Pension is focus of strike at WHX firm Effect on takeover plan of BethShip uncertain

February 23, 1997|By Sean Somerville | Sean Somerville,SUN STAFF

When BethShip Inc.'s workers voted on their last contract in 1995, they had two choices: a 20-cent an hour wage increase or improved pension benefits.

The vote wasn't even close: The workers voted overwhelmingly for a better pension.

"I think it was primarily because of age and seniority," said Lonnie Vick, executive secretary for the Industrial Union of Marine & Shipbuilding Workers of America local that represents the yard's 800 workers, including about 100 who had been laid off.

He estimated that the average worker was 45 with 20 years of service. "Plus a lot of workers have been laid off, so a 20-cent increase wouldn't benefit them," he said.

Now, workers at the Sparrows Point yard -- Bethlehem Steel Corp.'s only remaining shipyard -- face the possibility of a takeover by WHX Corp., whose Wheeling-Pittsburgh Steel Corp. plants have been idled for four months by a United Steelworkers strike.

The dividing issue: Pensions.

The 4,500 Wheeling-Pittsburgh steel workers want the type of traditional pension BethShip workers have -- one that guarantees retirees a set monthly payment based on a worker's years of service. Under Wheeling-Pittsburgh's plan, the company makes contributions based on an employees' number of hours worked. How much a worker ends up getting also depends on investment returns.

WHX is the sole company negotiating to buy the yard. Bethlehem hopes to reach a sale agreement by the end of March. WHX and union officials, who plan to meet soon, would not discuss the prospect that the purchaser would seek changes in BethShip's pension plan.

"We can't even begin to talk about that," said Paul Bucha, a WHX director who is leading the company's efforts to buy the yard. Vick said he would not assume anything about the strike's consequences for the yard, which will be closed if it isn't sold. Asked if WHX will try to change BethShip's benefit packages, he said, "I have no idea."

But steel and shipbuilding experts say any buyer will try to cut labor costs. "Fringe benefits at BethShip are about 50 percent of wages," said Tim Colton, an Arlington, Va.-based shipbuilding consultant. "That's high for the industry. The more typical ratio is about 40 percent . A new owner is looking to reduce costs."

Wheeling-Pittsburgh plants had traditional pension benefits -- also known as a defined-benefit plan -- until 1985, when the company filed for Chapter 11 bankruptcy protection. The plan, which was underfunded by $500 million, was terminated. The federal Pension Benefit Guaranty Corp. assumed its obligations.

Workers agreed to the alternative type of plan -- known as a defined-contribution plan -- in 1990 as the company sought to reorganize under Ron LaBow, now chairman and CEO of WHX. The union agreed in 1994 to continue the defined-contribution plan until last Oct. 1, the first day of the current strike, said Charles Robideau, a spokesman for the Steelworkers union.

Wheeling-Pittsburgh currently contributes between 32 cents and $1.15 an hour to its workers retirement depending on age. The company has proposed increases for the top three age groups -- 50 to 54, 55 to 60 and above 60.

WHX has also offered to guarantee workers between $1,200 and $1,600 a month, depending on years of service, by making up any difference between benefits provided by the Pension Benefit Guaranty Corp. and the current defined-contribution plan.

But union officials say the company's proposal commits it to provide the benefits only to workers who retire during the term of a four-year contract. And unlike a defined benefit plan, it would not be insured by the Pension Benefit Guaranty Corp.

The union, said Robideau, the Steelworkers' spokesman, wants to return to a defined-benefit plan, which means a permanent commitment to a monthly benefit, Pension Benefit Guaranty Corp. protection and less risk.

"In a defined-contribution plan, you're at the mercy of the market and it's not backed by the Pension Benefit Guaranty Corp," Robideau said.

Companies prefer defined-contribution plans to defined-benefit plans because they are less expensive, easier to manage -- and predictable. Under defined-benefit plans, companies face much more risk -- their obligation can increase dramatically if investment returns drop.

The two sides in the Wheeling-Pittsburgh strike characterized their last talks on Feb. 13, as "frank and constructive."

Industry analysts said WHX's defined-contribution plan gives it a cost advantage over many other American steelmakers, which have defined-benefit plans. But the differences also mean labor difficulties like the current strike.

In 1994, according to analysts, WHX sought to solve its pension problems by launching a hostile bid for Teledyne Inc., the Los Angeles-based defense contractor with an $860 million surplus in its pension plan. The bid was rejected. "We were told that if they had gotten Teledyne, we would have a defined-benefit plan," Robideau said.

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