Steel retiree health-care bill is struggling

Defeat could imperil a deal for Beth Steel

September 11, 2002|By BLOOMBERG NEWS

WASHINGTON - Legislation that pledges as much as $13 billion to pay health insurance for retired steelworkers is facing resistance, prompting concern that a cornerstone of industry plans to consolidate may be jeopardized.

The measure's failure would mean companies such as U.S. Steel Corp. would be unable to acquire weaker rivals such as bankrupt Bethlehem Steel Corp. because commitments to retirees, obligations known as "legacy costs," are too high.

"There won't be any restructuring without the legacy costs being dealt with," Gary Hubbard, a spokesman for the United Steelworkers of America labor union, said yesterday. "There will just be a series of bankruptcies."

The legislation, which would pay health-insurance costs for retired steel workers at companies that fail or are acquired, is intended to help bail out an industry that has seen 23 companies declare bankruptcy since late 1997, with most blaming unfair foreign competition and high labor costs.

The bill has generated opposition from lawmakers, including Louisiana Republican Billy Tauzin, chairman of the Energy and Commerce Committee, who says it's too expensive.

It has also drawn fire from nonunion steelmakers such as Nucor Corp., the most profitable steel company, and legislators who say the measure unfairly benefits steelworkers over those in industries such as textiles and aerospace.

In addition, opponents say the measure would preserve inefficient U.S. steelmaking capacity. The bill is more than 40 votes shy of the 217 co-sponsors needed to bring the measure to the floor before Congress adjourns next month.

When President Bush set tariffs on many steel imports of as much as 30 percent in March, he said the industry must devise a plan to become more competitive. That was to include acquiring weaker companies and shutting mills.

That won't happen without federal money to offset the legacy costs of the big integrated producers, which make steel by mining iron ore and smelting it, according to the legislation's backers.

Rep. John Dingell, a Michigan Democrat who is one of the bill's authors, said at a hearing of a House Energy and Commerce subcommittee yesterday that Bush's tariffs didn't go far enough to help the U.S. industry.

Bush "did not address two key challenges facing the American steel industry: excess foreign capacity and steel legacy costs," he said.

Those costs are borne by companies that have seen employment in the U.S. industry plummet since the 1970s as new technology and foreign competition cut into the old-line integrated companies' operating models.

U.S. steelmaking jobs have fallen from more than half a million in the mid-1970s to about 145,000 today, according to union statistics. That leaves only about one active steelworker to support benefits for five retirees.

Minimills, which make steel by melting scrap, are twice as efficient as integrated mills. Nucor produced more than 1,300 tons per employee in 1999, compared with fewer than 650 tons per employee at U.S. Steel.

Minimills also aren't unionized and don't have legacy costs, which has led them to oppose the bill, claiming that it would support one sector of the industry while ignoring another.

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