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Tuesday, March 04, 2003

By Len Boselovic, Post-Gazette Staff Writer

The federal government's rejection of a $250 million loan guarantee for bankrupt Wheeling-Pittsburgh Steel is raising all-too-familiar cries of anger and anguish in distressed Ohio Valley steel towns.

The Wheeling, W.Va.-based steelmakers' plan to resuscitate itself hinged on approval by the Emergency Steel Loan Guarantee Board -- the government panel created in late 1999 to assist steel companies hurt by a barrage of cheap steel imports that sent the financially fragile industry reeling.

Late Friday, the board -- composed of Federal Reserve Board Chairman Alan Greenspan, Securities and Exchange Commission Chairman William H. Donaldson and Secretary of Commerce Donald Evans -- unanimously turned down Wheeling-Pitt's application, citing doubts about the twice-bankrupted company's ability to honor its obligations. The loan was to have been provided by the Royal Bank of Canada.

"We've done everything possible as union members to save this company. We've taken two pays cuts," said Mickey Forte, president of United Steelworkers union Local 1187 at Wheeling-Pitt's plant in Allenport. "I don't know what the hell more they want."

Like other union members, Forte can't reconcile the prospect of providing billions of dollars in aid to Turkey to further a war against Iraq with failing to assist domestic steelmakers.

"We've got damn money for everybody except for the industry you need," he said with obvious bitterness.

Although the 1999 legislation gave the board the authority to guarantee up to $1 billion in loans, only two steelmakers -- Hanna Steel of Birmingham, Ala., and Geneva Steel of Salt Lake City -- actually have borrowed money. And while Hanna is making its payments on a $42 million guaranteed loan, Geneva, which received a $110 million guaranteed loan in order to extricate itself from bankruptcy, has shut down and defaulted on the loan, requiring the government to pay its lender 85 percent of the unpaid balance, a board spokesman said.

The loan guarantees were supposed to give ailing steelmakers access to capital so they could reorganize, with the Bush Administration buying them some time by slapping duties on a variety of imports. But some wonder if the composition of the board and its decision to reject Wheeling-Pitt's application may be a signal that the administration wants to move more forcefully to close down uncompetitive U.S. mills, something the administration is encouraging other nations to do in order to reduce the imbalance between demand and supply.

USW President Leo W. Gerard said the board's decision is "just one more example of an administration that will promise you anything when the cameras are rolling, but delivers nothing when the chips are down." He said his union will find a way to save Wheeling-Pitt "in spite of this latest government betrayal."

Wheeling-Pitt, whose first stay in bankruptcy lasted from 1985 to 1991, filed for bankruptcy in November, 2002, and has lost $226.5 million the last two years at plants in West Virginia, Ohio and Pennsylvania.

With the loan guarantee rejected, the company's alternatives include resubmitting an application to the board by June 30, finding an investor or a lender who doesn't require a guarantee, or liquidating.

James Bradley, Wheeling-Pitt president and chief executive officer, said the company would develop an alternate survival plan and that merging with another steelmaker is "the most likely scenario." Wheeling-Pitt and Weirton Steel have discussed a possible merger in the past.

One thing is certain, said union leader Forte. He's not ready to call it quits yet.

"We may end up going under, but we're not going without a fight," he vowed.

The Associated Press contributed to this report.