Bethlehem Steel Corp., reporting its second big annual loss in a row, said yesterday it would leave the bar, rod and wire business, threatening 350 jobs at the Sparrows Point plant as the company struggles for profitability.
The company also will eliminate its common stock dividend and cut its work force by 6,500 over the next two years, leaving about 22,000 employees on its payroll.
Yesterday's announcement came at a time when a deep recession in the construction and auto industries is severely curtailing demand for Bethlehem's core products, requiring the company to accelerate efforts to get rid of money-losing operations. The bar, rod and wire division, in particular, hadn't done well even in good times and was subject to vicious global competition.
In his report to stockholders, Walter F. Williams, Bethlehem's chairman and chief executive, said the outlook for the company continues to be "clouded" by the uncertain economy and depressed consumer and business confidence.
He said he doubts that the company will be profitable in the first quarter but that plant modernization programs should "enable it to take advantage of business opportunities as they arise in 1992."
Bethlehem reported a loss of $638.1 million, or $8.47 a share, during the fourth quarter of 1991, compared with a loss of $516.8 million, or $6.91 a share, for the 1990 fourth quarter.
Revenues in the quarter were $1 billion, down from $1.2 billion in the comparable quarter a year earlier.
Because of the losses, the company said, it is eliminating its 10-cent-a-share quarterly dividend.
For the year, the company lost $767 million, or $10.41 a share, compared with a loss of $463.5 million, or $6.45 a share, in 1990. Sales last year were $4.3 billion, down from $4.9 billion in 1990.
The actions announced yesterday were painful for the company and its employees, but a number of major investors and analysts suggested the moves were inevitable and ultimately would be positive.
"People are viewing this as what was needed to be done to be competitive with the rest of the industry," said Robert Schenosky of Kemper Securities Group. "It doesn't make them weaker. In the long run, it make them stronger."
"It's horrible news for people who work at Bethlehem and horribly painful for investors, but it's good news if this company is to survive," said Tom Sprague, an analyst at Fidelity Investments, a major shareholder in the steel company.
In response to yesterday's announcement, Bethlehem's stock dropped $2.25 a share, to $13.75. Charles Bradford, an analyst ++ at UBS Securities, attributed the steep decline to mandated sales by many large pension funds that are precluded from holding stocks not paying dividends.
Bethlehem said it intends to sell the entire bar, rod and wire division, which makes steel rods for such products as belted tires and bolts, to a buyer that would continue the business. If the company cannot find such a buyer soon, it will sell the division's assets. Bethlehem has hired Salomon Brothers Inc. as a financial adviser to implement those plans.
The division employs about 350 of the 6,400 workers at the Sparrows Point mill.
Bethlehem's decision to sell its bar, rod and wire division -- which is based in Johnstown, Pa., and includes a rod mill at Sparrows Point -- came after unsuccessful efforts to negotiate a new labor agreement with the United Steelworkers union.
The union argued that the requested concessions were too high and that the company had already made up its mind to get out of that business.
The company also announced that it will take the coke oven operation at Sparrows Point from a "hot idle" status to a "cold idle" condition because it found that needed repairs to meet air pollution control standards were more extensive than expected, according to Bethlehem spokesman G. Ted Baldwin.
This action will result in another 40 people being laid off, the company said.
Yesterday's announcement represented another major loss of workers at Sparrows Point. Bethlehem said last year that it would shut down the coke ovens for at least two years as it studied their future.
About 400 workers were laid off and 100 others reassigned in December as a result, Mr. Baldwin said.
The moves announced yesterday will reduce Bethlehem's employment by 25 percent, but capacity will be reduced substantially less, resulting in significant improvement in productivity.
Reacting to the announcement, Standard & Poor's placed Bethlehem on credit watch with negative implications, citing the difficult industry-wide environment and the impact losses and write-offs have had on the company's balance sheet.
Between the end of 1990 and the end of 1992, stockholders' equity declined to $675 million from $1.5 billion and cash declined to $84 million from $274 billion.
Also, by 1993, the company must recognize unfunded post-retirement pension obligations that, according to its statement yesterday, exceed its remaining net worth.
Bethlehem estimated that at the end of 1991, these obligations amounted to between $1.1 billion and $1.6 billion before taxes, or between $700 million and $1.1 billion after taxes.
Three months ending 12/31/91
.. .. .. .. Revenue .. .. .. .. Net .. .. .. Share
'91 . .. 1,025,700,000 .. (638,100,000). (8.47)
'90 . ..1,200,300,000 .. (516,800,000). (6.91)
% change .. .. .. 14.5 .. .. .. .. . N/A. .. . N/A
Twelve months ending 12/31/91
.. .. .. .. Revenue .. .. .. .. Net .. .. .. Share
'91 . ..4,317,900,000 .. (767,000,000). (10.41)
'90 . ..4,899,200,000 .. (463,500,000). .(6.45)
% change .. .. .. 11.9 .. .. .. .. . N/A .. .. N/A