WHX pension fund seized
The federal government Friday took control of WHX Corp.'s pension plan, which covers 9,400 current or retired workers at two subsidiaries, including Wheeling-Pittsburgh Steel Corp., the nation's eighth biggest integrated steel producer.
Wheeling-Pitt president James G. Bradley termed the move by the federal Pension Benefit Guaranty Corp. "premature."
"We did not anticipate that the PBGC would take this action and had no advance notice of their announcement," said Bradley, who also serves as chief executive officer of the financially troubled steel company, which filed for Chapter 11 bankruptcy protection in November 2000.
"We believe this action was premature."
Explaining the move, PBGC director Steven A. Kandarian said New York-based WHX's pension plan has $300 million in assets but more than $443 million in liabilities.
In addition to covering current and retired employees of Wheeling-Pitt, including some 360 workers at the firm's Allenport plant, the pension fund covers subsidiary Handy and Harman, a metal manufacturer based in Rye, N.Y.
The federal program will be liable for about $65 million in benefits owed to retirees, but that figure could balloon to as much as $378 million, Kandarian said.
But Bradley voiced the belief the government simply can't take control of the pension plan.
Before PBGC can act on its announcement, Bradley said, it must obtain WHX's consent or obtain a court border allowing it to terminate the WHX pension plan and assume responsibility for paying benefits.
"The announcement today is not a reflection of our long-term business plan for emerging from bankruptcy," Bradley said in a statement issued Friday afternoon. "I believe this action is nothing more than the PBGC taking preemptive action, as it has done with previous steel company pension plans, in order to limit its potential future liabilities. In fact, as part of the review process, the Emergency Steel Loan Board solicited input from the PBGC, which did not offer any objections to the plan."
Bradley was referring to discussions Wheeling-Pitt has had with the Emergency Steel Loan Board this week, after that agency rejected the steel maker's joint application with the Royal Bank of Canada for a $250 million loan that was key to emerging from bankruptcy.
The board rejected the loan application because it was not convinced Wheeling-Pitt had the earning potential to repay the loan.
Bradley said Wheeling-Pitt expects to file an amended application with the board early next week.
"The PBGC's announcement will not affect our day-to-day operations and will not change our plans to file an amended application with the Emergency Steel Loan Board," he said.
Since its 2000 bankruptcy filing, Wheeling-Pitt has cut more than 700 jobs through attrition and layoffs.
In all, the company employees about 3,800 workers at Allenport and plants at Follansbee and Beech Bottom in West Virginia and the Ohio towns of Steubenville, Mingo Junction, Canfield, Yorkville and Martins Ferry.
PBGC spokesman Jeffrey Speicher said Wheeling-Pitt's failure to obtain the $250 million loan package was a factor in the federal takeover of WHX's pension plan.
Wheeling-Pitt's current pension plan was created in 1997 and Handy & Harman's plan was merged with it in 1998, Kandarian said.
"PBGC, as the insurer of the benefits plan, analyzed the financial situation of the company and we certainly looked at all factors that would contribute to their ability to maintain the plant," Speicher said, adding that the pension plan "is considered ended as of today."
Bernie Ravasio, president of United Steelworkers of America Local 1190 in Steubenville, said he was shocked by the PBGC announcement.
He said he planned to ask the union's legal department if the federal takeover is legal, contending that the plan is fully funded.
Some three dozen domestic steel companies have filed for bankruptcy and many have gone out of business since 1998, when low-priced imports began flooding the U.S. market.
Since Oct. 1, 2001, the PBGC has assumed more than $8 billion in claims from struggling steel companies, including Bethlehem Steel, LTV Steel and National Steel.
The maximum guaranteed annual pension through PBGC for workers retiring this year at age 65 is $43,977, according to the Associated Press.
"The PBGC's insurance guarantees will protect the basic pension benefits of workers and retirees in the WHX pension plan," Kandarian said.
Mickey Forte, president of United Steel Workers of America Local 1187 in Allenport, challenged the claim that the government has assumed control of the pension plan.
"The government is not taking anything over," he said. "They've taken preemptive action."
He also said the claim that union members would get $40,000 a year was false.
"It's totally wrong as usual," he said. "The only people that make $40,000 pensions are legislators - the people that pass the laws for themselves.
"The people that can retire should be guaranteed their pension at exactly what it is right now. There are no supplements."
Forte said the union workers make $40 a month, according to how many years they have vested in the plan.
"I'm 55 years old. I have 35 years of service. I can retire at this point but I can only count 30 years. I would get $1,200 a month," he said. "There is no one here now, in the past, and in the future that would make $40,000 a year in pension. It's false."