Bethlehem plans joint venture with British company

January 25, 1991|By David Conn

C Bethlehem Steel Corp. announced yesterday plans to form a joint venture with Britain's largest steelmaker that could cost up to 2,000 jobs and will result in a half-billion-dollar restructuring charge in the fourth quarter of 1990.

Company spokesmen said the proposed venture would have no effect on Bethlehem's Sparrows Point plant in southeastern Baltimore County or on the roughly 7,000 people who work there.

Yesterday's announcement that a letter of intent had been signed to study a joint venture with British Steel Corp., the fourth-largest steelmaking company in the world, called for creating a new entity, 50 percent controlled by each company. The new entity would own most of the assets at an extensively modernized Steelton, Pa., plant, and some of the assets at the Bethlehem, Pa., plant.

The modernization at Steelton would affect the electric furnaces there and would add another caster so that the plant could produce more semifinished products and more modern rail ties. The plant's 1.3 million-ton capacity would be increased, but a spokesman could not say by how much.

Steel production at the Bethlehem, Pa., plant, where the nation's second-largest steelmaker is based, would be ended, said company spokesman Arthur Roth. Instead, the Bethlehem plant would continue to do finishing work for the structural steel and rail products made at the modernized Steelton plant, about 100 miles away.

The project, which would require the approval of both companies' boards of directors, would require "significant capital investment," Bethlehem said in a statement. It would not specify how much or by whom.

The company did say that it intends to take a $550 million restructuring charge for the fourth quarter, which ended Dec. 31, 1990, resulting in a "substantial net loss for both the fourth quarter and the full year."

For the first nine months of 1990, Bethlehem reported net income of $53.3 million on sales of $3.7 billion. The 1990 results will be announced Jan. 30. Bethlehem's stock closed at $13.50 a share yesterday, down 50 cents.

The restructuring charge will reflect the costs of laying off as many as 2,000 workers, mostly at the Bethlehem, Pa., plant, and shutting down that location's blast furnaces and oxygen furnace, among other smaller assets, Mr. Roth said.

The whole project depends, however, on the results of a feasibility study now under way and on the "employees' cooperation and willingness to adopt best work practices and compensation programs throughout its operations," the company said. It emphasized that the "employees' response to this challenge will be critical to a decision to proceed with the venture."

District 9 of the United Steelworkers of America in Bethlehem, the union branch most affected by the announcement, said in a statement yesterday that it is "seriously concerned about any joint venture such as Bethlehem's plan, which could impact our members' future."

The union said it "will insist . . . that any new investment be aimed at improving productivity, rather than the elimination of jobs."

The British Steel operation would bring Bethlehem into the ranks of the major U.S. steelmakers that have formed substantial joint ventures with foreign companies, said Ben Teplitz, executive editor of American Metal Market, an industry newspaper in New York.

The company's BethForge Division in Bethlehem is a joint

venture with a French company but is a relatively small operation.

"I think that they made a good decision," said John C. Tumazos, a steel-industry analyst with Donaldson, Lufkin & Jenrette in New York. "Given the state of the steel industry, I'd say it's a pretty good deal."

Mr. Roth said the $200 million modernization of the hot strip mill at Sparrows Point continues apace and wouldn't be affected by the British Steel project.

The proposed joint venture also has no connection with Bethlehem's September announcement of a plan to spend $100 million to modernize the company's bar, rod and wire division, which is based in Johnstown, Pa.,and has about 350 workers in Baltimore.

*Steelmakers at a glance

British Steel Corp., formerly owned by the British government and now a publicly traded company, is the fourth-largest steelmaker in the world, and the largest in the United Kingdom. ** The company has subsidiaries in Argentina, Belgium, Canada, France, Germany, Hong Kong, India, Ireland, the Netherlands, New Zealand, Norway, South Africa, Sweden, Switzerland, the United States and Turkey.

Headquarters: London. Chairman: Sir Robert Scholey, 68Deputy Chairman: Sir Ronald Halstead, 63. Chief Executive: Martin Llowarch, 54.

Products: Strip, plate, tubular, stainless, semi-finished and finished steel products.

Employees: 54,000.

Financial information

Year ended March 31, 1990.

Sales: $8.4 billion.

Operating income: $1.2 billion.

Net income: $930 million.

NYSE ticker symbol: BST.

Price per ADS* (as of 1/24/91): $22.625, up 87.5 cents.

Bethlehem Steel Corp., a publicly traded company, is the second-largest steelmaker in the United States and the ninth-largest in the world. Its facilities include 10 steel plants, eight shipyards and a fleet of ore- and product-carrying vessels. It has sales agents and interests in raw materials operations in about 40 foreign countries.

Headquarters: Bethlehem, Pa. Chairman, Chief Executive: WalteF. Williams, 61. Vice President: Lonnie A. Arnett, 44.

Products: Sheet steel, tin plate, rails and axles for railroads, plate steel, wire rods, pipes, structural shapes, ingots, highway guardrails, offshore oil-drilling rigs and ship repair services.

Employees: 30,500.

Financial information

Nine months ended Sept. 30, 1990.

Sales: $3.7 billion.

Operating income: $67.5 million.

Net income: $53.3 million.

NYSE ticker symbol: BS.

Price (as of 1/24/91): $13.50, down 50 cents.

* ADS (American Depositary Shares) equal to 10 U.K. shares.

Sources: Dow Jones, British Steel Corp.; Iron and Steel Works of the World

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