Wheeling steel firm may face job cuts

December 14, 2007|By Allison Connolly | Allison Connolly,SUN REPORTER

Sparrows Point workers anxious about plans to sell the Baltimore County steel mill to E2 Acquisition Corp. might not find comfort in the news coming from their would-be corporate sibling, Wheeling-Pittsburgh Corp.

Esmark Inc., the steel distributor that is taking the lead in E2 and recently took over Wheeling-Pitt, will be cutting jobs there "in the near future," United Steelworkers Local 1190 President Ken Aspenleiter confirmed yesterday.

A memo to Wheeling-Pitt workers issued yesterday by the Steelworkers union and obtained by The Sun said "all plants will be at risk" for permanent job reductions and layoffs. Wheeling-Pitt employs about 3,000 in Ohio, Pennsylvania and West Virginia.

Aspenleiter said plans are uncertain but a rough cutback number of 300 "sounds familiar." He said he hopes that Wheeling-Pitt management will consider buyouts or voluntary retirements instead of layoffs. Craig T. Bouchard, chairman and chief executive of E2 and co-founder of Esmark, did not return a call for comment.

Sparrows Point has been profitable under current owner ArcelorMittal, so John Cirri, president of United Steelworkers Local 9477, which represents production and maintenance workers at Sparrows Point, said he doesn't expect similar job reductions here if E2 takes over.

A key part of Esmark's strategy in acquiring Sparrows Point is for it to supply cheap steel slab to Wheeling-Pitt to turn into finished product, with the goal of burnishing the ailing steelmaker's bottom line and attracting new customers.

Cirri said the specter of job cuts at Wheeling-Pitt concerned him. "Cutbacks and layoffs was not the picture painted for me about Wheeling-Pitt," he said.

Mittal Steel Co. NV of the Netherlands, which bought Sparrows Point in 2005, is being forced by the Justice Department to sell Sparrows Point to settle antitrust concerns related to its $38 billion merger with Luxembourg-based Arcelor SA.

But E2's $1.35 billion purchase deal has been delayed and two self-imposed deadlines have come and gone. If ArcelorMittal, E2 and the Steelworkers cannot come to a timely agreement, the court-appointed trustee overseeing the case could step in and find a new buyer for the plant.

ArcelorMittal would continue to own and operate the plant until a sale is completed.

The trustee, Joseph G. Krauss, a partner in the Washington law firm Hogan & Hartson LLP, did not respond yesterday to a request seeking comment. ArcelorMittal spokesman William C. Steers said yesterday in an e-mail that there was no update in the situation.

Wheeling-Pitt, which has been through bankruptcy reorganization twice, has been hemorrhaging money and Esmark plans to cut overall operating costs by $150 million per year, according to a letter sent to Wheeling-Pitt shareholders prior to their vote on the sale.

Esmark Chief Executive Officer James P. Bouchard wrote in the letter that Wheeling-Pitt "cannot continue to be viable as a stand-alone entity without a stronger balance sheet, dramatically reduced cost structure and a broader, larger and more profitable customer base."

Esmark promised to infuse fresh capital of between $50 million and $200 million. James Bouchard wrote that Wheeling-Pitt's debt should be reduced from $525 million to $275 million by year's end.

Aspenleiter said the looming job cuts are part of that restructuring plan.

"Money is the issue now," he said.


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