Steel survival at stake in merger: ; Success relies on including all major companies

DAILY MAIL WASHINGTON BUREAU

WASHINGTON - Steel company consolidation is a non-starter unlessboth major West Virginia steel producers are included andsteelworker benefits are protected, Steel Caucus Chairman JayRockefeller, D-W.Va., said.

Executives at some of the nation's largest steel companies,including Wheeling-Pittsburgh Steel, said Tuesday they wantcongressional and administration support for a plan to allow as manyas a half dozen steel producers to merge into a single company.

Battered by bankruptcies and foreign imports, steel producers sayconsolidation represents the domestic steel industry's hope forsurvival.

"It's survival," was also Rockefeller's answer to why Wheeling-Pittsburgh and neighboring Weirton Steel must be included in anyconsolidation plan. If the companies aren't in on the merger, theycould disappear, Rockefeller said.

As it is, both West Virginia producers are struggling. Wheeling-Pittsburgh has filed for bankruptcy, while Weirton has been forcedto restructure and lay off workers.

Noting that several European and Japanese manufacturers haveannounced mergers in recent weeks, Weirton's chief executiveofficer, John Walker, said, "These super-mergers will make itdifficult for smaller producers to compete in the years ahead."

The conceived merger would likely combine four to six domesticproducers, creating a company that would manufacturer about 30million tons of steel a year. In addition to Wheeling-PittsburghSteel, U.S. Steel and Bethlehem Steel are known to have been part ofthe consolidation talks. In a letter to U.S. Steel Chairman TomUsher and in talks Tuesday with Commerce Secretary Don Evans,Rockefeller reiterated his concern that Weirton also must beincluded.

The other condition on consolidation is that retiree benefitsmust be taken care of, Rockefeller said. The benefits, known aslegacy costs, are estimated at $10 billion over 10 years.

Steelworkers President Leo Gerard said a "creative solution" mustbe found to deal with legacy costs. Current workers' jobs also mustbe protected. "There may be too many steel companies, but there arenot too many steel workers," Gerard said.

There are currently about 140,000 active steelworkers and 600,000retirees.

Mark Glyptis, head of the Independent Steelworkers Union, saidthe news of consolidation talks came as no surprise. The Bushadministration had said consolidation was necessary when announcingit would undertake a massive investigation of steel imports. TheU.S. International Trade Commission is set to announce later thisweek what remedies, such as tariffs or quotas, it favors to dealwith the steel importation problem.

Rockefeller also has said consolidation could be a solution tosaving the domestic steel industry and introduced legislationencouraging mergers earlier this year.

Glyptis said he wasn't convinced consolidation was the answer tosteel's woes. "I don't believe bigger is always better," he said.

A Penn State professor who studies mergers agrees. "Bigness onits own, mergers on their own, are not a solution," said FariborzGhadar.

Writer Karin Fischer can be reached at (202) 662-8732 or by e-mail at kfischer@dailymail.com.