|WEIRTON WORKERS BUYOUT|
September 23, 1983
Workers in Weirton, W.Va., are weighing whether to buy one of the country's largest steel plants, the state's largest private employer, National Steel.
JIM LEHRER: There was another election today, in Weirton, W.Va., one that also involved steelworkers. They're the 8,000 employees at the large Weirton steel plant now owned by National Steel, or as it's presently called, the National Intergroup Corporation.
National has offered to sell the plant to the workers, which would make it the largest worker-owned company in the nation. Deciding yes or no was what the workers were voting on today. Charlayne Hunter-Gault was in Weirton earlier this week, and here is her report.
|The employee takeover plan|
CHARLAYNE HUNTER-GAULT: A positive vote would make Weirton Steel one of the country's 10 largest steel companies. The Weirton works today employs more than 7,000 workers; another 2,500 are on the recall list. The plant is West Virginia's largest private employer, its largest user of electric power, and the overwhelming presence in this company town of 26,000 people. Downtown Weirton is just a thin strip of shops, churches and community buildings along the rim of the plant. A mill closing would probably end just about everything in this valley.
Everyone here agrees that the employee takeover plan is going to be approved by the majority of the union membership. What's not clear is whether the workers can make a go of it once the plant belongs to them.
The key feature of the deal is a 32% cut in labor costs. In exchange, the workers become stockholders who share in any future profits. The concessions would topple Weirton workers from their position as the highest-paid steelworkers in the country. Weirton workers have always belonged to their own independent union, unaffiliated with the United Steelworkers. The union president is Walter Bish.
Was it, in effect, this plan or nothing?
WALTER BISH, union president: Well, National more or less gave us an alternative on March the 2nd, back in 1982, either to -- they would probably take us down to a finishing mill employing approximately 1,200 to 1,500 people, or we could check into what is known as an ESOP, an employee stock ownership plan. Of course we have done that. We have checked into it and we think that it's something that will work for the people here in Weirton.
CHARLAYNE HUNTER-GAULT: Well, why is it that you think the employees can make it work when National Steel couldn't make it work?
WALTER BISH: Well, under an ESOP there are several tax advantage, tax shelters an employee-owned company can get. Also there are the concessions, the concessions that the employees would be willing to give to a corporation that they would own, as opposed to giving concessions back to a corporation where the profits go out to shareholders and stockholders other than the employees.
|Prospects for success|
CHARLAYNE HUNTER-GAULT: Since National Steel first suggested the idea of employee ownership 18 months ago, the Weirton community has mobilized itself to buy the plant. There have been telethons, bake sales and parades to raise more than $2 million to pay for feasibility studies, corporate lawyers and investment bankers. This week I talked with a group of workers who support the purchase plan.
You feel pretty excited about taking it over?
FIRST STEEL WORKER: I think it's the chance of a lifetime for us. We're going to be owners and we have profit sharing coming back. We'll have stock. One of the biggest things that I like about it too is we're used to National dictating to us what we can and can't do. We want to put capital improvements here, a coke plant, strip steel -- whatever -- we have to get their approval. Now on our own we can do that and do what we want to do.
SECOND STEEL WORKER: I think it's exciting, but if I had a choice, I wish nothing would have happened at all, you know. I mean, this may be the better deal in the long run, but it's still a little risky.
CHARLAYNE HUNTER-GAULT: Can an employee-owned Weirton Steel make a go of it? Experts disagree. I first talked with steel analyst Charles Bradford of Merrill Lynch.
Mr. Bradford, as a Wall Street analyst, what chances do you think the Weirton employee-ownership plan has of succeeding?
CHARLES BRADFORD, Merrill Lynch: Over the near term they should do quite well. We're looking for a pretty substantial pickup in the steel business over the next two, maybe three or four years before we have another recession. And they should be quite competitive compared to other domestic steelworkers because of the wage reduction.
CHARLAYNE HUNTER-GAULT: You said "in the near term."
CHARLES BRADFORD: Well, long-term there are some problems. Weirton needs to spend hundreds of millions of dollars on modernization, and can an employee-owned company raise that kind of money, is the big question. Will banks, insurance companies or whatever be willing to lend to a company where you don't have a long-term record of its financial expertise and profitability?
CHARLAYNE HUNTER-GAULT: What would be your best guess?
CHARLES BRADFORD: It's going to be difficult.
CHARLAYNE HUNTER-GAULT: Mr. Rosen, do you think the Weirton employee-ownership plan is a good one?
COREY ROSEN, executive director, National Center for Employee Ownership: I do. I think it's well thought out and provides for a good role for the employees and the company, and I think the company has good prospects for success.
CHARLAYNE HUNTER-GAULT: So the prognosis is good?
COREY ROSEN: I think so, and history is on their side. There have been about 65 employee buyouts since 1971. Weirton is the largest, but 90% of those have succeeded, which is a remarkable track record.
CHARLAYNE HUNTER-GAULT: The new company is going to have to come up with about $1 billion for modernizing the plant. Is that going to be a problem?
COREY ROSEN: They got a very good financial deal from National Steel, and if they are reasonably profitable, I can't see any difficulty in their raising that money. Banks and other sources of commercial private capital have been much more willing to make assistance available to employee ownership companies in the last few years, largely because studies have consistently shown now that these companies are substantially more profitable, productive and job-creating than comparable conventional companies.
|Will outdated technology hurt the plant?|
CHARLAYNE HUNTER-GAULT: Joel Hirschorn studies the steel industry for the Congressional Office of Technology Assessment.
Mr. Hirschorn, from your perspective, what shape is the Weirton plant in today?
JOEL HIRSCHORN, Congressional Office of Technology Assessment: Well, the longer term prospects for plants like Weirton are really not quite positive because the technology that they're using is really very old technology. People don't seem to understand that the technology to make iron and make steel is changing, very rapidly, actually. And, for example, the Weirton plant is based on three blast furnaces to make two million tons of steel a year. A new steel industry plant could make four to five times that amount of steel in one blast furnace. Technologically, the plant is one of the better older integrated plants in the country, but it still will have a tough time competing in the world steel market.
CHARLAYNE HUNTER-GAULT: The voter turnout was heavy in Weirton today. Most of the 8,000 eligible steelworkers already had voted by early this evening. The final results won't be known until late tonight.
The vote, however, won't settle all the outstanding issues. Lawsuits have been filed by several hundred older workers who claim their pension benefits have been unfairly reduced as a result of the buyout plan. They say National Steel is violating a provision of its current contract with the union that calls for $400 a month in supplemental benefits to be paid workers should the plant shut down. National argues that they are not shutting the plant down, but merely transferring ownership. Therefore, the workers are not entitled to the additional benefit. The workers will not be able to assume ownership of the plant until the lawsuits are settled, and nobody is quite sure just when that will be.