formally on several occasions to discuss the matter in dispute. Those meetings occurred on 28 August, 5, 10 and
17 September and the matter has also been the subject of a number of telephone conversations. Unfortunately we are unable to reach agreement on an appropriate wage outcome. The intention of clause 5(1) Part B of the agreement includes the following key points. Firstly, it provides an opportunity for the parties to extend and vary the agreement for an additional 12 month period. The parties have indicated that this is their preferred approach.

Secondly, the 12 month extension means that the agreement in its current format will be in place until 1 November 2008. The only change to the current agreement is a wage increase to apply for the 12 month extension. Thirdly, where agreement could not be reached on the amount of the wage increase, the matter would be referred to the Commission in accordance with the dispute resolution procedure. Fourthly, the clause provides a process by which agreement could be reached around the amount of a wage increase. That process was a survey of customers and within the steel industry. Finally, the company understood that the survey outcomes would largely determine the amount of the wage increase to apply for the 12 month extension.

So a survey has been conducted of customers and within the steel industry. The outcome of that survey has been shared with the AWU during discussions and negotiations. The AWU has acknowledged and accepted the information contained within the survey outcomes and during our negotiations the AWU has not sought to provide any additional information relating to wage increases, to customers or within the steel industry generally.

So in accordance with clause 5(1) Part B of the agreement, as I mentioned, the company has conducted a survey. Information relating to the wage increases of 12 companies has been gathered as part of the survey. These companies can be classified as either a customer or part of the steel industry or both. On 25 August and 5 September the company shared the survey outcomes with the AWU and I will just tender a copy of the survey outcomes.

THE SENIOR DEPUTY PRESIDENT: Mr Parmenter, are you asking me to arbitrate this?

MR PARMENTER: Yes, your Honour, sorry.

THE SENIOR DEPUTY PRESIDENT: What do you say about that, Mr Buntman?

MR BUNTMAN: Yes, we agree with that your Honour.

THE SENIOR DEPUTY PRESIDENT: Right.

MR BUNTMAN: We are requesting you to arbitrate in this matter.

THE SENIOR DEPUTY PRESIDENT: Thank you.

I will adjourn briefly.

<SHORT ADJOURNMENT [10.15AM]
<RESUMED [10.19AM]

THE SENIOR DEPUTY PRESIDENT: Mr Parmenter, in conference I have raised with you the issue of my husband working for the AWU. Does that create any problems for you in terms of me arbitrating the matter?

MR PARMENTER: Your Honour, we have no problems with the arbitration being done.

THE SENIOR DEPUTY PRESIDENT: Mr Buntman?

MR BUNTMAN: We have no problems, your Honour.

THE SENIOR DEPUTY PRESIDENT: Thank you. Mr Parmenter.

MR PARMENTER: Your Honour, I would like to tender a copy of the survey information that we shared with the AWU during our negotiations.

EXHIBIT #P1 ASPECTS OF THE CURRENT CERTIFIED AGREEMENT, SURVEY MATERIAL

MR PARMENTER: Your Honour, the material that I have provided is essentially a document that was discussed between the parties during the negotiations. The first page is really setting some context, if you like. Then the following three pages outline some benchmark information that we gathered as part of the survey. The final page is Consumer Price Index information over the past four years.

Your Honour, the outcomes for 2007 of the survey data have been highlighted and show that eight of the 12 companies surveyed had agreed to pay an increase in 2007 of 4 per cent per annum. The average increase paid by the 12 companies in 2007 was 4.14 per cent per annum. Of the 12 companies surveyed the highest increase was 4.5 per cent per annum, which was paid by three companies. The Smorgon and Toyota agreements were negotiated in 2005 and the Silcar agreement relates to mechanical trades.

So your Honour, the position of BlueScope Steel is that a wage increase of up to 4 per cent is appropriate for the 12 month extension. This is in line with the majority outcome of the survey and is more generous than recent movements in the CPI. So a 4 per cent wage increase is greater than the year on year per cent change Consumer Price Index for Melbourne 2006 and 2007, which was 2.6 per cent.

Your Honour, BlueScope Steel believes that a wage increase of up to 4 per cent for 12 months is appropriate, particularly given the business performance of the Westernport site over the past three years. Recently employees have received an update on the business performance of the Westernport site. The update focussed on the relatively poor performance of the plant and the challenges that we face over the coming years from increasing domestic and overseas competition; together with increasing input costs in a range of key materials or utilities.

We have summarised some of that material for the benefit of the Commission and we will take you through that material shortly. We believe that it helps to demonstrate why a wage increase of 4 per cent is more appropriate than a higher increase. The information that we will share with you is a summarised version of the employee presentation, so it doesn’t contain all the material that was presented to employees. The material has previously been shared with the AWU during some discussions and your Honour I would seek to tender a copy of that presentation.

THE SENIOR DEPUTY PRESIDENT: Thank you.

EXHIBIT #P2 WESTERNPORT BUSINESS UPDATE

MR PARMENTER: Your Honour, Mr Battye is the vice president of operations for the rolling part of our plant I will just ask Mr Battye to explain the material to the Commission.

THE SENIOR DEPUTY PRESIDENT: Okay, Mr Battye.

MR BATTYE: Yes, if we go through the first page. There's an overview of Coded and Building Products Australia Financial Performance. So this is the sector that our facility falls into and this sector includes ourselves, our Spring Hill facilities, our service centre facilities and Lysaght. If we look at the financials for the previous few years, in financial year June 03 there was earnings before interest and tax of $156m. In financial year 2004, 238. In financial year June 05, two million. In financial year June 06, minus three million and the financial year just finished, 41 million.

So I guess a few of the key points on here are obviously that there's been two exceptionally poor years in the performance of our sector of the company. Last year in terms of its 41 million; in context the first half of the year was actually 49 million and the second half was an eight million reduction there. That has basically been driven by, I guess, a few factors. The Australian dollar and foreign exchange is a key issue. Also competition from imports and changing in our domestic market mix and moving into export market. So if we go to the next page.

THE SENIOR DEPUTY PRESIDENT: Interestingly in terms of this document, the first page, these other parts of the diagram, the aqua and the lighter green, they are showing what? Just take the aqua first.

MR BATTYE: Yes, so would you like me run through those?

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: Yes. So I guess the attempt of that is to explain the difference between the financial year that had the two million and then to the minus three million. So if we work through them, it's saying in that move from the 05 to the 06 year, drivers around that were export prices; so a negative impact around export prices.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: There was a positive impact from the previous year around domestic prices; a negative impact in our mix through that sector; conversion costs; zinc and aluminium prices. So we will cover later in the document the increases in raw materials that have occurred. A positive aspect in terms of our steel feed prices between the 05 and 06 year. I guess some one- off - - -

THE SENIOR DEPUTY PRESIDENT: Sorry ,did you say a positive for steel feed?

MR BATTYE: Yes, for the 05 to 06 year, for the difference between those two years.

THE SENIOR DEPUTY PRESIDENT: But the steel feed is showing below zero.

MR BATTYE: Yes, so I guess the context of the diagram is it actually is a waterfall diagram and basically the bars will start where the previous bar finishes.

THE SENIOR DEPUTY PRESIDENT: I see.

MR BATTYE: So it'll go two, minus, it will come up from that, down from that.

THE SENIOR DEPUTY PRESIDENT: I see. Right, so it's gone from minus a hundred up to zero, has it?

MR BATTYE: Yes. So essentially - - -

THE SENIOR DEPUTY PRESIDENT: So it's a hundred and four improvement.

MR BATTYE: Yes.

THE SENIOR DEPUTY PRESIDENT: Yes, okay.

MR BATTYE: Between those two financial years.

THE SENIOR DEPUTY PRESIDENT: I see. Yes. Okay, and the others are again an improvement?

MR BATTYE: Yes. So all of the negative impacts are the grey ones with the brackets in there and the others are positive.

THE SENIOR DEPUTY PRESIDENT: I see. Okay. All right, so let me just absorb that. The mix is what?

MR BATTYE: So that's looking at the types of products that we are making through the facilities.

THE SENIOR DEPUTY PRESIDENT: Right.

MR BATTYE: So I guess there's high value add products and low value add products that we could be producing and it's the mix of what products we are producing, which obviously dictates the revenue that they generate and the cost of manufacturing them.

THE SENIOR DEPUTY PRESIDENT: Okay. What is steel feed again?

MR BATTYE: So that's the cost of our raw materials, slab or coil. Yes, so this is the raw material that comes from our Port Kembla steel making facility.

THE SENIOR DEPUTY PRESIDENT: Right.

MR BATTYE: At the bottom of the - and we also have material come from other sources.

THE SENIOR DEPUTY PRESIDENT: Okay, so in summary then, in terms of you going from an ..... of 238 to three million - sorry, two million plus to three million minus.

MR BATTYE: Yes.

THE SENIOR DEPUTY PRESIDENT: The things that have worked for you are the domestic prices.

MR BATTYE: Yes.

THE SENIOR DEPUTY PRESIDENT: An improvement in the cost of raw materials; is that the way to read it?

MR BATTYE: So in terms of steel prices they were positive. There was an improvement between those two budgeted years.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: In terms of raw materials such as zinc, aluminium et cetera, which we use on our metal coating process there was a negative impact.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: But I guess the other key on the graph is if you look at, I guess, the 41. That's a three per cent return on net assets.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: Which is a very low return for that type of investment.

