CSC LTD. Judge to decide fate of benefits

THE VINDICATOR, YOUNGSTOWN
Lenders want to prevent CSC from paying $250,000 a week for health care.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- A judge is considering whether CSC Ltd. workers and retirees will have health care benefits after Monday.
Judge William Bodoh said his decision will rest on whether CSC Ltd. has the funds to continue paying $250,000 a week for health care, supplemental unemployment benefits and workers' compensation benefits.
He could order payments to extend the benefits for 1,100 hourly employees and retirees for two more weeks. April 13 is the date when lenders to the Warren company can order the mill sold piece by piece if a buyer doesn't step forward.
If Bodoh sides with the lenders and doesn't order the benefit payments, coverage expires Monday.
Hearing: Bodoh held a hearing Thursday in U.S. Bankruptcy Court in Youngstown and said he would rule after considering the arguments. He said he thinks law requires the payments to be made because of a union contract, but only if the ailing steelmaker has the money.
Jeffrey Baddeley, attorney for CSC, told the judge that the money is available because CSC has earned $10 million since its January filing for bankruptcy protection. Sales have amounted to about $24 million, while expenses have been about $14 million.
He also said that paying the benefits adds value to the plant if it is sold. Twenty-two workers are scheduled next week, performing operations that will better preserve the plant for future operations if it is sold.
Even though nearly all of the hourly workers are laid off, a labor contract requires CSC to pay for benefits for all employees and retirees as long as some are working. No steel has been made recently, but workers have been processing products. Processing now is complete but there still is some inventory being sold.
Lenders' stance: Ronald Hanson, attorney for CSC's lenders, argued that the steelmaker doesn't have the money to pay the benefits. The $10 million earned by CSC since January is the property of the lenders under loan agreements, he said. That money is a "very bad return" for lenders based on the amount that has been loaned to CSC, he said.
Hanson said the mothballing work being done to preserve the plant can be done later by a buyer. All that is needed is maintenance work, he said.
Eight workers are scheduled for this work in two weeks, but Hanson said it would be cheaper to hire an outside firm. He estimated the cost of contracting out the work at between $12,000 and $25,000 a week, compared with the $250,000 cost of paying benefits for the entire union work force.
David Fusco, a union attorney, said contracting out the work would violate the labor agreement.
"Retirees and employees should not be given the short end of the stick in this matter," he said.
Baddeley said continuing the benefits is important to CSC because it would boost workers' morale. Hanson said, however, that morale isn't important because the lenders think it unlikely the mill will continue to operate.
Hanson said the lenders offered to pay for the benefits of only those employees working in the plant but the union rejected it.
Need time: John Kubilis, president of Steelworkers Local 2243, said afterward that gaining the two weeks of benefits is important because it will give the company and union time to find a solution to health care coverage.
One possibility is providing union members with a self-paid plan with reduced benefits under the federal COBRA law.
That law requires a company to make health care benefits available to unemployed workers at their own expense.
COBRA can't help CSC now, however, because it won't have a plan to offer if a $170,000 weekly payment isn't made by Monday, Kubilis said. With extra time, perhaps the union can find a way to piggypack coverage for union members onto the salaried workers' plan, he said.