Steel workers' benefits in peril

Bethlehem seeks changes to health, pension plans

Picture more bleak for retirees

July 10, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

Bethlehem Steel Corp. said yesterday that it is in such dire straits that it plans to slash health care benefits for employees and retirees, negotiate a new labor contract and drastically change its pension program in the hopes of getting the company back on solid footing.

The bankrupt steelmaker employs about 3,400 at its Sparrows Point plant and is Baltimore County's second-largest employer. But it is the area's 20,000 Bethlehem retirees and surviving spouses - who rely on the steelmaker for their pensions and to help pay for their medical benefits and prescription drugs - who might feel the greatest pain from the changes.

"Time is a-wasting," said Bethlehem's chairman and chief executive, Robert S. "Steve" Miller Jr. "We have the benefit of a tariff remedy, and we've done the hard work of stabilizing the company, and now we're in the position to get on with it and do this work so we are not in a free fall anymore."

Miller said it is "too soon to tell" what changes would be made to the health care plan, but he expects that it would include "a lot more co-pays and deductions and cost-saving measures built into the plan, which would be designed to try and preserve catastrophic benefits but would involve more participation from individual employees."

As for retirees, he said, the picture is more bleak.

"In bankruptcy court there is much more sympathy to keeping the active work force motivated to preserve and enhance assets," Miller said in an interview. "Creditors view those who have already retired merely as claimants against the estate and not as adding value. ... There is certainly going to be a change.

"I don't like being the messenger, but those are the grim facts."

The company also said yesterday that the federal government will probably take over its pension program, which is underfunded and has virtually no hope of becoming solvent.

The United Steelworkers of America, which represents the company's hourly workers, said yesterday that it is willing to negotiate a new contract but is unlikely to accept health care cuts or huge changes to the pension program.

Bethlehem filed for Chapter 11 in October with a pension plan that was underfunded by $2 billion and a health care obligation of $3 billion. Since the filing, it has been dropped from the New York Stock Exchange, its stock price has fallen to less than a quarter, and it is all but ignored by Wall Street analysts. The company lost $157 million from operations during the first five months of the year, according to filings with the Securities and Exchange Commission.

The steelmaker employs about 13,000 companywide, has 74,000 retirees, and is paying health care benefits to 130,000 workers, retirees and dependents.

Miller said that if the federal Pension Benefit Guaranty Corp. takes over the company's pension plan and starts making payments to retirees, the company will try to switch from its current plan of guaranteeing a certain pension to a 401(k) plan in which defined benefits are not promised. The move would not only save the steelmaker money, he said, but it might also be required by the government, which doesn't allow a company to dump its pension plan and then offer the same benefits to employees.

Changes to employee and retiree benefits would need to be approved by creditors and the bankruptcy court. In addition, the Steelworkers would have to sign off on changes to a plan. And, so far, the union doesn't like what it's hearing.

"We're not going to balance the company's books completely on the backs of retirees and workers," said Steelworkers spokesman John Duray. "There are many ways to economize and reduce costs, and not just take it out of the hides of the most vulnerable people."

More than 30 U.S. steel firms have filed for bankruptcy protection in the past four years, in part because of their huge "legacy costs" - health care and pension obligations - coupled with a flood of inexpensive imports that reached an all-time high in 1998 and drove prices to a20-year low.

In March, President Bush imposed tariffs of up to 30 percent on certain types of imported steel, but he also warned domestic producers that the tariffs would be rescinded if the industry failed to streamline and consolidate.

As part of that effort, Bethlehem has been in talks to form a joint venture at its Sparrows Point plant with Brazilian steelmaker Companhia Siderurgica Nacional. Miller said that because the continuing negotiations are taking longer than expected, he decided to proceed with the restructuring plans.

"The president fired a warning shot that if we do not restructure, he would take away the tariffs," Miller said. "And we've got a whole lot of things that happened in the past 30 days that made this announcement inevitable and desirable."

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