Weirton Urges Cuts in Health Care Costs

By THE ASSOCIATED PRESS

NY Times, February 26, 2003

Weirton Steel Corp. is telling some 4,600 of its retirees that the West Virginia steel maker could be forced into bankruptcy if they reject a proposal requiring them to make hefty copayments toward their health care costs.

Meetings to explain the changes, which would force most retirees under age 65 to pay $200 a month toward their health care premiums -- currently they pay nothing -- and double the copayment for most prescription drugs, began Monday and will continue through next week.

Retirees then have until March 21 to decide whether to sign a waiver agreeing to the changes. If 75 percent or more agree, active workers will be asked to vote on cuts to their health benefits as well, potentially helping the company slash an estimated total of $34 million from its costs. Active workers already have agreed to wage and pension concessions.

Bankruptcy -- a word that both executives and union leaders are normally careful to avoid -- is mentioned five times in a letter and six-page fact sheet retirees receive when they show up for the meetings.

Weirton Steel President and CEO John Walker said its use now is not a scare tactic but a necessary way to connect the dots for retirees. The company has put together a plan to save a total $120 million, and each component is linked.

``We're on our way to getting a substantial portion of that,'' Walker said Wednesday.

Last week, the 3,200-member Independent Steelworkers Union approved a new one-year contract that saves the company some $38 million. It cuts pay 5 percent, cancels a planned $1 per hour raise and freezes accrued pension benefits at current levels to stop a $400 million liability from growing any larger.

``There are other pieces, which I don't want to get into now, but we'd be halfway there with this,'' Walker said.

The fact sheet for retirees warns that if Weirton Steel were to file for bankruptcy, all health care and possibly their pensions could be lost. By volunteering to contribute more toward their coverage, the retirees could help protect their own futures, it says.

``The plain facts are that retiree benefit costs are such a large part of our costs, we do not believe we can successfully accomplish our cost-saving goals without including retirees,'' the letter says.

``Other companies have taken a very different path, resulting in the termination of retiree health care insurance benefits,'' it says. ``This campaign, we believe, is the 'Weirton way' to address this very serious problem.''

The comment was a reference to companies such as Pennsylvania's bankrupt Bethlehem Steel, which is being purchased by Cleveland-based International Steel Group and which plans to terminate benefits for some 95,000 retirees.

Like other U.S. producers battered by foreign competition since 1998, Weirton Steel has been unable to post a profit since the second quarter of 2000, when it had a net gain of about $500,000.

Company and union officials alike have been determined to avoid bankruptcy, publicly acknowledging that Weirton Steel would be unlikely to re-emerge if forced to file. Of some 35 U.S. companies that have gone that route since 1998, nearly half have closed.

Weirton Steel's executives and the Independent Steelworkers Union have repeatedly said they will not abandon their retirees, but the fact sheet begs for their help.

The fact sheet warns that ``anything short of 100 percent participation leaves us short of our required cost savings targets.''

``We are hopeful that some substantial percentage of participation may get us there, or at least provide some breathing room,'' it says. ``If we do not get all or a substantial portion of our retirees to support this initiative, we will likely be facing bankruptcy.''

The changes target the under-65 retirees because they are the highest-cost group, company officials said.

Costs for those over 65 are limited because they already pay a major portion of their insurance costs, and Medicare helps reduce those costs. There is no governmental assistance for people under

65.

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