THE SENIOR DEPUTY PRESIDENT: You said in terms of the financial year, did you say half of it was - - -

MR BATTYE: Yes, so for the last financial year the first half was 49 million.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: The second half was minus eight, and that's driven by the factors around competition, move to export and raw material prices.

THE SENIOR DEPUTY PRESIDENT: There's a substantial difference between 04 and 05.

MR BATTYE: Yes.

THE SENIOR DEPUTY PRESIDENT: What is that due to?

MR BATTYE: So there's a, I guess, whole host of factors there; changes in the market and some, I guess, will be evident in the following slides around the impact of China et cetera.

THE SENIOR DEPUTY PRESIDENT: Yes, I catch you. Thank you. Yes.

MR BATTYE: So the next slide is really looking at, I guess, the impact of China and the steel industry related to Australia. So the top left-hand corner, if we look at the China steel production as the first graph. It's showing that from 2003 starting at a base of 222 million tonnes of steel production, up to I guess 475 for the forecast for 2007 to finish off. So a significant increase in the steel production out of China, which equates to over a third of the world's steel production.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: Context of that, if we move on to the next graph, is looking at the net imports and exports. So that's really looking at, in terms of our steel production, is it being consumed as a net in the country or import? Are they consuming more than that and importing it or exporting it? So if they were to export 50 million tonnes and import 50 million tonne of other product, it would show a zero on that graph. So clearly it's showing in 2002 a net importer. An increase in 2003 and then declining in 2004 and 2005 to 2006, where they are a net exporter of steel.

THE SENIOR DEPUTY PRESIDENT: So they are exporting more steel than they are importing, is that right?

MR BATTYE: So they are producing more steel than they are consuming in the country.

THE SENIOR DEPUTY PRESIDENT: Yes. Are these financial years or calendar years?

MR BATTYE: I believe they are calendar years, and I guess analysts predict that that trend will continue and will grow significantly in terms of excess capacity, given the facilities that are in China.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: So the bottom graph is actually looking at the flat steel imports in Australia. So the top graph is showing, I guess, a consistent increase in imports into Australia. If we go to the lower graph, so the bottom line on that graph, that's looking at the percentage of imports from China in that sector. Quite clearly it has been a very low player in that market and in the 04/05 period that has increased significantly; a drop off the following year and continues to be strong currently.

So I guess the key context around China is obviously those imports et cetera affecting the domestic market and they also impact on export markets that we were traditionally exporting to.

THE SENIOR DEPUTY PRESIDENT: Yes. Okay, so the pink line is a percentage of the blue line, is that right?

MR BATTYE: Yes.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: So yes, the real key on that showing the impact both domestically and on our export markets. If we go to the next page. So the next page is actually looking at our despatches to the various market sectors. So I guess if you look at the sectors that we classify the markets into. The legend at the bottom, we have pipe and tube, the manufacturing markets, automotive market, building market, distribution which actually supplies the previous markets that have been identified and export.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: So if we look at the graph for the pipe and tube markets at the bottom line, a steady decline in that market. In terms of manufacturing in general, a steady decline. Automotive industry, again a decline there. In terms of building, I guess it's a consistent growth there, slowing down in terms of the speed of that growth but a consistent growth in that market sector. If we look at the yellow line, so the distribution market, you can see a clear drop off in that distribution market and that's reflecting the moves in the automotive manufacturing markets et cetera. So it's one of our channels to market, and obviously the export market with that excess capacity and our facilities, then we have been focussing on export markets.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: So I guess in the context of what does it mean in terms of a shift to the export sector, the following slide runs through an example of the impact that that can have. So if we take a situation where the facility at Westernport produces exactly the same products, has exactly the same costs, but in situation one has the mix to domestic and in situation two, 66,000 tonnes is actually swapped across to export. So it comes out of the domestic and is taken up by export. That can have a 54 per cent reduction in the ....., so a significant impact by the shift in those market sectors. I guess there's three things that clearly drive that.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: One is obviously the export markets and the pricings that are attainable in that market sector. There are increased costs in freight when shipping to the export market and the strong Australian dollar has a significant impact on the business in relation to that.

THE SENIOR DEPUTY PRESIDENT: Right.

MR BATTYE: The final slide is I guess - - -

THE SENIOR DEPUTY PRESIDENT: Is that for Westernport?

MR BATTYE: (No audible response).

THE SENIOR DEPUTY PRESIDENT: Yes, okay. Yes?

MR BATTYE: The final slide is looking at some of our input costs. I guess just picked a few of them there. Zinc prices from 2003 have increased from around $1500 per tonne up to just under 5000, so a significant increase in raw materials. Aluminium, similar increases. In feed materials, in terms of our paint line raw materials, seeing an increase in those materials.

The last graph is a little bit different. It has some forecasts around there on electricity increases, but again seeing a continued increase and I guess projecting there to be a more significant increase in relation to that. So I guess they are the key aspects. As Mr Parmenter outlined, we went through a business pack in a lot more detail with a lot of the aspects with the workforce recently, and we have still got a few of the workforce to roll that pack out to.

THE SENIOR DEPUTY PRESIDENT: In terms of diagram 3, I think it's page 3, the diagram which is the Westernport sales by sector.

MR BATTYE: Yes.

THE SENIOR DEPUTY PRESIDENT: What is the net effect of those sales variations?

MR BATTYE: So I guess in terms of the impact on the business, you are looking at the increase in export around there so there's part of that around production capability.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BATTYE: Increased capacity there and also round the decline of the domestic market and the move to export.

THE SENIOR DEPUTY PRESIDENT: Yes, and if I'm doing a graph of sales overall, what will it look like? Will it trend up?

MR BATTYE: So overall domestically it will trend down.

THE SENIOR DEPUTY PRESIDENT: Overall domestically it's trending down, is it?

MR BATTYE: Yes.

THE SENIOR DEPUTY PRESIDENT: So if you look at the last few years, say from 2004 on, you have got in exports a substantial dip but then a rise back to, at least in the last sort of year, late 90s levels. You have got a dip though in distribution.

MR BATTYE: Yes.

THE SENIOR DEPUTY PRESIDENT: But you have got trend up in building.

MR BATTYE: Yes.

THE SENIOR DEPUTY PRESIDENT: Those trends up in building and export are not sufficient to overcome the trend, somewhat flat but slightly declining trends in the others?

MR BATTYE: Yes.

THE SENIOR DEPUTY PRESIDENT: Yes, okay. Yes, thank you.

MR BATTYE: Whilst the export market is not, I guess, one of our core market sectors, it's obviously domestics where we are focussing.

THE SENIOR DEPUTY PRESIDENT: Yes. What percentage of Westernport is domestic?

MR BATTYE: So current numbers would be 75 per cent roughly, from the graph.

THE SENIOR DEPUTY PRESIDENT: 75 per cent? Yes, okay. Thank you.

Mr Parmenter.

MR PARMENTER: Thank you, your Honour. In response to the current business position, Westernport has initiated or accelerated a number of programs aimed at reducing costs or increasing revenues. Examples include rationalising unprofitable products or customers, developing core export markets. As Mr Battye explained, the export market is significantly less attractive to Westernport than the domestic market in terms of earnings; and growing domestic volumes.

One of the challenges for the Westernport site is to reduce costs by $15m over the current financial year and that challenge has been discussed with employees as part of this presentation. So given the business performance of the site and the future challenges that we face, we say that any wage increase over 4 per cent per annum is financially irresponsible.

In addition, the total annual wages bill at Westernport for 2006/2007 financial year was in the order of $58.6m. That's for wages employees alone. A 4 per cent wage increase will add approximately $2.3m to annual costs. A four and a half per cent wage increase adds approximately $2.6m to costs. So half a percent equates to $300,000 and this is at a time when Westernport has initiated an aggressive cost reduction program.

Your Honour, we believe that our employees are well paid, well compensated and iron workers at Westernport, we would say, enjoy generous wages and conditions of employment. An iron worker level 3 has the potential to earn approximately $80,000 per annum, following the continuous shift roster. I have an outline here that I can provide to the Commission which just explains how the figure is derived.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR PARMENTER: So your Honour the one-page sheet basically sets out some of the conditions, if you like, that sit around the 12 hour roster. So employees work 160 hours in a 28 day cycle. They are paid 220 hours per 28 day cycle. On top of that there's a shift loading of 10 per cent for the actual hours worked and there are 13 shift cycles in a year. We have chosen iron worker level 3 because it's, if you like, a benchmark. Most employees at the site are either level 3 or above and level 3 is attainable in all areas of the plant. So you can see down the bottom of the table there, the total potential earnings are almost $80,000 per annum, if you factor in four hours discretionary overtime per week. If an employee does not work that discretionary overtime their earnings are approximately $70,000 per annum.

On top of that there are a number of other payments or benefits that apply. They include a short term incentive scheme which this year paid on average 9.3 per cent of base pay. It includes superannuation; another benefit is a generous superannuation scheme where, if an employee contributes 5 per cent, the employer contributes 14 per cent; and employee share plans, long service leave paid at shift rates et cetera.

THE SENIOR DEPUTY PRESIDENT: Just as a matter of interest, what is the take up on the higher employer contribution?

