The Steal Industry
Saturday, January 28, 2006
Gallagher: Are there parallels between Wilbur Ross' operations in the steel industry and in coal?
Reutter: Yes. Pension stripping is the most obvious. In purchasing LTV, Beth Steel, Weirton, and several smaller companies out of the bankruptcy. Ross walked away from these companies' previous obligations. In all, more than 150,000 retired steelworkers lost health-care benefits that they earned in retirement as part of their deferred paychecks. Ross, meanwhile, was in and out of the steel business in less than three years, pocketing $267 million in personal profits through his sell-off to Mittal Steel.
Ross used the same technique when he purchased bankrupt Horizon Natural Resources, once a United Mine Workers (UMW) operator. The federal bankruptcy judge in Kentucky ruled that Horizon did not have to pay health benefits for retired miners that it had negotiated with the UMW. Thanks to that decision, International Coal Group, which took over Horizon's assets, escaped from paying the post-retirement employee obligations to 4,000 retired and in many cases sick miners.
ICG also closed down UMW-represented mines when corporate ownership passed from Horizon to the Ross entity in 2004. Dirty business in the coal fields.
Gallagher: What's Wilbur Ross' involvement with Steve Miller, the man who took over Delphi Automotive Corp. in July and took it into bankruptcy three months later? Is Ross moving into the U.S. auto sector?
Reutter: Robert "Steve" Miller was the restructuring expert who placed Bethlehem Steel into bankruptcy in October 2001. That set off a chain of events that led to the sale of the company to Ross' International Steel Group (ISG) in May 2003. As CEO of the Bethlehem estate, Miller petitioned the bankruptcy judge for permission to end health benefits to retirees in a prearranged court filing with Ross. In was a two-step legal dance: First Bethlehem, as debtor-in-possession, was freed of its retiree obligations. Then Bethlehem's assets were sold to ISG, while the company itself was dissolved.
Last year, Miller returned from retirement to become chairman and CEO of Delphi, the nation's largest auto-parts maker. In October, he placed Delphi into Chapter 11 bankruptcy. A month before the filing, Ross announced that he had formed an investment fund to buy and globally consolidate auto-parts makers. Ross expressed interest in buying Delphi if the company succeeded in lowering its labor costs.
In the spirit of if once you succeed, Ross and Miller are repeating their playbook from Beth Steel. Once again, they are cloaking their activities with pronouncements about the pressures of globalization on U.S. companies. And once again, they are banking on working families to sacrifice their future incomes and benefits in order to rescue another American industry from purported ruin. Much of their p.r. is consequently aimed at the media, spinning this story about the waste and inefficiency of union contracts.
Let's hope that the shock from the Sago mine disaster including Ross' effort to downplay his ownership of the mine and Ben Hatfield's inept rescue attempt - results in a closer look at both Ross and his bank and hedge-fund enablers.
© 2006 Mark Reutter