Steel Crisis Deepens As LTV Shuts Down; Health Care and Pension Benefits in Danger
LTV Steel, the third largest integrated steelmaker in the U.S., stopped making steel in early December.
When it shut down, LTV had 7,700 union employees and 40,000 union retirees. Its two main steel-producing mills were in East Chicago, Indiana and Cleveland, with a finishing mill in Hennepin, Illinois and coke plants in Warren, Ohio and Chicago.
LTV Steel had filed for Chapter 11 bankruptcy a year earlier. That meant the company could try to reorganize with protection from creditors. Although the United Steelworkers negotiated a concessions package in July to try to save jobs, it is clear now that the company was not committed to saving the steelmaking operations. Instead its goal was to maintain only its Copperweld and Tube Division.
When the company asked to reopen the contract last spring, it wanted concessions the union couldn’t possibly give. For example, it wanted retirees to pay all but a token amount of the cost of health care.
When talks stalled, the union met with a committee of the unsecured creditors-mostly suppliers-who also had an interest in LTV continuing to make steel. They reached an agreement on concessions and were prepared to go to the bankruptcy judge with this proposal and ask him to appoint a trustee to take over the company if necessary.
The company agreed to accept the union-creditors plan. The majority of the cost savings would come from job eliminations and the deferral of wage increases. However, LTV continued to lose money, in part because of the repercussions on the economy after September 11, before the savings could really kick in.
In addition to problems facing the steel industry in general, LTV’s management made a number of decisions that greatly increased the company’s problems. They spent $250 million to buy half of Trico, a new Alabama mini-mill, that lost millions more. An iron pellet-producing plant in Trinidad lost $100 million.
Most analysts feel that when LTV bought Copperweld and the Welded Tube Co. of America for about $700 million, it overpaid by as much as $200 million. In addition, LTV installed an extremely expensive computer system that cost hundreds of millions more. The total of this mismanagement was probably over $1 billion, conservatively.
FEDERAL LOAN GUARANTEES
Another aspect to the story is LTV’s application for a federal loan guarantee. Part of the new concession contract hinged on the company receiving a $250 million loan, 85 percent of which would be guaranteed by the federal Emergency Steel Loan Guarantee Board.
However, it turns out that the Board does not actually like to pay out any money on guaranteed loans. The Board wants to be almost certain that the loan will be paid back before guaranteeing it. The Board indicated that it didn’t expect LTV to survive, and so it probably wouldn’t approve the loan.
At that point, LTV came back to the union with another concession request, supposedly to meet the Loan Board’s concerns. Management made a proposal it knew the union could not possibly accept. The union made a counter-offer, but on November 20, management-without informing the board of directors of the union’s new proposal-requested permission from the bankruptcy judge to close down the company and cancel the contract.
Once this occurred, customers and suppliers deserted. So even though the union and the non-secured creditors reached another agreement on a second concessions package, it was too late because of the loss of business.
When the closure becomes final, all steelworkers and retirees will lose their health coverage. Those with 30 years and those already on pension will have protections from the federal Pension Benefit Guarantee Board, but only those retiring before 1999 (before the last pension increase) will have full protection.
The Steelworkers negotiated a 60 percent pension increase in 1999, but because it has been in effect for less than five years, only about 20 percent of that increase will be guaranteed by the PBGC. The contractual pension supplements for victims of shut-downs are not guaranteed. It appeared that workers with less than 30 years’ service would receive nothing until age 62.
SAVE LTV CAMPAIGN
The Steelworkers, aided by Congressman Dennis Kucinich and others, developed an intensive campaign to save LTV Steel. They held rallies involving hundreds of steelworkers, including at the plant in Cleveland, in downtown Cleveland, and at the bankruptcy court hearing in Youngstown, Ohio. They gained the support of public officials, including the Cleveland city council, mayor, and congresspersons.
A rally in Youngstown on December 4 involved eight busloads of Steelworkers, of which half were from Indiana and Illinois. About 500 workers rallied for hours while the bankruptcy hearing was going on. Their chants of “No justice, no peace” and “Let’s make steel” could be heard in the courtroom.
On December 19 union and company reached an agreement that leaders said was the best they could accomplish at the time.
The agreement allows the company to go out of business, requiring it to keep the plant in usable condition (on “hot idle”) through February. The main point of the agreement was to make over 4,000 of the 7,700 employees immediately eligible for a pension (this is in addition to those who were already eligible to retire). Health insurance and half of supplemental unemployment pay was extended through the end of February.
The company confirmed that a trust fund would continue to pay retiree health benefits for several months, until it runs out. At that point, all retirees, including past retirees, will be on their own. (The union holds out hope that a new buyer will pick up at least some of the insurance costs.)
The union was able to reach this agreement in part because it was prepared to strike the only section of LTV that was running and making money-the Copperweld and Tube Division. The strike threat, according to Dave McCall, the Steelworkers’ Ohio District Director, was one of the main factors that convinced the company to allow the pensions. McCall also pointed out that a lot of credit goes to the solidarity of the members who stuck together and got involved in the campaign.
To pressure the government to help save LTV, the Steelworkers set up a “Tent City” in Washington starting December 11. The plan was to bring workers to stay in D.C. until Congress passed an attachment to President Bush’s economic stimulus package to ease the conditions for LTV to get a loan guarantee.
Hundreds of workers from around the Midwest camped out in the December cold outside the George Meany Labor College near Washington. During the day they went into the city to rally and visit congresspeople, and they reported a favorable response.
They did not get their amendments passed, but the economic stimulus package did not pass either. The union plans to reconvene in Washington and keep working for the measure.
As the plants remain on hot idle, the union is looking for a buyer. LTV, as part of the December 19 agreement, is supposed to cooperate. Congressman Kucinich said that as of January 12, there were at least three buyers interested in some of the facilities.