MR PARMENTER: I don't have exact figures, but my understanding is it's quite significant. It's very attractive. So your Honour in summary we say that an appropriate wages outcome for the next 12 months is up to 4 per cent due to the following. Firstly, the intent of clause 5(1) Part B of the agreement is that the survey of customers and within the steel industry would be the key determinant in settling the amount of the wage increase to apply for the 12 month extension. The survey shows a majority outcome of 4 per cent in 2007 and those outcomes were accepted by the AWU during our negotiations.

Westernport employees are well rewarded and increases over recent years have been in excess of Consumer Price Index. From a business perspective, Westernport must manage costs effectively. As outlined, we have recently accelerated a cost reduction program, engaging all our employees to assist in earning our future. We believe that an increase in excess of 4 per cent would be financially irresponsible, given the challenges that we are currently tackling, including poor business performance, increasing input costs and the decline in our traditional markets. If it pleases the Commission.

THE SENIOR DEPUTY PRESIDENT: Thank you. Mr Buntman.

MR BUNTMAN: Thank you, your Honour. If I could just indulge the Commission, I'll run through our submissions for this matter. The agreement in question is the BlueScope Steel Westernport Certified Agreement 2004/2007, which came into force on 23 March 2005 and has a nominal expiry of 1 November 2007. The appropriate section as section 5 regarding current proceedings has been explained by Mr Parmenter. We would say, however, that the wording of the parties undertaking a survey to assist determine a pay outcome is not a key determinant but merely a tool to assist the Commission in making a decision on an appropriate outcome in this matter.

As stated by Mr Parmenter, the parties have undertaken negotiations. They were without prejudice negotiations. BlueScope have indicated that they are seeking, I think the maximum of a 4 per cent outcome. The union on behalf of its members has indicated that it will consider 4.5 but in fact we are seeking a pay outcome of 5 per cent out of this matter, which reflects the results and achievements of our members working at what we would call the Westernport works, and the achievements they have resolved(six) throughout life of the current agreement.

Westernport works includes BlueScope, its alliance partners and contractors as well as our members, and people who are members of other unions. This claim is merely in relation to our members and we are seeking 5 per cent. BlueScope, and in particular, the Westernport works, have set a precedent in meeting the wage demand for its alliance partners which it funds, and contractors which it pays for. Those alliance partners and contractors have not provided the same amount of, we believe, cooperation and benefits that AWU members have at the site. Nor would the success of the site have been possible without the role of the AWU and its members working there. We believe that the 5 per cent would maintain that ongoing successful working relationship.

Section 7 of the agreement provides for annual yearly wage increases and on all permanent, all purpose allowances of 4 point per cent per annum on 1 November 2004, 2005 and 2006. The agreement itself a number of things. Section 1.2 provides that:

In order to ensure that BlueScope is able to provide employees with appropriate wage and wage related benefits and achieve the aspirations of BlueScope as a viable standalone steel company and the Westernport works, BlueScope and the AWU commit to work together to achieve four goals. Those goals being improve operating costs per tonne to at least equal or undercut overseas steel producers selling to Australia, reduce costs by at least 2 per cent per annum year upon year, ensure delivery performance of at least 98 per cent with a drive to reach one hundred per cent for each customer, and achieve working arrangements that allow BlueScope to move swiftly with changing conditions and customer needs.

Those are ongoing benefits which the AWU members working there have worked throughout the life of the agreement, and its predecessor agreements, to achieve with Westernport works and which we say a 5 per cent wage increase over the next 12 months should reflect those efforts.

As we will demonstrate there are numerous examples of AWU members working and cooperating with the Westernport works and instances where they have not needed to, to achieve as best as possible outcome. Section 3 of the agreement provides for the key principles underlying that and there are six of those. The first one is:

Continuing to do whatever is safe, logical and legal to achieve operational and organisational excellence in the workplace.

The second one is:

Maintaining competitive wages and conditions.

The third one is:

Minimising costs imposed on the business and readily support the implementation of cost and waste reduction initiatives.

The fourth one is

Satisfying customer requirements on a daily basis.

The fifth:

Eliminating the impact of industrial action being borne by customers, business and employees by adhering to the agreed dispute resolution procedure.

And finally:

Creating model remuneration systems more closely aligned to the needs of the business and the employees.

Essentially and critically these reflect the exact reasons why a 5 per cent is necessary over the next 12 months. Ensuring the health and safety of AWU members as well as all other persons and parties associated with the Westernport works is critical. AWU members strive to achieve best practice outcomes and should be rewarded accordingly. In the marketplace and work environment where shortcuts and cost cutting leads to a failure to ensure best practice at times, dangers and accidents also occurring, our union and our members have continued to strive to ensure maximisation of principles of health and safety, which can only be done through the cooperation between the parties. Throughout the life of this agreement we submit that the AWU members have in fact strived to achieve best practice.

We submit that by the very wording of the clause it would be illogical for the Westernport works to reduce wages over the next 12 months yet insist on achieving those organisational or operational areas of excellence, which is only possible with the AWU members. The agreement has provided for three.4.5 per cent increases; a 4 per cent increase is essentially, we say, a wage reduction.

THE SENIOR DEPUTY PRESIDENT: Well, it's not really, is it?

MR BUNTMAN: Sorry?

THE SENIOR DEPUTY PRESIDENT: It's not really a wage reduction. It's just not an increase as high as previously.

MR BUNTMAN: It's a reduction in the increase.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: We say the onus is upon the Westernport works to maintain competitive wages and conditions. We say that a 4 per cent increase does not reflect that but a 5 per cent does. We submit that the term "maintain" does not connote the 4 per cent that has been offered. We say that it warrants a 5 per cent wage increase.

THE SENIOR DEPUTY PRESIDENT: On what basis do you say 5 per cent? No one is getting 5 per cent.

MR BUNTMAN: That's correct.

THE SENIOR DEPUTY PRESIDENT: So on what basis do you say 5 per cent?

MR BUNTMAN: No, we are saying that the use of the word "maintain" does not connote that a wage increase below that provided in the previous three years of the agreement should be tenable and that is why we are seeking a 5 per cent wage increase.

THE SENIOR DEPUTY PRESIDENT: Where is the maintain?

MR BUNTMAN: Just bear with me for a moment. Section 3 provides under the key principles underlying the agreement:

Maintaining competitive wages and conditions.

THE SENIOR DEPUTY PRESIDENT: Yes, okay.

MR BUNTMAN: That term maintain is what I was referring to there, your Honour.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: We intend to demonstrate the extra efforts and tasks undertaken by AWU members, often on their own volition, and working alongside the management of Westernport to achieve its aims and goals of cost minimisation, profit maximisation and reduction of waste. Importantly an essential element of the successful rollover of this agreement for 12 months is the elimination of the right of employees to take lawful industrial action, to campaign for their minimum working terms and conditions of employment. Whilst industrial action can be a detrimental process and very costly to Westernport works, with flow-on effects to customers, and so we see a great benefit of an agreed and fair wage rise as eliminating that aspect of detrimental conduct by a protracted dispute process.

THE SENIOR DEPUTY PRESIDENT: It's also a benefit for your members. They don't have to lose wages. It's a win-win here. Yes, go on.

MR BUNTMAN: Mr Parmenter referred to research results that BlueScope had conducted, or survey results. We have conducted our own survey and research results. I would like to hand up a document. I've just provided one bundle of documents for the Commission and I will refer to them as I go along.

THE SENIOR DEPUTY PRESIDENT: Thank you.

EXHIBIT #B1 BUNDLE OF DOCUMENTS TITLED ANNEXURE A

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: The first things I'm going to talk about are documents marked annexure A and annexure B in that bundle. Basically those documents represent out research into the wage increases which have occurred across the steel industry and across the BlueScope family. We have identified 18 industrial instruments which contain wage increases, most of which have been during the life of the agreement which is in question here. There's an extensive list. Annexure B does graphically represent and make it somewhat easier to explain the process. But the ..... is 18 industrial instruments. There have been 52 wage increases, taking into account yearly increases based on the anniversary or other dates of wage increases specified in those instruments. Of those 52, only 15 have been below 4.5 per cent, which we equate to 71.2 per cent of all wage increases having been 4.5 per cent or above within the BlueScope family.

THE SENIOR DEPUTY PRESIDENT: Just let me understand this. So there's year 1, year 2, year 3. The date under each of those years is the date of the increase?

MR BUNTMAN: Basically we haven't included the actual dates. As comes in on annexure A it - yes, I'm sorry your Honour. Were you referring to annexure A there?

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: Yes, so that is the date of the increase.

THE SENIOR DEPUTY PRESIDENT: Okay, so if we look at Spring Hill is the first one.

MR BUNTMAN: Yes.

THE SENIOR DEPUTY PRESIDENT: There's two increases there of 4.5. There's no third increase in that?

MR BUNTMAN: That's correct, your Honour. I think the nominal expiry was - it was just a two year agreement.

THE SENIOR DEPUTY PRESIDENT: It's a two year agreement; it refers to an award. Do you know how that works?

MR BUNTMAN: I think the research I have here said it was an award made between BlueScope and its employees.

THE SENIOR DEPUTY PRESIDENT: So it's a consent award, is it, do you think?

MR BUNTMAN: Yes, I believe so.

THE SENIOR DEPUTY PRESIDENT: Okay. All right, so let's look at an agreement. Let's take Lysaght Tamworth; this is an agreement 04, expiring 24 eight and the last increase there was 4.5 per cent August last year. We don't have a new agreement for that area?

