Weirton, the nation’s sixth-largest integrated steel maker and number two tin producer, filed for Chapter 11 bankruptcy, which allows it to continue operating while it reorganizes its operations, according to the Associated Press. President and CEO John Walker said the company won a $225-million financing package from Fleet Capital Corp. of Chicago, which will help fund reorganization operations.
The small, employee-owned company had tried to hold on while an import crisis in the form of steel from overseas competitors took down dozens of competitors, but nevertheless racked up more than $700 million in losses over five years. Although Walker had been in the middle of a $120-million cost-cutting plan, Weirton board of directors nevertheless opted for the bankruptcy route this week.
“In the past year, we did everything we could do outside the bankruptcy venue before taking this necessary step,” Walker said, according to the AP. “Our previous initiatives strengthened the company, but it became increasingly evident in the current industry climate that Chapter 11 reorganization is the only remaining solution to address our liability issues.”
Union Buys Give Backs
The Independent Steelworkers Union (ISU) had helped Walker trim $38 million, approving a one-year contract that cut pay 5%, canceled a planned raise, and froze accrued pension benefits. The company planned to cut another $34 million by asking the 3,600 active employees and some 4,600 retirees and dependents for health care give backs.
Retirees, however, had been slow to embrace the request that they help cover the cost of health insurance with a $200 monthly deduction from their pension checks. They also faced higher co-payments for prescription drugs and doctor visits. Weirton Steel is seeking court approval to create a committee of retirees to address the pension issues.Combined, the contract and health care changes would have saved the company $72 million.
Despite its earlier financial cooperation, ISU President Mark Glyptis said the bankruptcy filing was unnecessary and avoidable.”Today, our senior management effectively gave up and conceded defeat,” he said, according to the AP. “But the working people of Weirton Steel will never surrender. We will not give up.”
While larger steel makers like Cleveland’s LTV and Pennsylvania’s Bethlehem Steel were eventually gobbled by the ongoing industry consolidations, creativity and determination kept Weirton independent. Bolstered by a strong relationship with the ISU, it endured a series of layoffs. It secured loans, negotiated $30 million in savings with vendors and saved $8 million with a machinery lease agreement.
The company and the nation’s steel industry have been battling for survival for the past several years. The industry has been combating what it says is unfair foreign competition and a slow economy. The Bush administration imposed tariffs of up to 30% on some foreign products in March 2002, a move designed to give US manufacturers time to recover and reorganize to become more competitive (See US Steel Shows Off Restructuring Plan ).
Hard hit by having to shoulder responsibility for the stream of steel maker pension plans from defunct or bankrupt companies was the Pension Benefit Guaranty Corp (PBGC), the federal private pension insurer. PBGC officials have repeatedly indicated that the steel plans have made an enormous dent in the agency’s finances (See PBGC Head Paints Gloomy Picture for 2003 – and Beyond ).