Sparrows Point job cut put at 30%

Almost 1,000 employees could be trimmed under ISG ownership

March 18, 2003|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Bethlehem Steel Corp.'s salaried and hourly work force at Sparrows Point would be trimmed by about 30 percent under the ownership of International Steel Group Inc., the ISG official designated to head the plant said yesterday.

John Lefler gave the rough estimate in an interview yesterday after meeting with 35 managers at Sparrows Point. The cutbacks would trim almost 1,000 of the 3,250 jobs at the plant.

Lefler, an ISG vice president and general manager, will lead Sparrows Point if U.S. Bankruptcy Court approves the $1.5 billion sale of Bethlehem assets, which is planned for next month.

Lefler and Rodney Mott, ISG's president and chief executive officer, met with the managers to discuss changes at the plant in coming weeks as the Cleveland company implements its low-cost operating philosophy.

Both officials also indicated that the plant would need to meet far more stringent operating targets than the company has in the past.

Yesterday's meeting coincided with Bethlehem Steel's internal announcement that it was replacing top executives at three main operations, including Sparrows Point, with interim managers as the company prepares for new ownership.

David K. Schoenen, the division's controller and manager of business services, replaced Van R. Reiner, the president of Bethlehem's Sparrows Point division since August 2000.

Schoenen will run Sparrows Point until the sale to ISG is completed and Lefler takes over.

Reiner, a 29-year Bethlehem employee, will become a senior adviser and help "ISG team members develop transition plans" until the proposed sale is completed next month, according to an internal memo sent to employees yesterday from Robert S. "Steve" Miller Jr., Bethlehem's chairman and chief executive officer,

The president of Bethlehem's Burns Harbor division in Indiana - the company's largest plant - and the manager of its Coatesville operations in Pennsylvania also were replaced yesterday, according to the memo.

Reiner and the other executives will remain with Bethlehem until the sale to ISG is completed, said Bette Kovach, a Bethlehem spokeswoman. "The changes were made because we're moving toward completion [of the sale] and ISG wanted more involvement," she said.

The $1.5 billion Bethlehem asset sale agreement signed last week would keep the company's plants running and create the country's largest maker of steel from raw materials.

The deal is still subject to an auction process in U.S. Bankruptcy Court in Manhattan, but both Bethlehem and ISG officials expect court approval by the end of April.

At yesterday's meeting, Mott told the managers that final decisions on the future of Sparrows Point's 450 salaried workers and 2,800 hourly workers will be made in the next few weeks.

"It's a tough time for some of us and an exciting time for some others. ... It's important to go forward," Mott told the Sparrows Point employees yesterday, and indicated that some will have positions with the new company while others will not.

"There's not a spot for everybody," he said. Mott also planned to meet with Bethlehem managers in Coatesville yesterday for similar talks.

Lefler said Sparrows Point needs to "break even" when operating at 70 percent capacity. He estimated that the plant is currently operating at a loss while running at 85 percent capacity.

In an interview after the meeting, Lefler said that the salaried work force of 450 would be reduced "probably in the 30 percent range," with a similar expectation for the hourly work force pending further negotiations with the United Steelworkers of America union.

ISG officials have said they have allotted $100 million for a "transition assistance program," which will give lump-sum payments to current employees who decide to leave.

In his talk with the Sparrows Point managers, Mott gave several glimpses into how an ISG-run Sparrows Point would operate.

He said Bethlehem's operations would be more decentralized than before. Functions such as purchasing, billing and even payroll will be handled by the individual operating units - a sharp departure from a system that centralized many corporate functions at Bethlehem's headquarters in Bethlehem, Pa.

"You're not going to do it just because we've done it that way before," Mott said. "We're going to think it through all over again."

Mott also said that ISG will "thin out" non-core services - such as maintenance, grounds-keeping, utilities - at Sparrows Point and other facilities, with such work being completed by outside contractors.

These services "won't be eliminated [altogether], but they will be affected," Mott said.

One of the bigger concerns, Mott told the managers yesterday, is that "the plant steps up to the line and makes its budget that is projected to the lenders."

To buy Bethlehem, ISG secured two loans totaling $700 million and a $300 million revolving credit line that it will use for working capital and to pay down debt.

Lefler said that under ISG, the Sparrows Point division will move toward adopting more of a "mini-mill" approach to steel-making, when it comes to controlling costs and seeking efficiencies. The mini-mills are low-cost competitors that make steel out of scrap metal rather than raw materials, but also have more flexible work-rules that allow them to keep the costs down and prices lower.

ISG broke into the steel industry early last year with the purchase of steel mills from LTV Corp. out of bankruptcy.

In LTV's case, like Bethlehem's ISG was able to buy steel-making assets without taking on such huge liabilities as retiree pension and health care costs. This year, ISG was also able to achieve a flexible contract with the union that enables it to keep labor costs down, and a similar agreement is expected to implemented at Bethlehem's operations.

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