MR BUNTMAN: The information I have is these are the most recent agreements for each particular aspect. Some have obviously passed their nominal expiry and haven't been replaced.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: It's more a reflection on the performance of the company throughout its family and what we consider are competitive wages and conditions they have been able to offer throughout the life of these previous agreements and the agreement which is about to expire, past its nominal expiry date.

THE SENIOR DEPUTY PRESIDENT: Yes, but you see you say that, you know, most of them give a 4.5 per cent increase, but most of them which give a 4.5 per cent increase have given that last year.

MR BUNTMAN: That's correct.

THE SENIOR DEPUTY PRESIDENT: So we are actually talking about a year on from most of these agreements, are we?

MR BUNTMAN: Yes.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: Yes, that's correct. That's correct. Some of them do - for example if we go to the year 3 column.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: Some of them, for example - bear with me - the BlueScope Lysaght Dubbo one has another wage increase this year. It's the second last one on the second page.

THE SENIOR DEPUTY PRESIDENT: Yes. But arguably that's a lag, isn't it, on the current agreement?

MR BUNTMAN: I missed what you said, your Honour, I'm sorry.

THE SENIOR DEPUTY PRESIDENT: Arguably it's a lag on the current agreement because that's showing 05, 06, 07.

MR BUNTMAN: Yes.

THE SENIOR DEPUTY PRESIDENT: So is it arguably you had your agreement of three sets of 4.5? BlueScope Lysaght Dubbo actually were a bit delayed in getting their agreement, so they are now only getting the three sets of 4.5?

MR BUNTMAN: Well, yes, individually Lysaght would have negotiated its own agreement wit BlueScope. What we are trying to do is demonstrate that there has been essentially a precedent set that across the BlueScope family, during the previous periods of a lot of agreements which are passing or have passed the nominal expiry, the majority of times 4.5 per cent has been the annual wage increase. There are a few times where it has been below that and a few rare occasions where it has been above that. We would use it to demonstrate that precedent has essentially been set that an expectation of 4.5 per cent as an absolute minimum is expected and that an increase of 4 per cent should not be tenable.

THE SENIOR DEPUTY PRESIDENT: Okay, let me understand that. Let's just take BlueScope Lysaght Dubbo as an example. There's something there on the third-last entry on page 2, "BlueScope Lysaght Supplementary Agreement 04 X", I'm no sure what that means.

MR BUNTMAN: Expires, your Honour.

THE SENIOR DEPUTY PRESIDENT: So it has expired?

MR BUNTMAN: No, it expires in April 2008.

THE SENIOR DEPUTY PRESIDENT: I see. It expires in April 2008. Let's just take that first one; how does that compare with the second-last item; what is that?

MR BUNTMAN: Basically there are agreements which are underpinned by supplementary agreements.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: So what it demonstrates in that instance is that the supplementary agreement does not provide itself for wage increases but is underpinned by the Lysaght Dubbo one before it, which provides for 3.5 per cent wage increases. However the supplementary one does expire in April 2008, of which there is no additional wage increase provided for.

THE SENIOR DEPUTY PRESIDENT: No, I'm lost. You have got a BlueScope Lysaght Dubbo agreement, right?

MR BUNTMAN: Yes.

THE SENIOR DEPUTY PRESIDENT: Which one is that? Is it the third-last one or the second-last one?

MR BUNTMAN: It's the second-last one.

THE SENIOR DEPUTY PRESIDENT: Okay. Then do you say there's a supplementary agreement?

MR BUNTMAN: That's correct.

THE SENIOR DEPUTY PRESIDENT: So the second-last one was to expire 25 April next year?

MR BUNTMAN: That's correct.

THE SENIOR DEPUTY PRESIDENT: What is the supplementary one then?

MR BUNTMAN: It provides additional terms and conditions of employment be silent on wage increases and is in fact a small document which is - - -

THE SENIOR DEPUTY PRESIDENT: So, it has not altered the expiry date?

MR BUNTMAN: No.

THE SENIOR DEPUTY PRESIDENT: I see. But it has altered something else and so that the wage increase that was put in that original agreement was three sets of 4.5.

MR BUNTMAN: That's correct, your Honour.

THE SENIOR DEPUTY PRESIDENT: Yes, okay. Is that the same with the BlueScope Lysaght Geelong supplementary?

MR BUNTMAN: That's correct, your Honour.

THE SENIOR DEPUTY PRESIDENT: Yes, okay. So is there any supplementary agreements that provide for a fourth wage increase?

MR BUNTMAN: Sorry, provide for?

THE SENIOR DEPUTY PRESIDENT: A fourth wage increase?

MR BUNTMAN: No, your Honour.

THE SENIOR DEPUTY PRESIDENT: Okay. Yes, okay. So in terms of this document, the last operative date of a wage increase under extant agreements is 24 April 07; is that right, at Lysaght Dubbo?

MR BUNTMAN: Yes, the 25th, your Honour. Yes.

THE SENIOR DEPUTY PRESIDENT: Now maybe your Lysaght Lindhurst, 8 August 07?

MR BUNTMAN: Yes, there's a number of - for example the Lysaght Cardiff one expires on 23 November 07. The Lysaght Geelong expires 30 September 07.

THE SENIOR DEPUTY PRESIDENT: Yes, yes, but if you take the Cardiff one.

MR BUNTMAN: Yes.

THE SENIOR DEPUTY PRESIDENT: The last time they got an increase and the last increase that is going to apply under that agreement is November last year.

MR BUNTMAN: That's correct, your Honour.

THE SENIOR DEPUTY PRESIDENT: Yes, okay. Yes.

MR BUNTMAN: I'll move on from it.

THE SENIOR DEPUTY PRESIDENT: Indeed, is it a fair summation that in the BlueScope family of companies this is the first increase for, what may it be, 08, to determine you said? No one has negotiated an increase for 08? Because these all look like agreements from what I might call the last round.

MR BUNTMAN: Another document I will bring up will demonstrate new agreements with Westernport alliance partners at Westernport works, which do cover upcoming periods.

THE SENIOR DEPUTY PRESIDENT: Yes, but they are alliance partners.

MR BUNTMAN: Yes.

THE SENIOR DEPUTY PRESIDENT: As opposed to what I might call BlueScope proper.

MR BUNTMAN: Yes, that would be correct, based on that information in those annexures there.

THE SENIOR DEPUTY PRESIDENT: Yes. Yes, okay.

MR BUNTMAN: It is an unusual agreement in that it does provide for that 12 month rollover. I haven't seen too many agreements like that. Therefore finding agreements of similar types is not easy.

THE SENIOR DEPUTY PRESIDENT: Yes. No, that's all right. In the future either side will argue whether what is said formed part of the last agreement and what was the first round of the next. Yes, okay. Yes, go on.

MR BUNTMAN: Thank you, your Honour. If we move on to a document that's titled Annexure C there.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: That's wage increases in the BlueScope Steel Limited Westernport works, its alliance partners and its contractors. All these people work on the same site down at Westernport there. They work alongside AWU members and other union members at the works there. Now there's six agreements there which I think one of those was referred to in Mr Parmenter's documentation. Actually it wasn't. I thought it was there, but it wasn't. Those alliance partners have negotiated new agreements with BlueScope. BlueScope funds them, it pays the contractors and in every one of those agreements there's a 4.5 per cent wage increase.

THE SENIOR DEPUTY PRESIDENT: What does NED stand for?

MR BUNTMAN: Nominal expiry date.

THE SENIOR DEPUTY PRESIDENT: Okay.

MR BUNTMAN: So for example we have Roll Surface Technologies Australian Workers Union Westernport Collective Agreement which has a nominal expiry date of April 2010, has three 4.5 per cent wage increases. The Westernport Maintenance Alliance Agreement, which has been lodged, again has three 4.5 per cent wage increases. Now I notice there's a typo on the document in terms of the year that the wage increase falls. I do apologise for that.

THE SENIOR DEPUTY PRESIDENT: Is it two seven two eight two nine?

MR BUNTMAN: Yes, that's correct.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: Again, if we move to Sodexho, it has three 4.5 per cent wage increases, one which is an increase in November 2007 and again these all demonstrate that in the current state of play, the current market, with people working on site there, that they are all getting 4.5 per cent wage increases.

THE SENIOR DEPUTY PRESIDENT: From the Westernport site services their first 4.5 was September 05 and than not another 4.5 until March 07; is that right?

MR BUNTMAN: That's correct.

THE SENIOR DEPUTY PRESIDENT: Yes, okay.

MR BUNTMAN: There's a few there where the dates don't fall on the exact anniversary each year.

THE SENIOR DEPUTY PRESIDENT: Yes, sure. The Westernport Maintenance Alliance Agreement is an agreement which is said to have - which seems to have a nominal expiry date of 2010 with pay increases of April 07. Mr Parmenter might be better able to answer these; these are what you might call alliance partners; do you know when the alliance partnership for Westernport maintenance alliance came into effect?

MR BUNTMAN: I'll just seek instructions on that, your Honour. Yes. I'm instructed there's an element of back pay involved.

THE SENIOR DEPUTY PRESIDENT: Right.

MR BUNTMAN: It was lodged I think at the same time as the Silcar agreement. IF Mr Parmenter wants to - - -

THE SENIOR DEPUTY PRESIDENT: Yes, he may be better able to answer that.

MR BUNTMAN: Yes, I'm sorry, I’m instructed it is the Silcar agreement, which is in the - - -

THE SENIOR DEPUTY PRESIDENT: That's the Silcar agreement, is it?

