By KEVIN NEVERS

Bethlehem Steel Corporation, the nation’s second largest integrated steel manufacturer, whose products built the Golden Gate Bridge in San Francisco and the Liberty ships of World War II, has filed a voluntary petition for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.

In a statement released around 8 a.m. today, Bethlehem said that it will continue its operations and customer service “without interruption” and that a $450 million loan commitment from GE Capital should “provide sufficient liquidity to meet ongoing operating needs.”

“Despite nearly $300 million in net cost reductions since the middle of 1998,” Bethlehem said, “the company could not overcome the injury caused by record levels of unfairly traded steel imports and the slowing economy that have severely reduced prices, shipments, and production. Since mid-1998, Bethlehem’s revenues have been reduced over this same period by approximately $1.3 billion annually. The resulting operating losses of approximately $500 million and negative cash flow since the middle of 1998 have severely impaired the company’s financial condition.”

Bethlehem filed the voluntary petition in the U.S. Bankruptcy Court for the Southern District of New York. Under Chapter 11 Bethlehem will obtain relief “for the foreseeable future” from its creditors to this point, company spokesman Bob Bilheimer told the Chesterton Tribune, and a moratorium will be declared on debt payments. Meanwhile, a loan commitment from GE Capital for $450 million debtor-in-possession financing—subject to the approval of the bankruptcy court—will allow Bethlehem to operate as “a going-forward business” and to defray the costs of operation incurred after today.

He could not say, however, whether the company would pay the second installment of its property taxes, due in Indiana Nov. 15. “I don’t have the answer to that question.” On the one hand, Bilheimer said, the property tax payment could be considered one of the costs of doing business after the Chapter 11 filing. But it could also be considered a liability incurred prior to that filing.

“During these restructuring proceedings,” the company said, “Bethlehem will continue steel production without interruption with the same level of commitment to superior quality and service to our valued customer base. The company’s key supplier relationships remain intact and the continued support of the supply base is essential to the development of a successful plan of reorganization.”

The goal of that reorganization plan will be twofold, the company said: in the short term, to stop Bethlehem’s hemorrhaging and give it the breathing time necessary to “stabilize” its finances; in the long term, “to return Bethlehem to sustained profitability.” Among other things, the company will seek in that reorganization plan to improve its capital structure; to undertake discussions with the United Steelworkers of America “to improve productivity and further reduce costs, particularly employment and health care costs”; and to find “a solution to its approximate $3 billion retiree health care obligation.”

Said Bethlehem’s new chair and CEO, Robert Miller Jr., “This step is imperative to preserve not only the company’s future but also the future of our workforce. Working together with the USWA and government, management intends to take full advantage of the opportunities afforded by the Chapter 11 process to return Bethlehem to sustained profitability. Our employees have demonstrated their support to get us through these difficult times. We appreciate their loyalty and contributions.”

Miller emphasized, though, that the “cooperation of the USWA is essential to increase productivity by establishing more flexible work practices and to implement new initiatives to significantly reduce our health care obligations. Discussions with the USWA have already begun.”

In addition, Miller said, as part of “aggressive” cost reduction initiatives, Bethlehem expects to reduce the company’s total workforce by January 2002, although he did not say how many positions it will seek to eliminate or where.

USWA

The immediate impact of Chapter 11 on Local 6787 of the United Steelworkers of America is unclear. “We obviously are going to wind up in some sort of discussions and negotiations,” said Tom Conway, the chair of the local’s bargaining committee.

Although Conway did not use the word “concessions,” he did say that “any plan that has a reasonable chance of success” will be on the table. “But just giving up things up if it won’t succeed makes no sense.”

“We’re going to work with the company,” Conway said. “We’re going to preserve our members’ standard of living. . . . We are going to do what makes sense, both in the short term and the long term. We’re not ruling anything out or anything in.”

“But this isn’t only the union role,” Conway added. The Bethlehem filing is “a bellwether of what’s going on in the country,” he said, and “the government needs to help.” Not only must the U.S. International Trade Commission pursue its 201 investigation—which Conway nevertheless characterized as “too little, too late”—the Bush Administration must also review the legacy costs burdening the entire industry, Conway urged.

“Is this country really willing to give up one of its basic industries?” Conway asked. “It’s frustrating. We don’t think this is a management problem. It’s not a problem with labor. It’s not a problem with costs. It’s a problem with a failed trade policy and government inaction which has come home to roost.”

The Feds

On one thing Conway and Miller agree. “Government assistance and support,” as Miller said, “will be required if we are to reestablish a vibrant and healthy domestic steel industry.”

That assistance and support could come in two forms, the company said: a favorable ruling from the International Trade Commission and a package of comprehensive remedies, like countervailing and anti-dumping duty orders; as well as “participation in the necessary consolidation of the highly fragmented domestic steel industry,” including “solutions to the retiree health care issue.”

The Company

Bethlehem was founded in 1904. It currently employs around 13,000 and provides benefits to around 130,000.

It provided the steel for such structures as the U.S. Supreme Court building, Chicago’s Merchandise Mart, and much of the New York skyline.

During World War II, the company’s workforce numbered around 300,000, and Bethlehem had shipyards on both the East and West coasts which deliver one per day and a total of 1,121 to the Allied war effort. Bethlehem continues to provide steel to the military today and was the sole supplier of armor plate steel for the repair of the USS Cole.

Burns Harbor Division was the last integrated steel mill built in the U.S.

Posted 10/15/2001