WARREN Expert says WCI will work hard to avoid bankruptcy

THE VINDICATOR, YOUNGSTOWN, OHIO
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
WARREN -- WCI Steel officials will do everything possible to resolve the company's financial troubles without filing for bankruptcy protection, a steel industry expert says, because that's the only way to preserve the owner's equity in the company.
Renco Group Inc., the holding company that owns WCI, is owned by millionaire industrialist Ira L. Rennert. The company also owns Indiana-based AM General Corp., manufacturer of the Hummer and Humvee vehicles, as well as a Kentucky coal company and a Utah producer of magnesium.
"They're going to struggle mightily to keep [WCI] from going into bankruptcy because Mr. Rennert's stock will lose most or all of its value if it goes that way," said Michael Locker, president of Locker Associates, a New York business consulting firm, and publisher of a monthly steel industry newsletter.
"That's why Mr. Rennert will put money into it to keep it going."
Avoiding bankruptcy court would also be easier for everyone involved, Locker said. "If they can restructure without going into bankruptcy, it will be less disruptive to their customers, their suppliers, their employees and the community in general."
Locker is very familiar with WCI because his company specializes in corporate restructuring and was part of an effort to save another Warren steelmaker, CSC Ltd. The specialty steel producer filed for Chapter 11 bankruptcy protection but eventually closed down two years ago, leaving 1,300 jobless.
Restructuring plan
WCI, the Mahoning Valley's third largest industrial employer with about 1,800 workers, revealed a restructuring plan this week aimed at reducing its continuing losses and making the company profitable again.
The plan would require "a significant cash infusion" from Renco, an agreement by lending bankers to reduce its debt payments, and contract revisions for United Steelworkers of America Local 1375. Officials have been saying since March that there are no plans to file for federal bankruptcy protection.
The restructuring proposal emerged from a comprehensive analysis by Metal Strategies of West Chester, Pa., a strategic planning and business plan development company hired to study WCI's operations.
Tim Roberts, a WCI spokesman, has said Renco has indicated it is receptive to making the cash contribution needed, if negotiations with the union and the banks are successful.
Renco already pumped an additional $15 million into WCI's coffers in March when the company reported a loss of $37.6 million for its fiscal 2002. The integrated steelmaker has lost an additional $17.5 million in the first half of fiscal 2003.
Union view
Michael Rubicz, president of Local 1375, said the union is willing to discuss revisions to its existing contract but has not yet agreed to make changes.
He said the union favors the "self-directed workplace" concept, which was adopted by International Steel Group Inc. when it bought LTV Steel in Cleveland last year. The USW and ISG agreed to reduce the number of supervisors in the mill, giving rank-and-file workers more input.
That change has been a big money-saver for ISG, Locker said, lowering its cost of making a cold rolled steel coil by $100 a ton. The coil sells for about $400 a ton, he said, so the reduced production cost results in substantially higher profits for the company.
Rubicz said talks between the union and WCI will likely go through the summer, with some sessions to be conducted locally to involve the local membership. He theorized that the restructuring plan, including new commitments by the union, bankers and owner, might be final by some time in September.
vinarsky@vindy.com