NEW YORK -- When the Bethlehem Steel Corp. announced earlier this week that it would report a $64 million loss for the second quarter, it caused some nervousness among investors who had generally perceived the fortunes of the nation's second-largest steel producer, after USX, to be improving.
After all, the company's losses had narrowed over the last year or so, and Bethlehem was laying off fewer workers and closing fewer plants.
But the $64 million loss made it clear that Bethlehem's problems persist. In part, that loss results from a litigation charge. The company said its results would include a $25 million charge to increase its reserves for loss contingencies in connection with an appeal it lost last month before the Supreme Court of Kentucky over a long-standing dispute over theownership of a coal mine in eastern Kentucky. But even without that charge, Bethlehem said, the company would have suffered a net loss of $39 million, weaker results than the $29 million net loss in the second quarter of last year.
The company and all U.S. steel producers are suffering from continued low demand. Cars and appliances are using less and less steel from year to year, a trend that has been under way for decades.
But what is clearly hurting Bethlehem most, analysts and company officials contend, is the continued price competition among steel companies desperate to hold on to market share and customers. The average price of the sheet steel that goes into cars and appliances is now about $300 a ton, roughly the same price it has been for a year and far below the $450-a-ton price of the summer of 1988.
But appearances might be deceiving, analysts further contend. Although Bethlehem has problems aplenty, its competitive position has been steadily improving.
The company lost $10 for every ton of steel it shipped in the first quarter of this year, a far narrower loss than the $21 a ton it lost in the fourth quarter of last year and the loss of $22 a ton in the third quarter of 1991.
Even the USX Corp., widely regarded as the most efficient among the nation's big steel companies, also had a $10-a-ton loss in the first quarter, according to industry analysts. In contrast, in the first quarter there was a $32-a-ton loss at Inland Steel and a $46-a-ton loss at Armco.
"If you look at their financial performance, they really haven't been doing that poorly in comparison with the average of the big six steelmakers," said Christopher Plummer, an analyst with Resource Strategies Inc., an economic consulting firm in Philadelphia. "They seem to always have some unusual items that affect the net income figure, but have a lot going for them. They have trimmed their work force and cut their labor costs."
Other analysts contend that the company has forcefully brought in new technology.
"The company has invested in a lot of good technology and has been looking for new approaches in steel making," said John Jacobson, an analyst with AUS Consultants in Philadelphia.
"They have been adopting new technology in both their plant at Sparrows Point, Md., and at Burns Harbor, in Indiana. At the same time, there is clearly an effort to have more decision making at the plant level. The mills are doing a better job of making quality products and they are being more and more recognized for having efficient mills and production quality."
Still, many analysts, including Mr. Jacobson, suggest that while Bethlehem's problems have been exaggerated, the company still has to pare down the layers of management.
"They are moving in the right direction, but compared with the mini-mills, they are inefficient," Mr. Jacobson said. "Their biggest problem has been in taking forceful efforts to improve their own operations. They have spent too much time in the past by focusing on external factors, such as the trappings of success. They have always had a lot of layers of management."
Also, the company still makes some steel products -- structural steel and rail, for example -- that other large steelmakers have abandoned and left to the mini-mills, which make steel from scrap with smaller, lower-paid work forces.
Mr. Plummer noted that Bethlehem was still saddled with a mountainous unfunded pension liability.
Still, the company, which was widely rumored several years ago to be a candidate for a Chapter 11 filing, has come a long way in overcoming its old image of thick-layered bureaucracy and luxurious executive golf courses.