Forging America: The History of Bethlehem Steel - Chapter 8
Bethlehem Steel Graphic Banner: Chapter 8
As it turned out, he would last just 16 months. Dunham continued Barnette's lobby against foreign dumping and helped the company secure $90 million in credit. He emphasized the need for the domestic steel industry to consolidate its profitable operations and eliminate its money-losing ones. By the time he completed his first year, losses were piling up as never before. That, of course, didn't stop the company from giving Dunham a $2.5 million severance package as he walked out the door.
''By midyear, my optimism began to wane, as steel imports flooded our markets at devastatingly low prices and energy costs began to sour,'' Dunham told shareholders. ''Storm clouds were gathering, and it was clear that changes in our business environment were accelerating.''
The company posted a record $1.1 billion loss in the second quarter of 2001, and talk of bankruptcy was circulating through the hallways of City Hall. In the previous two years alone, 15 domestic steel companies had filed for bankruptcy, and Bethlehem appeared to be the next domino in the line.
''From what we're hearing,'' then-Mayor Cunningham said in the summer of 2001, ''it is not a matter of if, but when.''
But Bethlehem Steel wasn't conceding anything yet. For months, Millenbruch had been meeting secretly with almost any steel company willing to hear his pitch. Quietly, Bethlehem Steel had constructed a long-term plan that not only would pull the company out of its financial grave, but position it as one of the world's largest steelmakers. The plan called for a series of as many as five mergers or partnerships that would boost its production from 11.3 million tons a year to more than 40 million tons, a total rivaling that of the largest Russian, European and Chinese steelmakers. And the merger talks were not all within America's borders.
''If you go down the list of the top 20 steelmakers in the world,'' Millenbruch said, ''we probably had talks, some of them very serious talks, with half of them.''
Millenbruch would not give details of the negotiations, because The Steel signed confidentiality agreements in each. However, The Morning Call learned that the companies Bethlehem Steel negotiated with included top U.S. producer U.S. Steel, massive Japanese producer Nippon Steel Corp., NKK Steel of Tokyo and Paris-based Usinor, one of the world's largest steel companies. Smaller companies Bethlehem Steel talked with included the former Armco Steel of Middletown, Ohio; Dofasco Steel of Ontario, Canada; Wheeling-Pittsburgh Steel and National Steel of Mishawaka, Ind.
Some of the talks were little more than window shopping for isolated partnerships for specific products, but others went on for several months. The primary hurdle was always the same: Bethlehem Steel's labor contract, benefits and pension costs were overwhelming. Each potential merger candidate required deep cuts from a Bethlehem Steel labor force that didn't trust the company.
When Steel executives told union leaders that deep cuts were needed to complete a merger, the leaders said: Why should we ask 80-year-old widows to take cuts in their benefits, just so your stockholders can make more money? File for bankruptcy and come back and see us.
Union members hadn't forgotten that in 1995 they were asked for cuts in return for modernizing the Bethlehem plant, only to see the modernization plan killed after they took the cuts.
''Trust them, are you kidding me?'' says O'Brien, who by 2001 had left his union position and was a Democratic candidate for Congress. ''How can you trust someone who keeps lying to you?''
The reality was that no matter how much the union gave back, Bethlehem Steel's bankruptcy was inevitable.
Two weeks after Sept. 11, 2001, when the nation was devastated by terrorist-controlled planes crashing into the World Trade Center, the Pentagon and a field in Shanksville, Pa., Bethlehem Steel's board named Robert S. ''Steve'' Miller Jr., as its next chief executive. Miller had gained a reputation as a ''fix it'' specialist for failing corporations. He helped Chrysler Corp. get a $1.5 billion federal bailout and helped turn around trash disposal giant Waste Management Inc. and auto parts supplier Federal Mogul. This would be his eighth repair job in a decade.
Miller's ordination was unusual not only because it was the first time Bethlehem Steel looked outside the company for a leader even Trautlein was in the executive offices for three years before he was named chairman but for the speed with which it happened. Miller was a model railroad buff who, on Sept. 20, was attending a model train show in Salt Lake City when his wife called to relay a message to him. The next day he was meeting with Bethlehem Steel directors in New York City, and two days later he was appointed CEO.
''As much as I knew about Bethlehem was that in my earlier career as vice chairman of the Chrysler Corp., we bought a bunch of steel from them,'' Miller says. ''But steel companies come a dime a dozen. I had never been to the Lehigh Valley.''
Three weeks later, on Oct. 17, Bethlehem Steel filed for Chapter 11 bankruptcy. The decision was the board's, and in the haste of his appointment, Miller was not told before he accepted the job, but he said there was no avoiding it. The company was on its way to losing a record $1.9 billion that year, and its shrunken work force of 13,000 was saddled with the impossible task of supporting 95,000 retirees who were collecting pensions and benefits. A faltering economy and a stock market crash after Sept. 11 left the pension fund underfunded by an estimated $3 billion.