Bethlehem Steel files for bankruptcy

Sparrows Point plant will keep operating, firm's chairman says

Cutting jobs, expenses

October 16, 2001|By Robert Little | Robert Little,SUN STAFF

Bethlehem Steel Corp., a grandfather of American industry whose vast Sparrows Point mill once placed Baltimore among the world's top steel-makers and shipbuilders, filed for bankruptcy protection yesterday.

With $400 million in losses so far this year, the nation's third-largest steel manufacturer said it will cut jobs, renegotiate labor contracts and take "all possible steps" to reduce its expenses.

The company will continue making steel as it reorganizes, and Chairman Robert S. Miller Jr. said the Sparrows Point plant will remain "a centerpiece" of its operations.

But Bethlehem Steel will also pursue "every possible option" as it struggles to find a footing in an industry bloated by over capacity and besieged by foreign competition, he said. Those options include consolidating or trimming its major divisions.

"This step is imperative to preserve not only the company's future, but also the future of our work force," Miller said. "It is becoming increasingly clear that the economy is in a precipitous decline, and the market for steel has just gone on hold."

Bethlehem Steel is the latest in a stream of steel companies to seek Chapter 11 bankruptcy protection this year, including LTV Corp., Republic Technologies International and Wheeling-Pittsburgh Steel Corp.

Complaining of foreign manufacturers "dumping" steel in the United States at unfair discounts, the companies have pleaded for trade restrictions from the federal government and scrambled to cut expenses.

The International Trade Commission is investigating whether foreign imports create unfair competition for American manufacturers, a determination that could lead to a reduction in the amount of foreign steel allowed into the United States.

Critics were quick to blame the federal government's inaction for Bethlehem Steel's recent woes.

"How many companies have to go under before Washington gets the message?" asked Leo W. Gerard, president of the United Steelworkers of America.

U.S. Rep. Benjamin L. Cardin, a Baltimore Democrat, called Bethlehem Steel's bankruptcy a "direct result of our failure to strengthen our trade laws and enforce existing trade laws."

Bethlehem Steel employs roughly 13,000 workers nationwide - 4,000 in Baltimore - and negotiations for a new contract with the United Steelworkers of America are under way, officials said. Besides cutting jobs, it wants to move some operations to private contractors and implement new work rules to reduce costs.

Pension checks for Bethlehem Steel's 74,400 retirees - more than 20,000 of them in the Baltimore area - won't be affected by the bankruptcy filing; the company's $5.7 billion pension trust fund is separate from its assets.

But Bethlehem Steel's rolls also include nearly 130,000 people getting health care benefits, and Miller made clear in a letter mailed to retirees yesterday that the company wants to reduce those costs.

"We intend to seek assistance from the government, but we will need to take some self-help actions first, including changes to our benefits programs that will be necessary to successfully reorganize," Miller said in the letter.

"One thing is clear - returning Bethlehem to sustained profitability will require true partnership and shared sacrifice."

Bethlehem Steel was founded in 1904, but it has corporate roots dating back to pre-Civil War iron companies. It bought the Sparrows Point mill from Maryland Steel Co. in 1916.

At its peak during World War II, Bethlehem Steel employed more than 300,000 people - about 50,000 of them at the company's mills and shipyards in Baltimore.

This isn't the first time Bethlehem Steel workers have faced job losses at Sparrows Point. In 1997, the state of Maryland and Baltimore Gas and Electric Co. gave the company a combined $5 million in incentives to build a new mill, and union officials agreed to eliminate 900 jobs by the time the new plant opened in 2000.

The cultural and economic imprint of the mammoth Sparrows Point operation is still evident in Baltimore City today, said Joseph L. Arnold, a professor of history at the University of Maryland, Baltimore County.

He equated Bethlehem Steel's role in Baltimore's industrial development during the 20th century to that of the Baltimore & Ohio Railroad during the 19th century.

"Obviously, Sparrows Point was the largest single industrial employer in the city for decades and decades," said Arnold. "But it's also really a symbol of Baltimore as the gritty, industrial city - the reputation it had through most of the last 100 years.

"I'm sure there are thousands of people and families all over Baltimore with ties to Sparrows Point."

Bethlehem Steel is the third-largest steel manufacturer in the United States, behind Pittsburgh-based U.S. Steel and Charlotte-based Nucor Corp.

The Sparrows Point plant, while far smaller than it once was, is still one of Bethlehem Steel's two primary manufacturing sites.

And so it is part of the company's problem, said Aldo Mazzaferro, a steel analyst for Goldman Sachs & Co.

Despite a $350 million upgrade, Sparrows Point is burdened with labor costs equal to roughly $100 for each ton of steel produced, he said. Foreign competitors might pay just $20 to $30 a ton.

"Sparrow's Point is one of the company's serious problems," Mazzaferro said. "Essentially, it has too many people making too little steel. It has to change."

While conceding that operations must change at Bethlehem Steel, Miller said the Sparrows Point mill will remain a major component of the company.

"There is no way we could take the investments we've made there in recent years and just turn it cold," Miller said. "I have every intention of Sparrows Point being the centerpiece of whatever new, larger, stronger company emerges from this process."

Sun staff writers Julie Bell and Kristine Henry contributed to this article.

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