EOpriv: LTV to go coop? Algoma worker/ownership scheme in CA bankruptcy

[Mike Wood <michaelwood@fuse.net>]

This article from the Cleveland Plain Dealer discusses, in popular
terms, the potential purchase of the assets of LTV by members of the
Steelworkers Union. This would come about through a corporate
restructuring, rather than an ESOP. I'm wondering what the success ratio
on these last-gasp purchases by workers in industries that are
undergoing upheaval. The results of emergency surgery are never as
positive as those of a planned operation, so I would probably expect a
low success ratio where the corporation was already in bankruptcy.
Mike Wood
Cincinnati
.
Business News
Union wants more say in running LTV affairs
04/26/01
By JENNIFER SCOTT CIMPERMAN and SANDRA
LIVINGSTON

The Steelworkers want a much bigger voice in LTV Corp.'s decisions
and suggest that workers and retirees should own most of the ailing
Cleveland steel maker.

The United Steelworkers of America proposed those and other
measures in an effort to fend off drastic cuts in benefits sought by
LTV,
which is operating under Chapter 11 bankruptcy protection from
creditors. In a summary of the union proposal obtained by The Plain
Dealer yesterday, the union wants discussion of:

A 67 percent share of common stock for workers and retirees.

Union rights to name a third of the company's directors, approve
another third and have a say in "all significant corporate
transactions."
The union now has the right to name just one board member.

Profit sharing.

Restrictions on LTV imports of steel and related products. (The
company has said it plans to bring in Latin American steel to make up
loss of output when it closes the West Side of the Cleveland Works in
June. The union's proposal calls for saving the West Side mill.)

The two-page summary does not include union explanations of how
these ideas could be carried out.

David McCall, Ohio district director for the Steelworkers and
chairman of the LTV bargaining committee, said the union was focusing
most on maintaining its members' standard of living and retirees'
health-care benefits and pensions. "If in doing that we also get a piece

of the stock of the company, we're willing to do that," he said.

"The most striking thing is, we are prepared to give the company all the

keys to be able to work smarter, because they can't figure it out,"
McCall said. ". . . I know our jobs are too important to allow [LTV
executives] to keep managing the way they're managing."

On Tuesday, union leaders met with LTV officials in Pittsburgh to
discuss their proposal and the steel maker's restructuring plan, which
includes an estimated $261 million savings a year, largely from wages,
benefits and pensions of hourly workers. LTV, which sought
bankruptcy protection on Dec. 29, says the cuts are necessary to keep
the company afloat. It has said it needs total savings of $800 million a

year from actions including contract changes, cuts in white-collar
staff,
and the closing of most of the West Side mill. Talks between the
company and the union are to resume tomorrow.

The union's proposal said it would discuss changes to work rules and
the health-care system - if LTV considers its ideas - provided that the
company crafts an "acceptable" reorganization plan and that the
government enacts "comprehensive" programs to limit steel imports,
improve access to capital and help with so-called legacy costs,
including pensions for retirees.

LTV spokesman Mark Tomasch would not comment. But in a printed
update distributed to managers and supervisors yesterday, LTV
cautioned that "government relief on imports or legacy costs will not
arrive in time to save LTV Steel."

"It is important that LTV Steel managers understand," the internal
memo says, "that the union's proposal does not begin to address either
the need for immediate cash savings or longer-term changes needed to
create a viable cost structure" for its mills in Cleveland and East
Chicago, Ind.

Still, workers at steel mills have completed successful buyouts. A
buyout bought years for West Virginia's Weirton Steel Corp. In 1984,
employees swapped wage concessions and some benefits for
ownership. But Weirton, like other domestic steel companies, has
posted losses in recent years. (Since the buyout the company has sold
stock to the public, and the majority of its shares are now publicly
held).

Weirton workers were represented by an independent union, but the
Steelworkers have used the tactic as well. In the 1990s, Dofasco Inc.
put a subsidiary, Algoma Steel Inc. in Sault Ste. Marie, Ontario, into
the Canadian equivalent of Chapter 11 bankruptcy protection. The
union rejected Dofasco's reorganization plan, which included major
cutbacks and worker concessions. Instead, it led the company into the
biggest employee buyout in Canadian history. Workers got more than
60 percent of Algoma, the right to appoint or approve a majority of
board directors, veto rights over a company sale and involvement on
the plant floor.

But on Monday, Algoma again sought protection from creditors.

More than a dozen U.S. steel makers also are in bankruptcy court. So
worker ownership isn't a guarantee against cheap imports and falling
prices, but the deals have provided some respite.

"Some haven't been successful," said Michael Locker, president of the
consulting firm Locker Associates in New York, but "all lasted much
longer than they would have lasted if they hadn't done the deal. It
lengthened the period of time that people had jobs and got benefits."