Weirton Steel Corp. Files for Chapter 11

Weirton Steel Corp., the nation's sixth-largest integrated steel maker and No. 2 producer of tin, filed for Chapter 11 bankruptcy protection May 19th.

The small, employee-owned company held on while an import crisis took down dozens of competitors, but racked up more than $700 million in losses over five years.

President and CEO John Walker said the company has obtained a $225 million financing package from Fleet Capital Corp. of Chicago, which will allow the mill to keep operating while it reorganizes.

Walker had been in the middle of a plan to cut costs by $120 million when Weirton Steel's board of directors voted to file for bankruptcy.

"In the past year, we did everything we could do outside the bankruptcy venue before taking this necessary step," Walker said. "Our previous initiatives strengthened the company, but it became increasingly evident in the current industry climate that Chapter 11 reorganization is the only remaining solution to address our liability issues."

The Independent Steelworkers Union had helped Walker trim $38 million, approving a one-year contract that cut pay 5 percent, canceled a planned raise and froze accrued pension benefits. The company planned to cut another $34 million by asking the 3,600 active employees and some 4,600 retirees and dependents for health care givebacks.

Retirees, however, had been slow to embrace the request that they help cover the cost of health insurance with a $200 monthly deduction from their pension checks. They also faced higher copayments for prescription drugs and doctor visits. Weirton Steel is seeking court approval to create a committee of retirees to address the pension issues.

Combined, the contract and health care changes would have saved the company $72 million.

ISU President Mark Glyptis said the bankruptcy filing was unnecessary and avoidable.

"Today, our senior management effectively gave up and conceded defeat," he said. "But the working people of Weirton Steel will never surrender. We will not give up."

The company and the nation's steel industry have been battling for survival for the past several years. The industry has been combating what it says is unfair foreign competition and a slow economy.

The Bush administration imposed tariffs of up to 30 percent on some foreign products in March 2002, a move designed to give U.S. manufacturers time to recover and reorganize to become more competitive.

While larger companies like Cleveland's LTV and Pennsylvania's Bethlehem Steel were swallowed by the ongoing consolidations, creativity and determination kept Weirton independent.

Bolstered by a strong relationship with the ISU, it endured a series of layoffs. It secured loans, negotiated $30 million in savings with vendors and saved $8 million with a machinery lease agreement.

Monday's filing surprised a steel analyst who said Weirton Steel had seemed to "be bumping along."

But the company was squeezed by rising energy and material costs and declining prices for tin products, said Michael Locker, president of Locker Associates Inc. and author of the Steel Industry Update Newsletter.

Weirton's survival strategy centered on having the nation's largest tin mill. Only U.S. Steel Corp. produces more tin-plated steel than Weirton, where tin accounts for 38 percent of production and 50 percent of revenues.

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Analysts, however, had long warned that small, independent companies were not the way of the future in the rapidly changing industry, and Walker had said he expected his company to have some role in the consolidations.

Last year, shareholders rejected a proposal that would have made it easier for Weirton to merge with another steel producer. That decision could have foreshadowed Monday's filing, said Mark Parr, a Cleveland-based analyst with McDonald Investments Inc.

"The implication was that the company was seeking some help with another partner as early as last year," Parr said.

Weirton, which grew out of the former National Steel Corp., became the nation's largest, wholly employee-owned company in 1984. Associated Press