What To Watch

People, places and prospects that will shape Maryland's economy in 2002 ...

January 20, 2002

Bethlehem Steel Corp

Bethlehem Steel Corp. filed for Chapter 11 protection in October and will spend much of its energy this year trying to reorganize its way out of bankruptcy. To that end, its new chief executive, Robert S. "Steve" Miller Jr., will continue his push to have the federal government take over the health care costs of the steel maker's retirees, which is now a $3 billion unfunded obligation.

A success in Washington -- which is by no means assured -- would pave the way for an acquisition of Bethlehem by Pittsburgh-based U.S. Steel, which says it wants to make the purchase but has no intention of doing so if it must bear the costs of retiree health care.

Miller said he thinks that a Sparrows Point under ownership by U.S. Steel would have a "bright future," but so far there's been no official word on what would happen to the Baltimore County plant or its 3,500 employees if the acquisition were to occur.

Meanwhile, the steel industry is awaiting more relief from Washington: Following an International Trade Commission ruling that steel imports are hurting the domestic industry, President Bush has until mid-February to decide what, if any, tariffs to impose on imported steel. Domestic producers have complained that a surge in foreign steel in the United States has driven down prices and played a significant role in the fact that more than two dozen U.S. steel makers have filed for bankruptcy protection since 1998.

Commercial real estate

From offices and hotels to shops and warehouses, commercial real estate should follow the nation's economy out of recession this year, the experts say. However, recovery may come more slowly in areas such as downtown Baltimore compared with the most popular submarkets of Columbia and the airport area of the Baltimore-Washington corridor.

The industry has an oversupply of space for the scant level of demand, the result of several boom years in construction that were fueled by available financing, developers and leasing agents say. The experts do not believe the Baltimore region is as overbuilt as it was in the early 1990s, when rents plummeted and building owners went bankrupt. Nor do they believe that the area is as bad off as other areas of the country that had large amounts of space abandoned by legions of high-tech companies that went bust.

So the real estate comeback should be quicker than in the last cycle -- so long as demand returns in 2002 as expected. Already, the developers say defense companies and government agencies are beginning to seek more space in the suburbs.

BWI

Baltimore-Washington International Airport will capture a larger share of the local market for air travel, but a nationwide reduction in flying means there will be fewer passengers and fewer flights flowing through the region's busiest airport in 2002.

After years of double-digit growth at BWI, state officials are projecting passenger numbers to fall by more than a million this year as the aviation industry struggles to recover from an industrywide slump. BWI's new executive director will spend much of the year trying to revamp the airport's passenger security systems to prevent terrorist attacks, while at the same time proceeding with a $1.8 billion construction program.

Though BWI has fared better than most airports nationwide, airport officials will also have to find a way to fill the gaps left by US Airways' MetroJet service, which was eliminated as part of a cost-cutting move last month. AirTran Airways and the airport's dominant carrier, Southwest Airlines, are likely contenders to take over routes and gates left by MetroJet. But transportation officials will likely go after additional carriers in a bid to put the airport back into growth mode.

Health care

The state's largest health insurer, CareFirst BlueCross BlueShield, will be seeking to convert to for-profit status and be bought by California-based WellPoint Health Networks Inc. for $1.3 billion.

The deal will undergo a lengthy and detailed regulatory review -- likely lasting into 2003--- in Maryland and the other places where CareFirst operates, the District of Columbia and Delaware. CareFirst's chief executive, William L. Jews, will be leading the effort to convince government officials that the deal is in the public interest and should be allowed to proceed.

If regulators approve the conversion and sale, they must also decide whether $1.3 billion is a fair price, and how that money should be divided among the jurisdictions. Maryland legislators are also trying to decide how the money should be spent if the deal is concluded. It will have to go to a foundation or other public purpose related to health, but Maryland lawmakers are particularly interested in using it to provide coverage for those who have trouble getting conventional health insurance.

Biotechnology

MedImmune Inc. rang up $480 million in sales of its flagship drug Synagis last winter, fueling its status as Maryland's most profitable biotechnology company.

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