MR BUNTMAN: Which is in Mr Parmenter's document he handed up, an alliance partner.

THE SENIOR DEPUTY PRESIDENT: Yes, okay.

MR BUNTMAN: What we would like to demonstrate with this document is we have alliance partners, we have contractors getting 4.5 per cent every year and then these are negotiated agreements already, with BlueScope Westernport works. Now BlueScope are approaching us and saying, "Well, we're only going to give you 4 per cent" and we feel that there isn't a justification why our members should be treated diferentially(sic) or be provided with a lower wage increase than alliance partners and contractors on site, of who BlueScope pay. We use this document to demonstrate that 4.5 per cent has been the common increase provided.

THE SENIOR DEPUTY PRESIDENT: Yes. It's a question of where you come in the cycle though, isn't it, in terms of explanation of that? I mean arguably some of these agreements which are showing a 4.5 per cent increase now, apply from now, are delayed effects of the 4.5 they have already had.

MR BUNTMAN: That may be the case with some of them but some of these are still which go - clearly if the parties have agreed to provide that over a period of time, the same market conditions must have been foreseen or exist at the time of making the agreement.

THE SENIOR DEPUTY PRESIDENT: Well, I assume you would say that particularly in respect of Roll Surface and the Silcar agreement, that they are showing 4.5 still, throughout 2008/09.

MR BUNTMAN: That's correct.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: Thank you, your Honour. Now over the page of that document is a financial year 2007 results presentation for the period ending 30 June 2007; a presentation made by Kirby Adams, the managing director and CEO, and Paul O'Malley, the chief financial officer. I put in there a set of extracts which illuminate the performance of BlueScope over the past three years in which the agreement with the AWU has been in operation. We will run through them and we contend that they demonstrate the financial success of BlueScope as an organisation, thanks in large part to its Australian operations and its Westernport works.

The document which has an A on the left-hand side, it's called Zero Harm Is Our Goal For Our Team and Our Communities, represents lost time injury frequency rate and medically treated injury frequency rates. For the period 2005 to 2007 financial years it shows a clear decline in these figures. The reduction of these figures is one of the clearly identified goals in section 3 of the agreement, which states:

Continuing to do whatever is safe, logical and legal to achieve operational and organisational excellence in the workplace.

We would say that reducing levels of harm and injury and lost time injury is a key factor which goes to that, and these graphs clearly show from 2005 to 2007 a decline in all numbers.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: Now of course this is across the BlueScope family so we don't have, you know, often the exact details. The next document is headed Record Sales Volumes Driven By Strong Demand For BlueScope's Products. It demonstrates the impact of the sales volume contributed by Australia to its worldwide operations and in each of the three years demonstrated, the sales volumes have continued to increase with Australia's impact being a main contributor.

We can see in 2005 it was 43 per cent. It dropped to 32 per cent in 2006, despite the overall external despatches going up, and it rose in 2007. Again the record of 7.6 million tonnes, which was a record for BlueScope Australia, playing the largest factor in that.

THE SENIOR DEPUTY PRESIDENT: Now hang on. These million tonnes; are these exports are you saying?

MR BUNTMAN: I believe exports accounted for 36 per cent of the total volume in that figure.

THE SENIOR DEPUTY PRESIDENT: So is this the amount of product despatched from BlueScope?

MR BUNTMAN: This is the sales volumes.

THE SENIOR DEPUTY PRESIDENT: Sales volumes?

MR BUNTMAN: Yes.

THE SENIOR DEPUTY PRESIDENT: Okay.

MR BUNTMAN: We see the end of this financial year was a record and Australia provides over a third of that amount, which to us indicates a very healthy running organisation in Australia; not one suffering financial constraints and problems.

The next document is titled Taking Care of Our Shareholders and it shows an increase and rise in total return to shareholders. Obviously shareholder return is an essential key indicator of success for any public company and it showed that this figure overall since 2005 has continued to rise. Shareholders have been getting a greater return for their value. Shareholders will hold a company accountable if it suffers financially and doesn't perform its results(sic). By providing greater returns we say it's another indicator of the financial success and good running of BlueScope in Australia. They go towards our contention that there is not financial hardship for BlueScope and a key derivative of the success of BlueScope are those people working on site, and in particular in this instance it's the Westernport site.

We can't say what amount is directly rebatable to the Westernport works but we would say an overall symptom of the success of BlueScope would be reflected in Westernport works.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: The next two documents, simply again we are just trying to demonstrate the success of BlueScope over, well in this instance it's the financial years 2003 to 2007, which demonstrates just the enormous amount of revenue growth in the company across all sectors. The total revenue, for example, at financial year end 2007 was $8.8 billion, an increase of 68 per cent, I believe the graph demonstrates.

Similarly, the graphs on the next page indicate that there's a 68 per cent growth in sales revenue since 2003, symptoms of a well oiled company running very well, meeting its demands internationally and market forces, part of which has to be competitive wages. We contend that a key asset of the company is its people and so by providing a 4 per cent wage increase which has been less than the previous three years would potentially have a detrimental effect on all of these bottom lines. Even if miniscule on a worldwide scale, Australia is still providing the major growth for its worldwide operations. It would have a detrimental effect; something we wouldn't want to see happen.

Now I think Mr Parmenter provided a similar graph to that which is titled Coded and Building Product Administrative Variance Analysis.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: This one shows just the year ended 2006 to 2007, which can be seen that there's an increase of earnings before interest and tax of 44 million, with sales revenues up 15 per cent and a return on pre-tax net assets of 3 per cent, which are significant financial gains and results.

The purpose of the next page is simply to do an analysis of our nearest partner which is Asia, and their variance analysis which had an increase of only 23 million in its - excuse me - yes, 23 million compared to Australia's 44, although sales revenue was higher at 32 per cent. The actual overall figure, for example sales revenue in Asia was 1.38 billion at 32 per cent, where Australia's was 15 per cent of three point - almost 2 billion. So the actual volume was significantly higher and both achieved the same return on net assets.

We are just using that to demonstrate the strength of Australia's operations and a large part of which is the Westernport works. We say they paint a picture of a company that is not only financially stable but highly successful and is set to remain that way with Australia being a primary contributor to that success and Westernport playing a large role in that.

Another important aspect of the survey we say is let's look at what is happening on site. Let's look at what things the employees or AWU members are actually doing to make sure that Westernport works is successful and BlueScope is successful. Those efforts which often you can't put a financial dollar on go a long way to achieving the financial success, and which we believe that, you know, a reduced wage increase would be detrimental upon.

THE SENIOR DEPUTY PRESIDENT: How many employees?

MR BUNTMAN: Excuse me?

THE SENIOR DEPUTY PRESIDENT: How many employees are covered by this proposed increase?

MR BUNTMAN: 550 employees.

THE SENIOR DEPUTY PRESIDENT: Okay.

MR BUNTMAN: So throughout the duration of the agreement AWU employees at BlueScope have remained committed to the ongoing success and development of BlueScope as a leader in its field in Australia and worldwide; and they have strived to do whatever it takes to achieve those results and achieve the goals and objectives outlined in sections 1.2 and 2 of the agreement, which I alluded to earlier.

An example of this was in September 2005 where a hot strip mill fire occurred. It was a dangerous and damaging fire which caused a lot of damage and shut down of works. If it wasn't for the AWU members being proactive and really knocking on the door of management to get this thing fixed, the process to get the mill repaired would have taken a lot longer and wouldn't have been done. It was the initiative of the AWU members on site to get the mill up and running again and working for the benefit of everyone, that really got this project going. They readily volunteered their time to rebuild the mill as quick as possible and it allowed Westernport works to deploy people across the plant, even though it significantly reduced the peoples' individual overtime and earnings. For the greater good they did it.

They were willing to make sacrifices for the greater good and the hot strip mill was rebuilt and fully functioning, providing the financial benefits that it does for BlueScope; and those employees should be recognised. It's hard for us to go back to employees and say, "Well, thanks for your effort and you're going to have a reduced wage increase this year". We believe that these non-financial things demonstrate clearly that a wage increase greater than what has been offered throughout the life of the agreement should be forthcoming.

In addition to that, during peak production or flow times in the mill, the AWU members who work on the crews have cooperated and worked with the Westernport works to create a flexible working environment by cutting down manning levels on day shift and adjusting manning levels to work a night shift. So what value can you put on the flexibility to ensure the smooth and efficient running of the operations? Quite simply the employees agreed to do this. They didn't have to. They agreed to do this and cooperated fully with the organisation.

Without that cooperation the parties would have had to go through, probably, a significant restructuring project - I'm sorry - process and adjustment to the workforce. The direct effort of the unions and the members need to be recognised and they made sure that there was a smooth transition to ensure peak performance, costs savings which would results in the maximisation of profits.

Another thing that the members have worked on has been a restructure of the training classification process, which again members have worked cooperatively with Westernport works to create this. This has created greater employee ownership of management of operations through highly trained work teams. We say the most important assets of the works are the employees. They are highly trained work teams and their wage increase should reflect that. The restructure classification would be part of any new agreement that is formed between the parties in the future, and the employees should be entitled to due compensation for the efforts they have done now, which will reap greater rewards in the future.

