Because of a "rapidly softening steel market," Bethlehem Steel Corp. will furlough 500 workers at its Sparrows Point plant during Christmas week, the company's chairman and chief executive said yesterday.
Though for one week, the cutback is a precursor to permanent work force reductions expected in the next several months as the steelmaker tries to emerge from bankruptcy either on its own or as part of another company.
Robert S. "Steve" Miller, Bethlehem's chairman and chief executive, said yesterday there will be job reductions at Sparrows Point in the next couple of months but declined to give a precise number. Sparrows Point employs 3,300 workers.
"It is inevitable that we have to cut our costs," Miller said.
Miller visited the Baltimore County plant yesterday for meetings with employees and the media. The session had been scheduled before the federal Pension Benefit Guaranty Corp. terminated the bankrupt company's pension plan Wednesday.
The PBGC's move has threatened a possible deal to sell Bethlehem's assets to a rival steelmaker, Cleveland-based International Steel Group Inc., officials from both companies said.
Tom Conway, chairman of the United Steelworkers of America's negotiating committee, said he was aware that Bethlehem will need significant job reductions in order to be competitive.
As part of the current labor contract, the union and the company would have to agree on those reductions, Conway said. Both blue-collar and white-collar jobs will be affected, he said.
"We're convinced that the steel industry is undergoing sort of a historic change," Conway said. "Right now, frankly, we compete against cheap imports and cheap minimills. If we ignore it, we will eventually be forced out of business."
Next week's temporary layoff is the second in a month at Sparrows Point. Sparrows Point suspended finishing operations during Thanksgiving week and laid off 700 workers.
The finishing side of the plant will also be affected next week when the hot mill, which turns slabs of steel into thin coils, suspends operations.
At the plant's main office yesterday, Miller said Bethlehem has a business plan to continue operating through next year. The plan assumes that Bethlehem no longer has to contribute to the pension plan, that market conditions do not worsen and that it's able to keep customers, he said.
Miller said the steel market is softening, particularly in demand for products used by the construction industry and which are made at Sparrows Point. He said demand has remained strong at Bethlehem's biggest plant, in Burns Harbor, Ind., which makes steel for the automobile industry.
The PBGC, a government agency that insures pension programs, said it moved to terminate the pension plan and protect the benefits of 95,000 workers and retirees - including 14,600 in the Baltimore area - and limit its own liabilities. The agency would be liable for $3.7 billion of the Bethlehem plan, which is underfunded by a total $4.3 billion.
The pension takeover, which awaits court approval, would rank as the government's largest in the PBGC's 28-year history. As of Dec. 18, Bethlehem workers are no longer accruing new pension benefits.
Miller yesterday decried the PBGC's pension takeover move, saying it disrupted plans with ISG and the Steelworkers union to offer early-retirement enticements to senior employees. But he said he expects negotiations with ISG to continue past Jan. 6, the formal deadline of the two companies' 60-day exclusive exploration agreement.
"We have not made a decision on what course to take," said Miller, referring to a possible Bethlehem challenge in court to the pension plan's takeover. "We'll try to negotiate with the PBGC. We're hoping to get there by persuasion rather than litigation."
Sen. Barbara A. Mikulski, who flanked Miller at yesterday's media briefing, said she was "outraged" by the PBGC takeover.
Bethlehem is based in Pennsylvania, and Mikulski said she would enlist the support of that state's senior U.S. senator, Arlen Specter, and lobby other top government officials to pressure the PBGC to push back its termination date to February.
"If they're going to make the lives of my steelworkers miserable, I'm going to make their lives miserable," Mikulski vowed.
Miller contested the PBGC move, saying that Bethlehem was not in arrears on its pension-funding obligations. The company had expected to miss a required $190 million payment in July 2003.
Jeffrey Speicher, a PBGC spokesman, said "it's not necessary under the law for the plan to have missed its minimum funding payments for termination."
Said Speicher: "The PBGC determined that the plan is unaffordable and there's no reasonable scenario under which the company or the bankruptcy estate would be able to pay all of the benefits, given its level of underfunding."