Wednesday, May 21, 2003
Weirton Steel has financing to continue operating, says the CEO.
WEIRTON, W.Va. (AP) -- Weirton Steel Corp., the nation's sixth-largest integrated steelmaker and No. 2 producer of tin, filed for Chapter 11 bankruptcy protection today.
The small, employee-owned company held on while an import crisis took down dozens of competitors, but racked up more than $700 million in losses over five years.
John Walker, president and chief executive, said the company has obtained a $225 million financing package from Fleet Capital Corp. of Chicago, which will allow the mill to keep operating while the company reorganizes.
Walker had been in the middle of a plan to cut costs by $120 million.
Cutting costs
The Independent Steelworkers Union had already helped trim $38 million, approving a one-year contract in February that cut pay 5 percent, canceled a planned raise and froze accrued pension benefits.
The company planned to save another $34 million by asking the 3,600 active employees and some 4,600 retirees and dependents for health care givebacks.
Retirees, however, had been slow to embrace the request that they help cover the cost of health insurance with a $200 monthly deduction from their pension checks.
They also faced higher copayments for prescription drugs and doctor visits.
About three dozen U.S. producers have filed for bankruptcy since early 1998, when imported steel began to flood the market at prices below the cost of production.
The Bush administration imposed tariffs of up to 30 percent on some products in March 2002, a move designed to give U.S. manufacturers time to recover and reorganize to become more competitive.
Analysts surprised
While larger companies like Cleveland's LTV and Pennsylvania's Bethlehem Steel were swallowed by the ongoing consolidations, creativity and determination kept Weirton independent.
Bolstered by a strong relationship with the ISU, it endured a series of layoffs. It secured loans, negotiated $30 million in savings with vendors and saved $8 million with a machinery lease agreement.
Today's filing surprised a steel analyst who said Weirton had seemed to "be bumping along."
Weirton Steel was squeezed by rising energy and material costs and declining prices for tin products, said Michael Locker, president of Locker Associates Inc. and author of the Steel Industry Update Newsletter.