There has also been a number of initiatives and projects undertaken. Mr Parmenter referred to a waste reduction cost saving target of 15 million, something which quite simply couldn't be possible without the AWU members working cooperatively with them. In that vein, an ideas blitz was introduced whereby AWU employees were asked to submit cost saving and revenue generating ideas to the Westernport works leadership team. Whilst enabling AWU employees to take an active part in the idea generation, this process has delivered a considerable cost saving already to Westernport works, through the elimination of outside consultants and hours of time spent by the leadership team to do this alone.

Quite simply if Westernport is taking advantage, as it should, of its most knowledgeable assets, and that is its people, and they have happily obliged the company to achieve those goals - now this idea blitz, to date 200 ideas have been presented to the leadership team, of which 39 have been accepted and so far six implemented, delivering $1.5m in savings. There are a further 89 ideas currently under review, which if six can save 1.5 million, could save significant amounts of money. This is a direct result of the AWU members.

We would submit that every time - well, my instructions are that when the parties go through a wage negotiation process, the company always screams financial hardship and problems. We would submit that Westernport or BlueScope should demonstrate where cuts have been made from its senior management first, as providing leadership to say, "Well if we're getting wage cuts, everyone else should". I guess we challenge BlueScope to provide that information and then say, "Well, how much have we saved? Now what do we need to do?". We have no record of basically the top guns sacrifices occurring, it's always bottom up.

We would further submit that the preference for wage increase is more beneficial to companies that are contractors or alliance partners, as opposed to our members engaged by Westernport works, shows an indication of preferential treatment to non-AWU members. We say this could fall foul of the discriminatory practice -this could be a discriminatory practice against union members. In particular section 792 of the Workplace Relations Act which provides that:

An employer must not for a prohibitive reason or for reasons that include a prohibitive reason do or threaten to alter the position of an employee to the employee's prejudice.

Section 792C:

Or discriminate against another person in the terms or conditions in which the employer offers to employ that other person as an employee.

Subsection N provides:

In the case of an employee or an independent contractor who is a member of an industrial association that is seeking better industrial conditions is dissatisfied with his or her conditions.

I do apologise, that's section 793(M). These are the freedom of association provisions. We would say there is a possible argument that by offering alliance partners and contractors who say, "We want these pay rises" and BlueScope providing them, then turning round to our members and saying, "We're not going to give you the same amount" could be discriminatory because they are in fact members of the union. That's not founded. That is our submission and we do take it seriously, the differential treatment.

A further issue is that AWU employees throughout the life of the agreement have been required to undertake safety and fire warden training. These personnel are essential in the case of fire or bomb threats or other issues, and as I've said there was already a fire. They have been required to partake in active duties following the training or in the event of such emergencies occurring. That poses obvious health and safety issues to the employees involved in that. What is interesting is the employees don't get paid for that training. They don't get remunerated for it. They don't get any reward for putting themselves in danger for the greater good of fellow workers, whether they be members of the same union or anyone else. We would say that the wage increase we are seeking would reflect that fact, a health and safety issue which our employees put themselves into.

Another example is the uncoated department of Westernport works which consists of four work crews. This has been restructured with the full cooperation and assistance of the AWU members. There consists four work crews with a certain number of employees in each crew. Westernport works have set about to restructure this by adjusting one of the work crews to reduce the number of employees in it, being eight in that particular work crew. That work crew will be responsible for the coil ..... and the slick line units.

The other three crews have up to 21 employees in each crew. That's over two and a half amount(sic) and they are responsible for running all other units which were previously run by the four units. What we are saying is we have happily worked with Westernport works to create a flexible working environment so they can achieve their operating goals, and reap the financial rewards for it. The per annum cost savings would be well over $100,000 for this small unit. Quite simply the union could have turned around and said, "Well, no, that's a disadvantage to us. We don't have to do that. We're not required to". But instead they have. They worked with BlueScope to achieve the financial goals and the operational goals it wants for the greater good.

We would say that a 4 per cent wage increase would be a slap in the face for these employees who have gone out of their way to change their job, their work life balances, and we believe that the wage increase we are seeking of 5 per cent over the next 12 months would be a reward and basically show other workers, if you work with us there are rewards involved.

I wanted to speak briefly about the Silcar agreement, or Silcar who is an alliance partner. Now basically my instructions are Silcar was able to attract BlueScope employees by offering higher wages and ensuring wage increases of 4.5 per cent. They were able to attract employees this way, naturally reducing the BlueScope workforce and its wage bill accordingly. We think that sends a message that if BlueScope are not able to offer our members a similar wage increase, then what does it say about retaining its talented workers, its long term workers? What happens when the CEU people, with all the experience, the leaders in the workforce, go to another company because they are offered more wages? It creates team disharmony. It creates imbalances in the workforce.

My instructions are we are already seeing on the shop floor or in the actual works that Silcar employees are essentially bragging about how much more they get paid than AWU members, because they were poached, creating a great deal of disharmony and animosity between workers who were once friends and colleagues. This is an immeasurable detriment to the company if there's friction and disharmony amongst its entire workforce. We believe that a 4 per cent wage increase would simply say to our members, you know, "You are not valued. Your tenure and experience isn't valued. If you get a better deal, go." There is no job security. There is no long term employment. We want to send a message to our members that if you work cooperatively with the company to achieve its goals, you will be rewarded for that.

We would submit that a 4 per cent wage increase does the opposite to that and Silcar is an example of how that has happened. They have successfully negotiated over the next three years a 4.5 per cent increase wage increase. We are only looking at the next 12 months. After that, you know, something else can be negotiated. We are saying, "Look, for the life of the agreement you've achieved a lot of great things. We don't think you should be disadvantaged for that".

Finally, I won't be too much longer your Honour.

THE SENIOR DEPUTY PRESIDENT: That's all right.

MR BUNTMAN: We believe that a reduced wage increase, put it that way, would be likely, if it can't be resolved, to lead to industrial disputation in future agreement making processes which could be long and protracted and unpleasant; disharmony amongst workers of varying areas, unions and employees on the site of the Westernport works; disenchantment as to the goals the Westernport works aims to achieve, as is outlined in the agreement; as well as employee job satisfaction.

We say it would have a severely detrimental impact upon the good working relations between the Westernport works and AWU members employed there, and the establishment of a negative precedent that would not be supported or tolerated by our union or our members in future agreements.

I will just refer to a couple of brief points made in Mr Parmenter's submissions. As stated he initially said that we were seeking a 4.5 per cent increase. Those were without prejudice discussions. We are seeking a 5 per cent wage increase. That's the instructions I've given to the members and that is what we are seeking here today. Mr Parmenter referred to the survey largely determining the wage increase. As I've stated we say it merely just assists. The decision is of the Commission and there is a range of issues, not just the statistical exercise, in determining what an appropriate wage increase is.

In the exhibit P1 which Mr Parmenter handed up, in their statistical analysis Silcar was the only alliance partner. Everyone else was a customer, a customer and steel industry. We say the most applicable one is Steelcar who is an alliance partner on site, who have an agreement which expands the next three years and they get 4.5 per cent increase of every year. We say in that statistical analysis or survey by BlueScope, that's a key employer to look at there.

If you refer to the second document handed up by BlueScope, which is P2, the first page Coated and Building Products - - -

THE SENIOR DEPUTY PRESIDENT: P2?

MR BUNTMAN: - - - Australia Financial Performance.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR BUNTMAN: Now it's important to note that there is this graph, but the agreement has been in place since March 2005 and expires 1 November 2007. So since 2005, which is the financial year ended in June and there was a $2m profit, since then there has been a $39m increase throughout the life of the agreement. This agreement wasn't operating prior to that, where there were the 156 and 238 million. I say this graph we should focus on what happened throughout the life of this agreement, and throughout the life of that agreement there was a $39m increase.

Turning to the Westernport sales by sector graph, that's the one with the coloured lines on it titled Westernport Challenges Our Changing Customer Profile. Again if we look at the period in which the agreement actually operated nearly all of those lines have increased. The distribution one did decrease initially but since, it looks like mid-2005, it has increased. All those figures have increased.

THE SENIOR DEPUTY PRESIDENT: Sorry, which one are you looking at?

MR BUNTMAN: I'm sorry. It's the graph which starts at 1998. This agreement has only been in force for three years. For those three years almost all of those figures have increased and I'm instructed that the building one, and it's a tonnes amount, it's not a dollar amount, and the building one is the most lucrative and that is continuing to rise. That is, I'm instructed, where the profits and revenue and growth for BlueScope will come, in the building, and it's the highest growth. It's continuing to rise throughout the life of this agreement. We would say that this information demonstrates again the success of BlueScope throughout the life of the agreement, and this is Westernport sales by sector; they have all increased. This can only be done with the cooperation and assistance of our members on site.

Over the page he's referred to "Importance of domestic tonnes versus export tonnes to the bottom line". In my understanding of the submission this is just a scenario. This hasn't actually happened, and so the weight to be given to it should be minimal if anything. We don't know if these 15 per cent increases or decreases will occur. They certainly haven't occurred in the life of the agreement, so we would say that the weight of this graph should be very, very minimal.

Finally, on the final page, Westernport Annual Electricity Usage, again these are forecast figures. They haven't actually occurred so we again say forecasts should be given minimal weight; actuality should be given larger weight.

We would conclude our submissions by simply saying that the agreement asks the parties to try and negotiate after a survey is taken. The parties have attempted to negotiate. That hasn't been resolved. The survey we have undertaken included not just a statistical analysis of previous family agreements, but it is current agreements with alliance partners and contractors as well as the real efforts made by the members under the agreement to improve the operating and financial performance of a company which, quite frankly, is highly successful. We don't believe that there are the financial constraints or the market impacts directly upon Westernport works which justify a 4 per cent wage increase. We therefore seek a 5 per cent wage increase. If it pleases the Commission.

