After the deal’s scheduled April 30 closing, Bethlehem Steel will exist only on paper for several months for bookkeeping purposes, according to an Associated Press report. Founded in 1904, Bethlehem Steel employed 300,000 people and operated 15 shipyards at the peak of its power during World War II. Today, it has around 11,000 workers. It filed for Chapter 11 bankruptcy in October 2001.
“A major piece of the consolidation of this industry is in place,” Bethlehem Steel chief executive Robert Miller told the AP. “This is a milestone day in the history of the steel business.” US Bankruptcy Judge Burton Lifland signed off on the sale at a hearing in New York that had been viewed largely as a formality.
ISG will become the country’s largest integrated steel maker after acquiring Bethlehem Steel’s plants in Indiana, Maryland, New York and Pennsylvania. The Cleveland-based ISG, formed last spring by Wilbur Ross Jr. to revive another of the nation’s steel giants, LTV Corp., was the only major Bethlehem Steel bidder.
The new company will be competing in a marketplace that has favored less expensive foreign steel over American-made products, but Miller said he thought ISG had a chance to succeed where Bethlehem Steel failed. Miller blamed Bethlehem’s collapse, in part, on its inability to generate enough revenue to cover the cost of pension and health benefits for tens of thousands of its retirees.(See Bethlehem Wants Plugs Pulled On Retiree Benefits ).
ISG is getting Bethlehem Steel’s plants in the deal, but not its obligations to its former workers, whose health benefits have been canceled and whose pension payments have been taken over by the Pension Benefit Guaranty Corp (PBGC), the federal pension insurer.
The Bethlehem plan and the responsibility for paying pension benefits to 95,000 workers and retirees represents the largest plan ever taken over by the PBGC in its 28-year history, both in terms of the number of participants and the amount of underfunding (see PBGC Takes On Its Biggest Liability Yet ). In December the PBGC estimated that Bethlehem’s plan was just 45% funded. Rescuing pension plans from the hard-hit US steel industry as well as the just as hard hit airline sector have blasted the PBGC’s budget (See Steel, Airlines Weigh on PBGC ).