U.S. Steel, Bethlehem, Wheeling-Pittsburgh Discuss Consolidation
{{#rendered}} {{/rendered}}The nation's biggest steelmaker, U.S. Steel, says it has been discussing merging with at least three other large steel companies in a move aimed at saving a dying industry.
"Our vision is to develop a growth-oriented, world-competitive steel company with a global reach," Thomas J. Usher, chairman of U.S. Steel parent USX Corp., said in a statement Tuesday.
Achieving such a consolidation would require overcoming enormous obstacles. Besides the difficulties of getting the parties to agree on terms, a merger would require possibly contentious concessions of more job cuts from labor and protection against imports from the government.
{{#rendered}} {{/rendered}}U.S. Steel, Bethlehem Steel and Wheeling-Pittsburgh Steel said they are involved in discussions with a fourth company and other potential partners they declined to identify.
"What I see coming out of it is a company that has the size and strength to compete in the global steel market of the future," said Robert S. Miller, chief executive of Bethlehem Steel, which filed for Chapter 11 bankruptcy protection on Oct. 15.
U.S. Steel spokesman John Armstrong said the negotiations were in the form of "mostly confidential discussions."
{{#rendered}} {{/rendered}}"They are not far along at all in terms of their detail, it's a concept discussion," Miller said. "The threshold question is government willingness to come to the party."
The companies have had discussions with key administration officials and at least a dozen legislators from steel producing states, said Miller, who as a top Chrysler executive in the 1980s helped secure a federal loan guarantee that kept the automaker in business.
USX owns the largest of six taconite mines on Minnesota's Iron Range, the Minntac operation in Mountain Iron. Bethlehem Steel owns the majority of Hibbing Taconite, although it's trying to sell that stake.
{{#rendered}} {{/rendered}}A consolidation would require a labor agreement that would reduce employment and operating costs and increase productivity, and government help with health-benefit and pension costs plaguing the industry, U.S. Steel and Bethlehem Steel said.
At Bethlehem, for example, those include health care costs for 130,000 beneficiaries, made up of 13,000 active workers, 74,000 retirees and their dependents. Potential merger partners are reluctant to take on the so-called "legacy" costs.
The United Steelworkers union supports consolidation to help the industry survive but union officials disputed the need for job cuts.
{{#rendered}} {{/rendered}}"Any restructuring must preserve the jobs of the workers who have made sacrifice after sacrifice in order to keep the industry alive," said Leo W. Gerard, the Steelworkers union president.
U.S. Steel said steel import restrictions favored by President Bush also are essential if a consolidation were to proceed. The U.S. International Trade Commission was to vote Friday on recommendations to the Bush administration to help companies recover from damage caused by low-priced imports.
Miller said it would take at least until the middle of 2002 to complete such a complex merger. He said the four companies in the talks have capacity to produce about 30 million tons of steel a year.
{{#rendered}} {{/rendered}}That would be nearly double U.S. Steel's capacity of more than 17-million tons. But the resulting company would still be dwarfed by the 50-million-ton capacity of the conglomerate that would result from the pending merger of France's Usinor, Luxembourg's Arbed and Spain's
"I think the possibility of consolidation happening is high because something has to give, with the large number of companies in bankruptcy," said Michael F. Gambardella, an analyst with J.P. Morgan. "There is just too much at stake."