THE SENIOR DEPUTY PRESIDENT: Thank you. Mr Parmenter.

MR PARMENTER: Thank you, your Honour. I would just like to respond to some of the material put forward by Mr Buntman during his submission. Your Honour, Mr Buntman submitted that the union is seeking 5 per cent and quite frankly that is news to us. During our negotiations and discussions we were clearly of the view that the union were seeking 4.5 per cent. During the last negotiation at the start of the discussion that had increased to 4.75 per cent, but by the end of the discussion it was back at 4.5. So for the union to come here this morning and say that they are seeking 5 per cent is disappointing to say the least.

Similarly the survey results that have been presented by the AWU have not been discussed with us so this is the first time we have actually seen that data. I will go to that data later in my response but I can assure you there is current activity throughout BlueScope at the moment renegotiating a number of agreements and my understanding is that 4.5 per cent is not the target of most of the company sites.

Your Honour, Mr Buntman referred a number of times to competitive wages and conditions and what I would like to hand up is a document that we have put together, what we refer to as a value proposition, employee value proposition. It essentially summaries, if you like, the terms and conditions of employment that people work under, that iron workers at Westernport work under. The first page focuses on wages so we believe that our employees are well paid in comparison to other employees. The next box there looks at shift work, the 12 hour shifts obviously maximise time away from the workplace by working 14 rostered shifts in a 28 day period. The shift weekend penalties and rostered overtime add significantly to annual earnings., As I outlined during my original submission there is potential for an iron worker level 3 to earn up towards $80,000 per annum.

On the second page we outline that there's a short term incentive scheme so there's an ability for employees to earn up to a target of 15 per cent of their base pay, sorry a stretch payment for 15 per cent of their base pay. Now it's an attractive bonus scheme which provides for significant bonus payments, depending on the performance of the employee's department and the company and site overall. I mentioned earlier superannuation which is very attractive, and long service leave employees are able to - well, employees are paid long service leave at shift rates, which is in excess of the Victorian Long Service Leave Act.

THE SENIOR DEPUTY PRESIDENT: Under the short term incentive scheme, Mr Parmenter, 10 per cent was the average in 04/05, 3 per cent 05/06 and 9.3 in 06/07; is there any particular reason for the decline in 04/05, 05/06?

MR PARMENTER: That reflected the financial performance of BlueScope Steel overall in that year.

THE SENIOR DEPUTY PRESIDENT: Right.

MR PARMENTER: Part of the 50 per cent of the short term incentive scheme relates to the company financials.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR PARMENTER: In that year neither the site, the division that we are a part of, nor the business overall met the targets that were set for the incentive scheme.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR PARMENTER: So no employees received a payment based on the business financials alone.

THE SENIOR DEPUTY PRESIDENT: Yes, okay.

MR PARMENTER: So other benefits of employment with BlueScope include the employee share plan, and there's a share plan that is open at the moment where if you purchase - well, you can purchase up to $500 worth of BlueScope shares and the company contributes twice that amount. So if you purchase $500 of shares you will end up with $1500 worth of shares. Other benefits, and I will - - -

THE SENIOR DEPUTY PRESIDENT: What is the take up on that?

MR PARMENTER: Quite high. Figures for the Westernport site earlier week were 79 per cent. I'm getting nods. It finishes on 16 October so we expect that it's - generally it has been a take up rate in the 90 per cent, after Westernport.

Other benefits include able to purchase company product at discounted prices, discounts available from a range of suppliers, an employee assistance program, training opportunities which is quite significant in that an employee could - when they start at Westernport they start at the base rate. Those training opportunities allow people to progress to higher levels, potentially to level 4 and a number of employees have achieved that; which obviously increases their income as well.

Some of the other benefits that we have listed there include canteens on site with subsidised food and a recreation centre that's available for the use of employees. So we basically say that employees do enjoy generous conditions of employment.

THE SENIOR DEPUTY PRESIDENT: I'll mark that document, Mr Parmenter.

EXHIBIT #P3 VALUE PROPOSITION OF BSL WESTERNPORT AS AN EMPLOYER

THE SENIOR DEPUTY PRESIDENT: Yes.

MR PARMENTER: Your Honour, Mr Buntman referred in his submission to contractors and alliance partners and the implication was that - no sorry, the statement was that all employees of those companies are getting a 4.5 per cent wage increase, therefore it's reasonable that BlueScope employees should also receive that wage increase. I think the implication, at least my understanding of what Mr Buntman was saying, was that those wage increases are negotiated with BlueScope Steel Westernport. That's not actually the case. Those wage increases are negotiated with their individual companies. BlueScope Steel has no input into those negotiations.

When or if we are approached by contractors regarding wage increases our response is that we are not interested. We are interested in the ability of the contractor to deliver work safely, on a good quality product, and what their end costs are. So we are not interested in what their hourly rates or pay increases are. We will compare contractors when we are making competitive tenders but we certainly do not get involved in negotiating wage rates with contractors.

THE SENIOR DEPUTY PRESIDENT: Is there escalation clauses in the contracts?

MR PARMENTER: In what way, your Honour?

THE SENIOR DEPUTY PRESIDENT: In the sense that if they increase their wages then they can get BlueScope to reimburse them.

MR PARMENTER: When we tender for work we request the contractors to lodge their submissions, which will include in most cases an overall cost. So there is an ability for the contractors to, in the settlement of the contract at the end of the job, to outline additional costs where they may or may not have occurred. I'm not sure if that answers your question or not.

THE SENIOR DEPUTY PRESIDENT: No. The terms of the contracts; are these fixed term contracts?

MR PARMENTER: Which ones, your Honour, sorry?

THE SENIOR DEPUTY PRESIDENT: The ones with for example Silcar.

MR PARMENTER: With Silcar we've got a rolling alliance arrangement with Silcar.

THE SENIOR DEPUTY PRESIDENT: Okay.

MR PARMENTER: So typically it's a five year arrangement.

THE SENIOR DEPUTY PRESIDENT: A five year arrangement.

MR PARMENTER: Yes.

THE SENIOR DEPUTY PRESIDENT: Do the terms of that provide that if their costs increase, for example their wages costs, can they seek reimbursement of that?

MR PARMENTER: Yes. Yes, they can. In some cases. So we have an alliance partnership with Silcar.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR PARMENTER: One of the features of the alliance partnership, if you like, is that a number of the costs are borne by BlueScope Steel. In a number of other cases on a number of other contractual arrangements increases in costs are borne by the contracting company.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR PARMENTER: There are different arrangements applying to different contractors.

THE SENIOR DEPUTY PRESIDENT: Okay. So in terms of the Silcar Westernport Maintenance Alliance Agreement.

MR PARMENTER: Yes.

THE SENIOR DEPUTY PRESIDENT: Where there has been an agreement, it would seem, earlier this year I think.

MR PARMENTER: It was.

THE SENIOR DEPUTY PRESIDENT: For three sets of four point five; was BlueScope, yourselves, aware of what was to be agreed to before it was agreed?

MR PARMENTER: We were aware that Silcar were negotiating their agreement. Silcar didn't seek approval from BlueScope in terms of the outcomes of the agreement.

THE SENIOR DEPUTY PRESIDENT: Okay, and are they able to have reimbursed each of the 4.5 per cent increases?

MR PARMENTER: Yes, they are, your Honour.

THE SENIOR DEPUTY PRESIDENT: Okay, and also Roll Surface Technologies?

MR PARMENTER: No, it's a different contractual arrangement with Roll Surface Technologies.

THE SENIOR DEPUTY PRESIDENT: Right. So they have agreed to three sets of four point five again this year.

MR PARMENTER: Correct.

THE SENIOR DEPUTY PRESIDENT: So were you aware of what they were doing?

MR PARMENTER: We were aware that they were negotiating an agreement, yes.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR PARMENTER: But not necessarily aware of all the detail.

THE SENIOR DEPUTY PRESIDENT: Right, but under their contract they can't seek reimbursement of the increase, is it?

MR PARMENTER: My understanding is not for that full amount.

THE SENIOR DEPUTY PRESIDENT: Right, okay. Yes, okay.

MR PARMENTER: So I guess the point that we make with those agreements, your Honour, as I said is that we don't have an approval process. So that those companies negotiate directly with their employees and/or the union. BlueScope is not involved in those negotiations and we certainly don’t get involved in any sort of approval or sign off of increases that might or might not apply to those agreements.

THE SENIOR DEPUTY PRESIDENT: Yes. The maintenance one with Silcar, that covers the metal site does it?

MR PARMENTER: That's correct, yes. So just on that agreement, you asked when Silcar commenced work on site, I think, during Mr Buntman's submissions. Silcar commenced on site with a maintenance workforce in 2004. So the alliance commenced in 2004 and at that time the mechanical trades workforce was made redundant.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR PARMENTER: They applied for jobs with Silcar and were offered positions.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR PARMENTER: So they had an agreement in place at that time that provided for agreements 2004, five and six and renegotiated an agreement this year.

THE SENIOR DEPUTY PRESIDENT: Yes, okay.

