Bethlehem Steel CEO faces a bevy of woes

Labor costs, financing, import restrictions expected to be focus

September 27, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

Bethlehem Steel Corp.'s board of directors has some distinct tasks in mind for the new chairman and chief executive it hired in a surprise move this week.

Robert S. "Steve" Miller, a former Chrysler Corp. executive known for turning around troubled companies, will be expected to work with the unions to reduce labor costs; with banks to secure financing for the troubled steel maker; and with government officials to win tighter restrictions on steel imports.

Bethlehem officials had reason to hope that the last item might be achieved. In June, President Bush ordered the International Trade Commission to study whether cheap imported steel - and the pressure it puts on what U.S. producers can charge - had harmed the domestic industry and to recommend relief measures.

But the U.S. campaign against terrorism launched in the aftermath of the attacks on the World Trade Center in New York and the Pentagon, analysts said, means that Miller and others in the industry will have a harder time getting the restrictions they covet.

"With the administration building a coalition to fight terrorism, the real question is if they will want to put trade restrictions on people who are potential allies," steel analyst Charles Bradford of Bradford Research said in New York.

Bethlehem has been hard hit by rising imports and the high cost of retirees' benefits. It posted a net loss last year of $118 million, and in the first half of this year it had an operating loss of $216 million. One-time charges put its net loss at $1.2 billion for the first half of the year. It has a negative net worth, and its stock has sunk under $2, closing at $1.22 yesterday.

For the first seven months of the year, Asia was the largest exporter of steel at 3.65 million tons, and European Union countries a close second at 3.5 million tons. Total U.S. steel imports were 17 million tons, a decline of 32 percent over the first seven months of 2000.

The impact on prices has been major. Hot-rolled steel that four years ago was selling for more than $350 a ton is now going for less than $250, and cold-rolled has dropped from $500 a ton to slightly more than $300.

"If we are going into a world-wartime mode, then erecting trade barriers as we are moving into that phase of world history would probably not be consistent with maximizing cooperation," said Mark L. Parr, head of metal research at McDonald Investments.

Industry representatives challenged that view. "That is just speculation at this point," sad Andrew G. Sharkey III, president and chief executive officer of American Iron and Steel Institute. He noted that the Organization for Economic Cooperation and Development went ahead with its scheduled meeting in Paris last week on how to reduce the world's overcapacity of steel.

While some in the industry, particularly the United Steelworkers of America, have argued that the attacks underscore the importance of having a strong domestic steel industry, analysts said the negatives from the attacks will far outweigh any residual benefits.

Steel from Bethlehem was used to repair the USS Cole after it was bombed in October, but Bradford said less than 1 percent of domestic steel is used for defense purposes. The only way the steel industry could see a meaningful rise in sales related to the attacks, analysts said, is if the government initiates a large public works effort to stimulate the economy and begins building a large number of bridges and highways.

But the more likely result of the attacks, which have shocked a weak economy, analysts said, is more bad news for U. S. steel makers - more than a dozen of which have filed for bankruptcy protection since mid-1998.

"The tragic events of Sept. 11 have put additional downward pressure on key areas in [steel] demand, such as the automotive market, such as the appliance market and such as the construction marketplace," Parr said. "Steel demand was already under a fair amount of pressure prior to Sept. 11."

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.