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Loss of Safety Net a Blow to Bethlehem Steel Retirees

Bankruptcy deal would end benefits long viewed as a reward for loyal service.

By David B. Caruso, Los Angeles Times

February 10 2003

BETHLEHEM, Pa. -- Some of them went to work in the blast furnaces when they were just 18, then spent half a lifetime handling molten slag and inhaling steel dust in some of the most dangerous jobs on earth.

But for the tens of thousands of Bethlehem Steel Corp. workers who stuck it out, retirement promised a rich reward: a hefty pension and a lifetime of almost free health care for themselves and their families.

"It was capitalism's version of socialized medicine," said James Van Vliet, a retired Bethlehem Steel vice president. "And it was an implied contract. It was the company and the workers saying, 'We are going to take care of each other.' "

It may go down in history as a promise unfulfilled.

Only a shadow of its former self, Bethlehem Steel announced Friday that it was seeking Bankruptcy Court approval to terminate health and life insurance benefits for 95,000 retired workers and their dependents March 31.

The move, seen as essential to the company's bid to sell its assets to International Steel Group Inc., which was approved by Bethlehem's board Saturday, followed news in December that Bethlehem Steel's pension plan was underfunded by $3.2 billion and would be turned over to a government agency.

The sale is subject to approval by the Bankruptcy Court.

Both pieces of bad news were expected. The American steel industry has been in decline for decades, and most of its former giants have been trimming pensions and benefits for retirees for years. Moreover, corporate America largely has shifted the responsibility of old-age provisioning to workers, with self-funded plans such as 401(k) accounts.

But the one-two punch still is a staggering blow for a generation that had been promised a lifetime of comforts in return for a career spent at one company.

Now, some could see their monthly $6 payments for health insurance jump to $200 to $300.

"That's a lot to swallow," said Len Christman, 67, who worked 39 years at Bethlehem Steel's sprawling plant in Bethlehem, about 40 miles north of Philadelphia. "It's a very tough position to be in at this stage in life."

Nearly all retirees will continue to enjoy some benefits. Pension payments, which are being taken over by the Pension Benefit Guaranty Corp., are expected to continue at about 90% of their former level. For workers older than 65, the federal Medicare program would pick up some health-care costs.

But Medicare, which covers hospital visits but doesn't pay for medications, won't come close to covering all the health problems suffered by many retired steelworkers.

Joe Pancoe, who worked for Bethlehem Steel for 31 years, said that at 81, he has asthma and a hacking cough and uses a slew of pills and inhalers to soothe his battered lungs.

"We, the old-timers, were part of the industrial revolution. And now we are part of the medical revolution. We have the emphysemas, we have the cancers. We have everything," he said.

He isn't positive his illnesses were related to his work as a spray painter in the plant's fabrication division, where he said his spit turned red from inhaling fumes, or in the research lab where he regularly handled bags of asbestos.

But as he sees it, the country owes him something either way. His labor built propellers for battleships and girders for skyscrapers and bridges.

"We helped the country, and the people who helped to build the country should get the benefit of it," Pancoe said.

Almost all workers agree that Bethlehem Steel is in little position to help. When it filed for bankruptcy protection in October 2001, the company had about 12,000 employees, down from more than 300,000 during World War II. Most factories have been closed.

Bruce Davis, a retired Bethlehem Steel lawyer who serves as legal counsel for the Retired Employees Benefit Coalition, said several labor groups were negotiating to extend the retirees' health-care benefits, at least temporarily.

The coalition has asked the company to continue the benefits until May 31 rather than March 31. It also anticipates that it will be able to offer Bethlehem Steel retirees a replacement health insurance package similar to ones offered to retirees at other failed steel companies.

The heaviest burden, Davis said, will be borne by retired workers who are under 65 and do not qualify for Medicare coverage.

"We need to find a way to get them to age 65 without bankrupting their financial portfolio," Davis said. "If we can do that, the pain of seeing this proud company walk away from them, after so many years, will be considerably lessened."