Bailing Out Bethlehem

September 14, 1992|By Ross Hetrick | Ross Hetrick,Staff Writer

Curtis H. Barnette was trained in rescues at age 12, when he became a lifeguard in the small town of St. Albans, W.Va.

Today, Mr. Barnette, 57, faces another lifesaving challenge at Bethlehem Steel Corp., the big steelmaker that has been thrashing in a sea of red ink for seven of the last 10 years.

Mr. Barnette, who goes by the name Hank, was named this month to succeed Walter F. Williams as Bethlehem Steel's chairman and chief executive officer.

On Nov. 1, the day after Mr. Williams leaves, Mr. Barnette will take control of a company that has been battling foreign imports and a dismal economy. And his progress in bringing the company back to profitability will directly affect the 7,300 workers at the Sparrows Point steel mill and shipyard in Baltimore County.

The 1980s were not good to Bethlehem Steel.

Starting in 1982, the company had five straight annual losses, followed by three years of profits. In 1990, the company slipped back into the red, and it has remained there since. In the first six months of this year, the company has lost $108.5 million, or $1.58 a share.

The company -- and the domestic steel industry -- were bolstered in the 1980s by import quotas that kept overseas competitors at bay. But those restrictions were lifted in March. Bethlehem Steel and 11 other steel companies have since filed unfair-trade-practice charges against steel companies from 21 countries, cases that are pending at the U.S. Commerce Department.

Understandably, the first priority for Mr. Barnette, who has worked for 25 years in Bethlehem Steel's legal department, is to return the company to profitability. But that is not entirely in the company's hands, he says.

"You tell me when this economy is going to pick up and tell me when we are going to get fair value for our products," Mr. Barnette said, noting that steel is selling for the same price it was in the 1980s.

Bethlehem Steel has tried several times in recent years to increase steel prices, but with little success. In early July, Bethlehem Steel, with the support of other steel companies, tried to raise the price of flat-rolled products. But that price increase was beaten back by competitive pressures.

Another factor: getting the U.S. government to take action against overseas companies that he says are heavily subsidized. "We cannot compete against foreign governments," he said.

"I think this economy is going to turn," Mr. Barnette said. "And if we see significant infrastructure building and expansion, there is no company better positioned to take advantage of that than Bethlehem."

To be in that position, Mr. Barnette plans to continue the strategy developed by Mr. Williams, which is to concentrate on the company's core steel business, rebuild the company's finances and to restructure the business.

The company has slashed its work force -- from 44,500 in 1985 to 29,600 by the end of last year -- and has invested $4 billion in the last decade in modern equipment.

The keys to the company's back-to-basics effort are the Sparrows Point and Burns Harbor, Ind., plants that produce flat-rolled steel and account for 80 percent of the Bethlehem Steel's revenues. "These are our flagship plants," Mr. Barnette said. "It's where we have spent the overwhelming majority of our capital expenditure dollars."

The goal: to make the two plants "low-cost, high-quality," producers of steel plate and sheet.

Modernization plans at two Pennsylvania plants, in Bethlehem and Steelton, also are being considered. But Mr. Barnette cautioned, "They must have business plans that demonstrate they will be low-cost, high-quality producers." And that means having a work force "that is willing to work together to make a low-cost, high-quality producer."

Mr. Barnette said Bethlehem Steel also must maintain its liquidity by negotiating a new $500 million line of credit to replace one established in 1987. Negotiations have started with banks, but the existing line still has 3 1/2 years to run.

Meanwhile, Bethlehem Steel is exploring partnerships and joint ventures. Bethlehem entered into such a joint venture in May when it agreed to build an $80 million plant in Jackson, Miss., with National Steel Corp. The majority owner of National Steel is NKK Corp., Japan's fifth-largest steelmaker.

The Mississippi plant, scheduled for completion in early 1994, will be able to produce 270,000 tons of galvanized and Galvalume sheet steel a year. Galvalume, a coating process patented by Bethlehem, uses zinc and aluminum.

*

Mr. Barnette started his career at Bethlehem Steel in 1967 almost by accident.

He grew up on a family farm in St. Albans, where his father worked in the maintenance department for Union Carbide Corp. and his mother was an elementary schoolteacher. His first job at the age of 10 was working at a public beach. Later, he was a lifeguard from the age of 12 until he was a sophomore in college.

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