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U.S. Steel's Usher asks Congress to help with costs

Thursday, April 04, 2002

By Len Boselovic, Post-Gazette Staff Writer

U.S. Steel Chairman Thomas J. Usher said yesterday that much-needed consolidation in the steel industry will be hindered if Congress doesn't provide a solution to the industry's retirement benefit costs.

The so-called legacy costs -- pension and medical benefits unionized steelmakers have promised retirees but can't pay for -- are estimated at $12 billion. U.S. Steel and other relatively healthy domestic producers are reluctant to acquire troubled steelmakers because they would have to assume those obligations.

"Right now, I'd say the thing that would help us the most is if Congress would do something on these legacy costs," Usher said during a meeting with the Post-Gazette's editorial board.

"This legacy thing has to be addressed soon because if it isn't addressed soon, you're going to see a lot more LTVs," he said.

The bankrupt Cleveland steelmaker has stopped paying retirement and medical benefits to its retirees and their dependents, including about 12,000 in the Pittsburgh region. Two federal programs, the Pension Benefit Guaranty Corp. and Medicare, provide a safety net for many retirees.

But workers who haven't worked long enough to qualify for a pension or aren't old enough to be eligible for Medicare are out of luck.

For those who are covered, the benefits aren't triggered until a company goes into bankruptcy. A federal program that would free steelmakers of those liabilities prior to bankruptcy would make weak producers more attractive acquisition targets, Usher said.

In December, Usher offered to acquire up to six U.S. competitors if the government assumed the retiree liabilities. His proposal met stiff resistance from lawmakers concerned that aiding one industry would set a dangerous precedent for bailing out other industries with the same problem.

Governments in other countries have assumed retiree costs, spurring mergers that created global steelmakers much larger than U.S. Steel, Usher said. He said U.S. Steel remained interested in growing through acquisitions here and abroad, with or without congressional action on legacy costs.

"My goal would be to get bigger here," he said.

Usher said U.S. Steel remained interested in National Steel, an acquisition it pursued in 1984 before meeting resistance on antitrust grounds. He doesn't believe the Bush administration would object to acquisitions because Bush realizes the importance of creating a large, powerful U.S. steel producer.

"We need to get to a size where we can negotiate from a position of strength," Usher said.

National's filing for bankruptcy last month has delayed negotiations, Usher said. U.S. Steel has an option to acquire 53 percent of National that expires June 15. That agreement, announced in January, may have to be reworked because of the bankruptcy, Usher said.

U.S. Steel also is considering several acquisitions in Central Europe, where it already owns a Slovakian steelmaker.

Usher raised the possibility yesterday of reworking the company's labor agreement with the United Steelworkers union before the existing contract expires in August 2004. Companies that purchase bankrupt producers are expected to gain concessions from the union, advantages U.S. Steel also would want.

Usher praised USW President Leo Gerard as a realistic leader who realizes the importance of being able to compete globally. "He doesn't have his head in the sand," Usher said. "I think there's opportunities for some constructive agreement."

USW officials said there have been no talks with U.S. Steel about an early labor agreement.

Post-Gazette staff writer Jim McKay contributed to this story.