LTV Assets Up For Auction

Aired January 24, 2002

The assets of LTV Steel are going on the auction block. Bids for the company's property will open on February 27. That's one day before the Cleveland works is due to be shut down for good. The only hope for the plant is a new owner who is willing to fire up the furnaces and start making steel again. But how attractive are the LTV facilities? It depends who you ask. 90.3 WCPN®'s Mike West has the story.

Mike West: On this hilltop just outside of downtown Cleveland, you can see most of the valley that leads to Lake Erie. It's filled with huge buildings, giant power line towers and railroad lines, that have all but been abandoned.

Art McAvinue: When it was running full blast if you would have parked here we would have been dead, because ya' had trucks and materials scattered all over the mill.

MW: Art McAvinue, who spent decades working at this mill as a maintenance foreman, has been retired for 10 years but still gives occasional tours of the facility. He sadly speaks of a time, not long ago when the valley was a beehive of activity as over 3,000 people made steel out of iron ore.

AM: You can see how dead it is around here now, no restaurants open, no truck traffic, trains are sitting on the railroad tracks, water tower don't even look like it's running. It's just a dead area. It's still on 1,200 acres if somebody would be interested in it. I still think it's a pretty good deal for 'em.

MW: These mills were built in the '50s but McAvinue says they have been updated over the years to make them efficient, cleaner and as productive as possible.

AM: We kept it in repair - if you look down there you can see where we been redoing the roofs, we took care of all the roofs and everything had to be maintained because environment would be on your butt if you didn't have it up-to-par.

MW: At least one steel expert believes that LTV is a good-looking piece of property with potential. Mark Parr is the senior vice president at McDonald Investments. He says one of the things that makes the mill attractive is that a new owner would not have to honor the old labor contract. In December, LTV executives agreed to pay benefits until the end of February and to keep the mill on "standby." The deal also means a new owner would not have to pay medical benefits and retirement checks to former LTV workers. Those costs were cited by management as a factor in their downfall.

Mark Parr: The effect of all that is that new owner, a potential acquirer of these assets, can really look at the assets as a unencumbered state. So there is a possibility here for a fresh start management situation because there really is no more management personal left as well as a fresh start labor situation because there is no labor left and there is no labor contract.

MW: Parr says another selling point is the good condition of LTV's east mill and other plants. He says no new integrated mills are likely to be built in the united states because of environmental issues and high costs. That also makes the plant attractive to companies who may want more steel making capacity if prices eventually rise.

MP: The assets are generally considered to be highly viable, they are highly capable. They are reasonably state-of-the-art and certainly have established a very sold customer base. These are really good assets and under the right set of operating circumstances could, no longer as AK Steel might say "this is a weak link in the U.S. integrated market." But with some changes in the way these assets are operated there's no reason why LTV couldn't become one of the stronger and maybe even the strongest of the integrated mills.

MW: Getting orders for steel and delivering it cheaper than the competition would be the first challenge of a new owner. That's according to Robert Brooks. He's the managing editor of "33 Metal Producing," a trade magazine for the metal industry. He says another problem is that banks are tight fisted when it comes to helping steel makers get the money they need for improvements and to weather the market slump.

Robert Brooks: There initial challenge will be convincing lenders to finance their effort. Capital is very expensive and it's very scarce. And available capital is very scarce and is not drawn to long range projects particularly in an industry where profit margins are very narrow, even when they are more frequently achieved.

MW: Brooks says big banks don't want to put money into steel because it takes too long to get a return. He feels the high-tech boom has made lenders too impatient for the lumbering steel makers. Brooks believes banks don't want to wait 5 to 10 years after being spoiled by the quick fortunes of the high tech companies. As far as saving money on labor costs at a resurrected LTVv, he doubts it's enough to make a difference.

RB: I think the absence of labor obligations could certainly help close the deal but I don't think it's going to be the leading incentive. I think the proper way to say it, the labor terms will not be a barrier. But I don't think it's proper to say labor terms would be an incentive.

MW: Another issue facing a new buyer will be the government's efforts to forge a deal with steel makers to reduce production. Political leaders are considering rules to block imported steel with high tariffs in exchange for cutting U.S. output. But on the other hand, if a foreign buyer would be able to make steel in the U.S. they may be able to get around those import restrictions. Bids for LTV are due by February 20, and an auction date has been set for February 27. After that it will be up to the company and the bankruptcy court to decide whether to accept any of the offers. In Cleveland, Mike West, 90.3 WCPN® News.