Chesterton Tribune

Bethlehem Steel will never see 100th birthday; court okays sale to ISG

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By KEVIN NEVERS

Bethlehem Steel Corporation will never see its 100th birthday.

Ninety-years after its founding, the bankrupt company is only days away now from the final sale of its assets and the dissolution of its storied name. By the end of the year its estate—a legal entity charged with managing the company’s liabilities and distributing the proceeds from the sale—will, in all likelihood, have ceased to exist as well.

On Tuesday the U.S. Bankruptcy Court for the Southern District of New York approved the sale of substantially all of Bethlehem’s assets to International Steel Group in a deal valued at $1.5 billion in cash and assumed liabilities.

The sale is expected to close April 30.

“Bethlehem and ISG will now work to complete the transaction to provide a continuum of service and employment to Bethlehem’s customers and employees,” Bethlehem Chair and CEO Robert “Steve” Miller Jr. said in a terse four-paragraph statement released Wednesday. “Combining the well-maintained and productive assets of Bethlehem with ISG creates a formidable competitor in the rapidly consolidating domestic steel industry. I believe that Bethlehem’s assets, under ISG ownership, will continue to be leading suppliers of innovative and customer-responsive steel products.”

At a teleconference which followed the court’s ruling, however, Miller was more loquacious, at times obviously pleased by the impending sale, at times wistful. “This is a milestone day in the history of the steel business,” he said. But, Miller noted later, “there is a sadness that the Bethlehem Steel that we all had affection for and was such an important part of American history did not make the century mark.”

Although ISG will have the rights to all of Bethlehem’s intellectual property, including its name and logo, Miller said that he expects to see the “orderly utilization of the ISG name going forward” and the mothballing of the Bethlehem name. ISG Chief Financial Officer Mitch Hecht told the Chesterton Tribune today that the company has no plans to use the Bethlehem name in the marketing of its product.

Miller did say with regret that he managed to achieve only one of his objectives on being hired by the Board of Directors in September 2001, just weeks before the company filed for Chapter 11 bankruptcy protection: namely, to keep the plants open long enough to place them in “good hands.” Bethlehem failed, on the other hand, to secure the benefits of retirees, especially in the matter of their health-care and life-insurance coverage, which the company terminated on March 31. Nevertheless, Miller said, retirees do have something like safety nets, either in the form of Medicare for those 65 and older or in the form of a 65 percent advanceable tax credit which retirees 55 to 64 and receiving benefits from the Pension Benefit Guaranty Corporation can use to pay the premiums for qualified health-care plans.

Some 90 percent of the company’s retirees, he added, are receiving the same monthly pension check which they were prior to the PBGC’s termination of Bethlehem’s pension plan; the remaining 10 percent, those who were highly paid or who retired young, are also receiving checks but smaller ones.

At one point Miller did take issue with a reporter when asked whether consolidation—ISG’s purchase of Bethlehem, US Steel’s purchase of National—will address the “problem” of overcapacity in the U.S. steel industry. Miller heatedly rejected the premise of that question altogether. “There is a bright future for the US. steelmaking industry and we do not have an overcapacity problem in America,” he said. Miller added that, as it is, the U.S. steel industry manufactures only enough product to meet 80 percent of this country’s needs, and that the real problem is global overcapacity and the inefficiency of older mills.

Consolidation, Miller said, is not only the necessary thing to do to save the U.S. steel industry. It’s also “the right thing.” In an industry as sensitive to price fluctuations as this one is, “economies of scale do matter,” and by making it possible for ISG to specialize its facilities, by rationalizing transportation networks and customer service, by establishing a single corporate overhead structure, the consolidation of the two companies will generate a series of synergies capable of withstanding the sort of price fluctuations which have crippled the U.S. steel industry over the past five years or so. “There is a reason why in Europe they’re down to about three major makers.”

And ISG’s new labor agreement with the United Steelworkers of America will only make the company more productive, Miller said, as will the streamlining and decentralization of management. ISG continues to negotiate the details of that contract with Bethlehem’s various locals.

When the sale closes April 30, Miller observed, ISG will come into possession of a raft of healthy facilities which, even after Bethlehem filed for bankruptcy protection, were still making money. “Every one of our plants was generating positive cash flow during the period of bankruptcy,” he said, just not enough to dig Bethlehem out of its $7 billion legacy-liability hole. Under ISG ownership, and relieved of that $7 billion burden, those facilities “will be better capitalized and have a brighter future” with—“by and large”—a “continuity of employment.”

For a short time—only until US Steel closes its purchase of National’s assets, sometime later in the second quarter—ISG will officially be the largest steelmaker in the country, with an annual capacity of 16 million tons. “We’re enormously happy,” Hecht said. “This is the dawn of a new day for the Bethlehem Steel facilities and for he U.S. industry overall. We look forward to our new employees coming on board and we look forward to expanding our good relationship with the state and local officials who’ve been so helpful in facilitating this transaction.”

 

Posted 4/23/2003