When a New York investment firm decided to go after the assets of defunct steelmaker LTV Corp. in Cleveland this year, it was able to make the acquisition without the extra baggage that would have come from buying an operational company, such as health-care payments for retirees, pension payouts or a labor contract with the union. When the steelmaker shut down at the end of December, those obligations evaporated.

Now that firm, WL Ross & Co. LLC, is looking at buying all or part of Bethlehem Steel Corp., and both sides say the goal is to strike a deal without a shutdown. Analysts are skeptical that Ross would find Bethlehem attractive, however.

In past labor contracts with the United Steelworkers of America, Bethlehem promised to provide health-care benefits to retirees. The bill for that sits at about $3 billion and is a huge check in the "con" column of any entity looking at buying the steelmaker.

Bethlehem's pension fund is also short about $3.2 billion, but it is expected that the federal Pension Benefit Guaranty Corp. will soon take over the plan, ridding the company of that burden.

Unless Bethlehem, which employs about 3,400 at its Sparrows Point plant, liquidates under a Chapter 7 bankruptcy or gets the Steelworkers to agree to dump retiree obligations, it will be difficult to unload that debt.

"I can't understand why [Ross] wouldn't just wait until Bethlehem liquidates," said Leo Larkin of Standard & Poor's. "The only thing I can think of is maybe they are trying to avoid a bidding war by starting a deal this way."

Analyst Charles Bradford, head of Bradford Research in New York, also said that winning a more favorable contract with the union - Ross and Bethlehem are in contract negotiations with the Steelworkers - is easier for a company to achieve when plants are shut down and the prospect of being permanently out of work looms.

"It may have to be completely closed, because that's what changes a lot of the attitudes," he said.

Wilbur L. Ross, head of the investment firm that owns the former LTV, now called International Steel Group Inc., said buying a defunct mill also has its pitfalls and that just because things went well with the LTV acquisition and subsequent restart four months ago doesn't mean the success would be repeated with Bethlehem.

Plants that have been shut down but are expected to reopen are put on "hot idle," meaning the furnaces that make the steel are not completely turned off because doing so could severely damage them. Ross said it would likely cost $3 million a week to keep Bethlehem's facilities on hot idle and that there would be additional expenses in rehiring a work force and restarting the plants.

"There's a danger it won't be shut down right and you could screw it up, so that would make it extremely expensive when you try to put it back online," Ross said. "In any event, I think it's way too early for people to second-guess one thing or the other; we haven't done due diligence yet, and analysts have also not done due diligence."

ISG and Bethlehem, which has filed for Chapter 11 bankruptcy protection, have signed an exclusivity agreement that gives ISG 60 days to perform due diligence. The agreement expires Jan. 6.

Ross declined to say whether dumping retiree health care obligations is a prerequisite for a deal, saying his firm doesn't have a handle on the environmental liabilities Bethlehem faces or what capital improvements are needed, and that all the financial issues have yet to be scrutinized.

He also said it's too soon to say what the odds are of consummating an agreement but that his firm has a record of closing deals.

"We have no reason to gin up a lot of excitement at Bethlehem only not to do it," he said. "We are spending millions of dollars on due diligence and we would not spend millions on due diligence if we weren't quite serious about it."

Steelworkers President Leo W. Gerard said he is encouraged by the talks between ISG and Bethlehem but noted that "the union's overriding obligation and objective is to represent the interests of our members and retirees" and that any consolidation plan "must be based on negotiations that result in protecting our members and retirees, the communities in which they live, and the nation's ability to make steel."

Bethlehem said the acquisition could be completed without a shutdown and that it has enough cash to keep operating independently into the second half of next year.

"In fact, we are farther away from a shutdown now than ever before," said spokeswoman Bette Kovach. "We have adequate liquidity, we are actively engaged in the labor negotiation process and we believe our pension plan will be terminated within the next few months."

Bethlehem has directed upper-level managers at its plants to submit by Nov. 15 plans for a hot-idle shutdown. The company said that is not an indication of things to come, but rather simply an insurance policy.

"Our contingency planning is similar to purchasing homeowners insurance for your house," Bethlehem Chairman and Chief Executive Robert S. "Steve" Miller Jr. said in a statement. "Do you expect a fire? Absolutely not. But you also don't want to be without insurance in the event of a problem that damages your home."