MR PARMENTER: So just on that point, your Honour, the Silcar agreement as we said relates to mechanical trades. BlueScope Steel, Silcar, RST, Sodexho, whoever else is on this list on annexure C, are different companies. We each have a different value proposition for employees, and a recent example of that is the employee share issues to BlueScope employees, which were not passed on to Silcar employees, weren't passed on to RST or Sodexho employees. So we have a different value proposition, if you like, to those other companies.

THE SENIOR DEPUTY PRESIDENT: That share purchase arrangement that I asked you about before.

MR PARMENTER: Yes.

THE SENIOR DEPUTY PRESIDENT: Is this something separate to the extant agreement?

MR PARMENTER: Yes, it is.

THE SENIOR DEPUTY PRESIDENT: Right.

MR PARMENTER: Yes, it sits outside the agreement. I guess the board makes a decision on an annual basis, based on the business performance of the company, whether there will be an employee share plan offer or not. Each financial year since 2003 there has been an employee share plan offer. They have varied in terms but there has been that ability to take up shares in the company.

THE SENIOR DEPUTY PRESIDENT: Yes.

MR PARMENTER: So just going back to annexure C, your Honour, if the AWU is saying that because the other companies on site are paying 4.5 per cent we have to, then we don't accept that. In our view it's a pattern bargaining arrangement. It doesn’t take into account our financial position or the needs of the business as we move forward.

Mr Buntman mentioned the hot strip mill recovery and I might just leave that at this stage and try and work through these in some sort of order that Mr Buntman put them.

So if I can go to the survey that was submitted by the AWU. As you mentioned, your Honour, a number of those agreements have actually expired. So it's certainly interesting from a historical perspective but those agreements have expired. In a lot of cases the last increase was in 2006 and yes, there were a number of agreements that provided for three lots of 4.5 per cent per annum over the term of their agreement, as did our agreement. There are several - sorry, a small number, two or three agreements that I can see that extend into 2007. Some of those provide for 4 per cent pay increases, some for four and a half.

So I guess my point in going back to this is I question the validity of the data. Certainly we are disappointed that it wasn't discussed with us prior to the discussion. I think bargaining in good faith means that we share information. But I don't see the relevance of a lot of the data that has been presented there.

Your Honour, Mr Buntman mentioned the hot strip mill fire and recovery process and that the AWU and employees were proactive and that it was an initiative of the AWU members to rebuild the hot strip mill. I guess in response to that, it was an initiative of everyone that the hot strip mill - it was in the benefits of everyone that the hot strip mill was rebuilt. The hot strip mill is an integral part of the plant; without that mill Westernport would be a very different business today to what it has been in the past, with a lot less employees.

In fact at the time of the hot strip mill recovery, employees remained on a 13 shift roster in most areas of the plant for the duration of the recovery. So this minimised the financial impact of shift changes on employees, even though the plant was operating on a reduced production schedule. It would have been possible to operate the plant on a significantly less attractive roster pattern during the recovery process. Significantly there were no jobs lost due to the fire and in fact employees were recognised at the time when a recovery bonus of $1000 per employee was paid to recognise the efforts of all employees in assisting with the recovery of the mill. So to say now that we need to make a payment for that, we don’t think that that is accurate.

Mr Buntman spoke about flexible manning levels and that employees have cooperated and we accept that. Employees have cooperated. We expect employees to cooperate. What we are talking about doing is making the business as successful as it can be. So from our perspective all employees are rewarded when the business is successful. A successful business is more likely to lead to job security and when the business is successful employees enjoy monetary benefits such as incentive plan payments and employee share plan arrangements.

Mr Buntman mentioned the employee development review which has had employee involvement. In fact the employee development review is provided for in the current agreement at clause 9 Part B which says that:

During the term of this agreement a review of the current classification levels and remuneration structure will take place.

It goes on to talk about some arrangements that would apply for that review. So we actively sought to involve employees in that review, recognising that it is appropriate that they have a role in reviewing the structure that is currently in place, and helping to determine a structure to take us forward.

Mr Buntman mentioned a cost reduction program and that there was a potential reduction in consultancy costs. In fact that cost reduction program has been run by the leadership team at the Westernport site, with a recognition that we need to reduce costs. We have sought ideas from all employees, not just AWU members, and the process that has followed is that a person submits an idea, it's reviewed by the leadership team on a weekly basis, and a decision is made whether it's pursued or not. So we have a number of ideas that have been accepted and hopefully we will get a number more to work with.

There was a suggestion that there may be discrimination based on union membership because of arrangements that have been made or sorry, agreements that have been reached with alliance partners. Again, we don't negotiate directly with contractors or alliance partners or the employees of alliance partners. So I certainly don't see that there's any discrimination taking place.

Mr Buntman mentioned the uncoated department which was restructured with the assistance of employees. Again the restructure occurred within the scope of agreement. It was in everyone's interests that that department was restructured. There was mention that there was a change to work life balances. In fact we have taken or the department has taken the route to have the least impact on people in terms of changes to roster arrangements.

Your Honour, Mr Buntman spoke about the overall results of BlueScope Steel for financial year ending 2007. I'm not proposing to go into that in a lot of detail, save to say that is the overall BlueScope results. They are not reflective of Westernport's performance. If I was wanting to be harsh I would say that Westernport has actually destroyed value to BlueScope Steel over the past three years. We certainly haven't added to it.

Mr Buntman spoke also about exhibit P2 and spoke about the performance of the company from a financial perspective in moving from a $2m profit in June 2005 to a $41m in June 2007. Westernport actually expects that our returns are in the order of those achieved in 2003/2004. If we do not reach those levels again in the future then we will be questioned as to what we are doing as a site, in terms of returning value on assets.

Mr Buntman referred to the sales by sector. I would simply say that the trend in almost all sectors save the building market and export are trending down. Export has certainly increased significantly since 2005, however as we outline on the subsequent page, the export market is not a profitable market for BlueScope - Westernport, sorry. It is a market which is characterised by spot prices so we are a price taker. We are impacted by the Australian dollar and we also contend with higher freight or shipping costs.

The electricity forecasts that were mentioned, they are indeed forecasts. We have a contract that's locked in at the moment. We will all have electricity cost increases in future simply due to the current weather conditions that we are experiencing. Westernport is no different to that.

So in summary, your Honour, we believe and we say that an appropriate wage outcome for the next 12 months is up to 4 per cent. The intent of clause 5(1) Part B of the agreement was that the survey of customers and within the steel industry would be the key determinant in settling the amount of a wage increase. The survey which we shared with the AWU showed a majority outcome of 4 per cent. Those outcomes at the time were accepted by the AWU. The information that has been presented today is new information to us.

Our Westernport employees are well rewarded and we believe that increases over recent years have been in excess of the Consumer Price Index . From a business perspective we need to manage our costs effectively. We have recently accelerated a cost reduction program engaging all our employees and we believe that an increase in excess of 4 per cent would be financially irresponsible at this time.

Thank you, your Honour.

THE SENIOR DEPUTY PRESIDENT: Thank you. Mr Parmenter, I think you tabled this document which is Iron Worker Potential Earnings and I don't think I marked it. I will mark it P4.

EXHIBIT #P4 DOCUMENT TITLED IRON WORKER POTENTIAL EARNINGS

THE SENIOR DEPUTY PRESIDENT: This increase is to apply from 1 November 2007?

MR PARMENTER: Correct, your Honour.

MR BUNTMAN: Correct.

THE SENIOR DEPUTY PRESIDENT: I will adjourn briefly.

<SHORT ADJOURNMENT [12.12PM]
<RESUMED [12.22PM]

THE SENIOR DEPUTY PRESIDENT: I have reached a determination in this matter. This matter concerns the wage increase that should apply under the BlueScope Steel Westernport Certified Agreement 2004/2007 from 1 November 2007. BlueScope Steel Limited Westernport says it should be no more than 4 per cent and the AWU seeks a 5 per cent increase.

I am satisfied the increase should be 4.25 per cent and I so determine. I have been persuaded that that is the appropriate increase to apply from 1 November 2007 by firstly, and most significantly, the wage increases that will apply over that period to BlueScope's customers and others within the steel industry, which show increases amongst those employees of between four and 4.5 per cent in general over the relevant period. Exhibits P1 and B1 are relevant in that regard.

Secondly, the market pressures on BlueScope Steel Limited at Westernport, including in respect of sales volumes, exchange rates and cost increases, and in that regard I refer to exhibits P2 and B1.

Thirdly, the other terms and conditions of employment benefits afforded BlueScope Steel Limited Westernport employees, as demonstrated in exhibits P3 and P4.

In my view in the circumstances a 4.25 per cent increase provides a sensible outcome in respect of the final wage increase to apply under the 2004/2007 BlueScope Steel Westernport Certified Agreement.

I now adjourn.

<ADJOURNED INDEFINITELY [12.24PM]

LIST OF WITNESSES, EXHIBITS AND MFIs

EXHIBIT #P1 ASPECTS OF THE CURRENT CERTIFIED AGREEMENT, SURVEY MATERIAL PN26
EXHIBIT #P2 WESTERNPORT BUSINESS UPDATE PN32
EXHIBIT #B1 BUNDLE OF DOCUMENTS TITLED ANNEXURE A PN185
EXHIBIT #P3 VALUE PROPOSITION OF BSL WESTERNPORT AS AN EMPLOYER PN386
EXHIBIT #P4 DOCUMENT TITLED IRON WORKER POTENTIAL EARNINGS PN463