By the Tribune and AP
In a move that will make it the fifth largest steelmaker in the world,
United States Steel Corporation announced this morning that it has signed an
agreement to acquire “substantially all” of bankrupt National Steel,
including the Midwest Steel plant in Portage.
The transaction is valued at about $950 million, including the assumption of
liabilities of about $200 million. The purchased would be completed in the
second quarter, if certain conditions are met, according to a statement
issued today by U.S. Steel.
U.S. Steel is now the nation’s largest steelmaker.
“We believe this agreement would be the best solution for National’s
employees, customers and communities,” John Price, the lead U.S. Steel
representative in Portage said in a statement. “It combines National’s
employees and facilities with a company that has a proud heritage of steel
industry leadership and a strong and enduring commitment to the future of
U.S. Steel, which is based in Pittsburgh and which operates the Gary Works
plant, said it would purchase National Steel plants in Canton, Ecorse and
River Rouge, Mich.; Granite City, Ill.; and Portage.
U.S. Steel will not assume any liabilities related to pension or
post-retirement benefit obligations for current National retirees and,
consistent with bankruptcy provisions, the transaction will exclude all
liabilities excepted those that have been agreed to by U.S. Steel.
Pivotal to the deal will be the successful negotiation of a labor contract
with the United Steelworkers of America and other unions representing
National employees, as well as bankruptcy court approval and other
regulatory approvals. The contract with the USWA expires in 2004.
The USWA reacted positively to today’s announcement, saying it presents an
opportunity for the union to continue playing a leading role in the
consolidation process, similar to the one that led to the International
Steel Group’s announcement earlier this week that it has made a bid to
purchase the operating assets of bankrupt Bethlehem Steel.
USWA said the U.S. Steel offer provides an attractive alternative in the
event National is unable to emerge from bankruptcy as a strong, viable
“While the USWA will continue to work on a stand-alone plan for
reorganization,” said USWA international president Leo W. Gerard, “we have
been strong advocates for consolidation for a long time. Should
consolidation prove to be the better alternative for our members, our long
relationship with U.S. Steel will be helpful in building upon the
consolidation process that got a major boost with ISG’s offer to buy
With the acquisition of National, U.S. Steel could increase production
capacity by as much as 40 percent and expects a combined annual cost savings
of about $170 million within two years of purchase, company officials said.
Savings will come from a reduction in redundant overhead, transportation
costs and an improved labor contract, company officials said.
“I believe this acquisition is consistent with National’s objective to
develop a restructuring plan that is in the best interest of all its
stakeholders and with the federal government’s call for consolidation in the
domestic steel industry. It is also an excellent opportunity for the workers
in these National facilities and the communities where they live,” said U.S.
Steel Chairman Thomas Usher.
U.S. Steel announced in the fall that it would get an infusion of $500
million from the sale of its coke mills, iron mines and transportation
company. The money was expected to be used for buying other steelmakers,
either in the beleaguered U.S. industry or in Europe, where it could avoid
crippling legacy costs.
The cash and stock purchase of National Steel will include up to $100
million in U.S. Steel common stock and the balance in cash.
National Steel, based in Mishawaka, had about $2.5 billion in sales in 2001.
It filed for Chapter 11 bankruptcy March 6.
U.S. Steel acquired the option to buy National Steel from Japan’s NKK Corp.
early last year.
The USWA has already reached a tentative agreement with ISG, which had
previously purchased the steelmaking assets of LTV Steel. The tentative
agreement with ISG establishes industry-leading wages, pensions and profit
sharing, broadens worker input into production decisions, establishes
ground-breaking company commitment to maintain, operate and invest in
domestic steel operations and to maintain prudent debt levels, maintains
strong limits on outside contracting, creates a new training program
directed by the Union, which will rectify years of neglect, and funds health
care for current and future retirees.
“These fundamental improvements in the structure of labor-management
relations will provide better pay, more secure retirement and greater
long-term employment security for our members while increasing productivity
and profits,” Gerard said. “We look forward to discussing the progress we
have already made in the ISG negotiations with U.S. Steel as it pursues
U.S. Steel: http://www.ussteel.com