Beth Steel toiling to forge an assured future for itself

Struggling company faces a determined union among its other worries

July 14, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

Bethlehem Steel Corp.'s plan to speed up its restructuring by chopping benefits and reworking its labor contracts is an attempt to beat the clock and remain solvent as it works toward finalizing several joint ventures - a process that has proved more protracted than had been expected.

But the country's third-largest steelmaker faces significant hurdles in trying to reshape itself. Chief among them is the United Steelworkers union, which seems disinclined to give up benefits - including health care and pension - without a fight.

The company faces other pressures, too:

President Bush's threat to rescind the recent tariffs on steel imports if domestic steelmakers do not restructure and consolidate soon.

A steel market that is short of supply but will soon will have millions more tons available, threatening to reverse the recent rise in prices.

Talks with the federal Pension Benefit Guaranty Corp., which Bethlehem says might take over its pension payments for retirees and force the company to change the plan for current workers.

"I think [the restructuring plan] is the right thing to do, I just don't see it happening," said Michael Gambardella, a steel analyst with J.P. Morgan Securities in New York.

Bethlehem, which filed for bankruptcy protection last fall, announced last week that to get its financial house in order, drastic changes are necessary. Though hoping for joint ventures, such as the one under discussion at the Sparrows Point plant with Companhia Siderurgica Nacional of Brazil, the company said it first must become stronger on its own.

The steelmaker wants a new, more flexible labor contract that would tie productivity levels to wages and would have fewer prohibitions against a worker's performing more than one type of job.

If successful, it would reshape Bethlehem more in the mold of minimills such as Nucor Corp., a profitable steelmaker that, besides making steel from scrap instead of from scratch as Bethlehem and other integrated mills do, uses nonunion labor and pays its workers based on how much steel they produce.

The Steelworkers union has said it is willing to work with the company on those issues. But the teamwork attitude disappears when talk turns to a reduction in benefits.

Bethlehem, which has about 3,400 employees in Baltimore, is in talks with the Pension Benefit Guaranty Corp., a federal agency created to guarantee pension benefits when a company is no longer able to pay them. The company's pension fund is underfunded by about $2 billion, and executives have said there is no hope of making up the shortfall. That opens the door for a federal takeover.

If that happens, many retirees will receive the same benefits they get now, but younger ones might not receive the full amount. The big question facing the company and union is what would happen to current workers.

Robert S. "Steve" Miller, Bethlehem's chairman and chief executive officer, said the company would switch from its current defined-benefit plan - in which a set pension payment is guaranteed - to a defined-contribution plan, such as a 401(k). But that would require union approval, and at this point the union isn't biting.

"As a supplement, [a 401(k) is] a fine idea, if it's in addition to a defined-benefit plan," said John Duray, spokesman for the Steelworkers union. "A 401(k) as gravy, that would be great."

The union is also opposed to major changes in its health-care plan - such as higher deductibles and co-payments - especially for retirees, who Miller said are unfortunately seen by creditors not as assets to the company but as claimants against an estate who don't add value and who could end up with greatly reduced benefits.

"Retirees are not dead weight; the fact that the company is there to begin with, the fact that it has assets and has 100 years of steelmaking is because of those people," Duray said. "To turn around and say, `Hey, were just going to push you over the cliff' is socially irresponsible if not criminal."

Bethlehem is not seeking these changes in a vacuum.

In March, Bush announced three years of tariffs on imported steel to give breathing room to domestic producers reeling after a flood of imports hit in 1998 and drove prices to 20-year lows. The tariffs came with a caveat, a midpoint review at which time the White House expects to determine whether the industry has used that breathing room to restructure, consolidate and address core problems, not just to sit back and enjoy higher profits.

"By the time the [tariffs] are lifted or expired, there will be changes; whether that happens before the expiration in an orderly fashion or afterward in a chaotic fashion, like LTV, is the big question," said John Anton, a steel analyst for DRI-WEFA in Washington. "I fear inertia will win out."

What happened at LTV Corp., which filed for Chapter 11 protection then shut down - and took with it all retiree benefits - is something Bethlehem and other domestic producers don't want to see occur at their companies.

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