Beth Steel retirees worry about benefits Pensioners keep eye on former employer's changing fortunes

April 06, 1997|By Sean Somerville | Sean Somerville,SUN STAFF

Never mind that it was the worst snowstorm this year.

The news that week had been bad: Bethlehem Steel had reported a $347 million quarterly loss, reflecting the cost of shedding four divisions. Company pensioners in the Baltimore region -- who outnumber those in the company's namesake Pennsylvania town -- needed to know more.

The alarm was so widespread that an organization that monitors Bethlehem's finances for retirees convened a meeting to allay concerns.

In up to 8 inches of snow, about 350 veterans of Bethlehem's Sparrows Point plant trudged to Dundalk Community College's theater on a Saturday in February.

Henry Betke, who went to the emergency meeting, said he wanted to make sure that Bethlehem would continue to pay his family's health insurance.

Losing that, he said, would be like losing everything. "I was concerned about myself and my wife," said Betke, a Bethlehem pensioner who still lives on the Essex street where he grew up. "I just turned 70."

Betke is one of about 15,000 Bethlehem pensioners in Maryland, who live mostly in the Baltimore area. He is part of a quiet subplot in Bethlehem Steel's recent struggles: the financial tether between the company and its former employees.

Bethlehem pumps about $128 million a year in pension payments into the state's economy. The company spends an additional $62 million for health care and insurance benefits for retirees and their dependents. The total: a hefty $190 million. Compare that with the $280 million in wages that Bethlehem paid its 5,300 workers at Sparrows Point last year.

With some retirees pulling in a few hundred dollars a month and others getting tens of thousands, pensioners' benefits work out to an average of about $8,300 a year -- most of which is federally guaranteed.

The company provides another $1,100 for health and life insurance for each of the pensioners and their dependents.

Pension plan underfunded

The fear of losing some of those benefits keeps retirees such as Betke focused on their former employer's finances, especially because Bethlehem Steel's pension plan is underfunded by about $870 million.

The attention is mutual. Bethlehem's so-called legacy costs represent a huge competitive disadvantage, but the nation's No. 2 steelmaker has little flexibility on pensions, which were determined by commitments made years ago. But the company is trying to cut health care costs by enticing retirees to switch to managed care.

$25 a ton

Chuck Bradford, a steel industry analyst for UBS Securities Corp., said Bethlehem is in its predicament because it failed to contribute to the pension plan when it could have. For every ton of steel shipped, Bethlehem pays $25 for pensions, he said.

"If they didn't have these costs, which are greater than their competitors', they would be reporting pretty substantial profitability," he said. "This is one of their biggest problems."

All this presents an irony: Even though some pensioners worked for the steel giant when it employed 292,000 people, their fortunes are tied to today's puny version, which will soon be employing about 15,000.

The company's former managers tend to live in Towson and Timonium, the unionized steel workers in Dundalk and Edgemere, according to the Retired Employees Benefits Coalition, or REBCO, the watchdog group for retirees that held ++ the February meeting. With their houses and cars generally paid for, their money moves directly into the economy.

"I'd say about 10 percent of my customers are retired Bethlehem workers," said Richard Bell, general manager of catering at Squire's Restaurant, a large Italian eatery on Holabird Avenue.

Bethlehem officials said last week that they could not comment on the company's financial relationship with retirees, because the company's human resources officials were unavailable. The company's annual report and filings with the Securities and Exchange Commission contain much of that information.

Bethlehem's backers have a lot to be concerned about. The company, which reported a $309 million loss last year, is still the nation's No. 2 steelmaker, but the No. 3 contender is closer than ever.

And in a symbolic blow, Bethlehem Steel was one of four big companies dumped last month from the 30 that make up the blue-chip Dow Jones industrial average.

"That tells me that somebody who knows more than I do thinks the company isn't what it used to be," said Phil Plitt, a 55-year-old retiree.

Plitt, who worked at Bethlehem Steel from 1964 until last June, retired on disability and gets pension benefits of $1,096 a month. Every day I watch CNBC and look for the BS on the ticker," he said. "If that company's going to go under, where's my pension going to go?"

In Steelworkers Hall on Dundalk Avenue, Frank Thackston, president of the Senior Steelworkers Association for Local 2609, said he doesn't rely on television. "I get information from upstairs," he said, nodding toward the union office.

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