By DON SHILLING

By DON SHILLING
VINDICATOR BUSINESS EDITOR
WARREN -- WCI Steel can survive bankruptcy, but it likely could be under new ownership, industry analysts say.
Other companies will be more interested in buying the Warren company because it filed for bankruptcy court protection Tuesday, said Michael Locker, a New York analyst. He said he thinks potential purchasers already are reviewing WCI.
"It's a strong option," he said.
Buyers like steel companies in bankruptcy because the buyers can avoid many of the costs dragging down the companies. Very few steel companies have been bought outside of bankruptcy court, Locker said.
The purchasers don't buy the company itself, but its assets. With court approval, labor contracts can be voided, and pension obligations and health care commitments to retirees can be dismissed.
In such cases, buyers look to increase productivity with new labor contracts, while pensions are taken over by the federal Pension Benefit Guaranty Corp. Retirees usually lose their health-care benefits.
Lower depreciation costs
Another advantage to buying a company in bankruptcy is that depreciation costs are reduced in accounting statements, said Brian Rayle, analyst with FTN Midwest Research in Cleveland.
Companies must claim certain costs based on the value of their assets, but those costs can be reduced dramatically if assets are sold in bankruptcy court for a fraction of their value. Lower costs lead to higher profits in income statements, Rayle said.
With the opportunity to escape these costs, some companies definitely are looking to buy, so any steel company with attractive assets is likely to be bought once it files for bankruptcy, he said.
International Steel Group of Cleveland, for example, was formed to buy LTV Steel in bankruptcy, and then it bought Acme Steel and Bethlehem Steel. Also, U.S. Steel of Pittsburgh bought National Steel.
Going it alone
Locker said, however, that WCI is in a good position to survive on its own should it choose that option.
WCI has developed some good products that serve niche markets that other producers don't meet, he said.
The local mill has prided itself in being able to fill orders that larger mills won't handle, including unusual widths of steel and shipments of smaller quantities.
Locker said WCI must develop a better marketing plan to take advantage of its capabilities and get its costs down. Not only must it reduce its direct labor costs, but it must reduce its energy and raw material expenses and increase productivity, he said.
While WCI has a good chance to survive, there are no guarantees, Locker said.
Other companies
About 40 steel processors and producers have filed for bankruptcy since 1998 when low-priced steel imports began arriving in this country in large quantities. Not all of these steel companies have been acquired or emerged from bankruptcy as an ongoing company. Some have just gone out of business.
This area has been hit hard lately by two such closings.
Two years ago, CSC Ltd., a Warren steel producer, closed, eliminating more than 1,300 jobs. Last year, Cold Metal Products, a Campbell steel processor, stopped operations and left more than 200 jobless.
shilling@vindy.com