CSC LTD. Union looks at worker buyout

Union leaders are investigating the feasibility of an employee purchase.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
WARREN -- Can CSC Ltd. workers take their destiny in their own hands by buying the bankrupt steel bar plant?
It's a question leaders of United Steelworkers of America Local 2243 have been grappling with as the cash-strapped Warren company faces shutdown, leaving 1,200 hourly and salaried workers jobless.
John Logue, director of the Ohio Employee Ownership Center at Kent State University, said his agency has been in talks with union leaders investigating a buyout.
The nonprofit center is funded by the Ohio Department of Development and charged with helping worker groups with buyout possibilities.
John Kubilis, president of Local 2243, has said a buyout is one avenue the union is pursuing to try to save its members' jobs.
"It's too soon to ask if an employee buyout will succeed," Logue said, "but I do believe the likelihood of CSC's continuing as an operating business, melting and casting and rolling steel, would be increased with an employee buyout effort."
Can attract partner: The move also can appeal to others.
"A work force that's willing to take the initiative ... to keep their jobs and has that kind of get-up-and-go is a much more attractive work force to outside buyers," Logue said.
He said the center has seen several cases in which a serious effort by an employee buyout group was enough to attract a business partner and, in some cases, the partnership was with a previous owner.
CSC filed for Chapter 11 bankruptcy protection in federal court in Youngstown on Jan. 12 and last week asked Judge William T. Bodoh to approve a plan to mothball the plant.
The steel bar producer is searching for a buyer willing to keep the plant intact and operating.
Would welcome effort: Atty. Matthew Goldman, who is heading up the Cleveland legal team representing CSC, said he would welcome an employee buyout effort.
"No one knows more about how to get an ESOP going than the Steelworkers," he said. "If anybody can make something like that work, they can."
Logue said worker buyouts, known as Employee Stock Ownership Plans, have been used as a means to avert plant shutdowns.
Northwest Airlines and Weirton Steel are two high-profile examples, but ESOPs have saved about 300 companies nationwide, he said.
More than 10,000 ESOPs are operating in the United States, employing more than 11 million workers. The Ohio Employee Ownership Center has assisted hundreds of employee groups since it was established at KSU in 1987.
Obstacles: Logue acknowledged that CSC is facing a multitude of problems. The steel industry is in a slump, caused by a flood of cheap, foreign steel imports last year and complicated by a decline in the auto industry and the economy in general.
Banks have become increasingly reluctant to lend to steel-related businesses.
However, steel is a cyclical industry, he said, so it's possible that employees could find a business partner willing to join them.
Center officials will also want to investigate whether an ESOP could be authorized to use the $60 million loan guarantee approved for CSC last fall by the federal Emergency Steel Loan Guarantee Board, Logue said.
"I don't know if that would be possible, but certainly a very attractive argument could be made that losing 1,200 jobs in Warren is something that would not serve anyone -- not the employees, not the community, not the company's suppliers," he said.
What's involved: The first step is to see if there's enough support for a buyout, Logue said, and the effort will work best if both union and salaried employees are united.
Next would come a series of feasibility studies to determine if an ESOP would be likely to succeed. Grants are available for a study, but matching funds are required.
Financial and production facts gathered in the study would be used to formulate a business plan and to present the ESOP proposal to prospective lenders.
Logue said the company would repay part of its principal on the loan each year and the employee stock would be placed in an account and released to employees in increments as the loan is repaid.
Typically, employees receive the stock allocated to their individual accounts at retirement.
Employees are not personally liable for the company's debts under an ESOP and are not expected to put up their homes or other property for collateral -- the plant and its facilities would serve as collateral.
If the employee-owned company were to fail, employee owners would have a claim on the business assets after all debts are paid.