WARREN WCI wants to restructure debt expenses, labor pact

The company wants the union to revise its current contract to cut labor costs.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
WARREN -- WCI Steel announced a restructuring plan today aimed at reversing the company's continuing financial losses and preserving the jobs of its 1,800 employees.
The steelmaker said its three-pronged plan would require new commitments from New York-based Renco Group Inc., its parent company, as well as from its lending banks and its employees.
Officials said the company has begun meetings with the United Steelworkers of America to discuss revising its labor agreement, which expires Oct. 31, 2004. USW Local 1375 represents hourly workers at the Warren mill.
"They certainly understand our situation and the need for us to change," said Tim Roberts, WCI spokesman.
International Steel Group, which bought LTV Steel last year, already has a revised contract with USW, he said, and U.S. Steel and Wheeling-Pittsburgh Steel are negotiating for changes. "Very soon we could be ringed by steel companies that have revised contracts and reduced labor costs," Roberts explained.
Debt payments
WCI executives have also met with lenders to discuss reductions in payments the company must make on its $300 million in secured notes. The debt is a result of improvements the company made to its continuous caster and ladle metallurgy complex in the early 1990s.
The steelmaker said its parent company has "indicated it is receptive to making the substantial cash infusion that would be an integral part of any successful financial restructuring."
Renco bailed out the steelmaker earlier this year by depositing an additional $15 million into its coffers. Officials said that cash infusion gave the company time to reassess its operations and to look for ways to make the mill profitable again.
Roberts said he could not say how much cash might be needed this time, but he stressed that the payment would be dependent upon new commitments by the union and WCI's lending banks.
Edward Caine, WCI president, said the company will continue to make customer needs a primary focus of its strategic planning process, during and after the restructuring.
"We will maintain our strong commitment to customer satisfaction, providing our customers with value-added services, including high quality products delivered on time," Caine said. "We appreciate their support as we work to make WCI a viable and financially sound steel supplier."
Quarterly loss
Announcement of the restructuring proposal came as WCI reported a loss of $13.4 million for its second quarter ending April 30, compared with a $11.8 million loss in the same period of 2002. The company reported a loss of $17.5 million for the first half of fiscal 2003, compared with a first half 2002 loss of $37.4 million.
Officials also acknowledged WCI will not be able to make an interest payment on its secured notes, which is due June 1, but officials are negotiating with the lenders and hope to be able to make that payment within the 30-day grace period. More information on the outcome of those talks will be released when WCI issues its second quarter financial report, Roberts said.
Assessment of operations
WCI's restructuring plan was the result of a comprehensive assessment of the company's operations that began in March after announcing its second consecutive year of losing money.
The Warren mill reported a net loss of $37.5 million on sales of $502 million in fiscal 2002, and it lost $100.8 million in fiscal 2001.
Metal Strategies, a Pa. company specializing in strategic planning and business plan development for metals businesses, was hired to work with WCI officials on the analysis.
Explaining the most recent quarterly loss, the company cited higher energy and raw material costs, the continuing slowdown in the manufacturing segment and increased competition from the reopening of formerly idled mills as factors.
The company said it will likely lose money again in the third quarter.