The Wall Street Journal reported that the estimated $1-billion deal will form the country’s largest steel company, but will also mean thousands of layoffs and a less generous employee labor contract. Today is the end of ISG’s 60-day period in which to buy Bethlehem, which has been in US Bankruptcy Court for more than a year.
Sources quoted by the Journal said International Steel chairman Wilbur Ross is likely to pay between $900 million and $1.1 billion for Bethlehem’s major plants — one in Indiana, just southeast of Chicago, and another near Baltimore.
Other smaller operations are likely to be included, but it isn’t clear which ones. Ross indicated that he wasn’t going to bid for all of Bethlehem’s assets, the Journal said.
The acquisition, which must receive bankruptcy-court approval, would call for huge jobs cuts and streamlined benefits for remaining steel-union employees, but already appears to have critical backing from the United Steelworkers of America, according to the newspaper report. The union has indicated it would be open to renegotiating a contract with International Steel to keep at least some of its members working at the mills.
Ross would still likely trim between 30% and 40% of Bethlehem Steel’s 12,000-member work force and significantly reduce health benefits for 67,000 Bethlehem retirees, the Journal said.
PBGC Pension Takeover
Bethlehem’s employees and retirees already face reduced retirement benefits because the steelmaker didn’t have the means to pay such benefits this year. As a result, the Pension Benefits Guaranty Corp. took over the pension-plan payouts, although it pays less to each worker than the Bethlehem, Pa., company did. (See PBGC Puts a Wrench In Bethlehem, International Steel Merger).
Ross wants to pattern Bethlehem Steel after LTV Corp. Last year, he revived the assets of steelmaker LTV after it was liquidated, and then he renamed it International Steel. He now operates the steel company with about 40% fewer workers and managers, and just before Christmas he won a new, less costly labor contract with the United Steelworkers of America that ties benefits to company performance. He hopes to do the same at Bethlehem, the WSJ said. (See ISG Pact Could Portend Steel Industry’s Labor Future).