Web Exclusive - LTV Corporation has closed its Cleveland Works steel plant, idling most of its remaining workforce and marking the end of nearly a hundred years of steel manufacturing in Cleveland. The company has been operating under federal bankruptcy protection since January, 2001. Back then LTV officials met with local, state and congressional leaders, along with the United Steel Workers of America and its union members, to discuss ways to pull the company back from the brink of financial collapse. In November they abandoned the effort, saying LTV was losing money at some two million dollars a day and that closing was the best option for repaying its creditors.
The ensuing bankruptcy court hearings in Youngstown were contentious. As union organizers and members hit the streets in protest, lawyers argued the merits and drawbacks of closing the plant. Those fighting to retain steel production have been very vocal, grabbing as much media attention as they could.
LTV officials, in contrast, have generally shunned the media spotlight. But on December 14th, Mark Tomasch, Senior Director of Corporate Communications at LTV, agreed to talk at length about the events of the past year that led to LTV's closing. With his own job expected to terminate with the final closing of LTV, Tomasch gives both the company's and his own insight on what transpired over the past year.
Bill Rice: What can we make of reports that there are buyers actively interested in buying the integrated steel facility here?
Mark Tomasch: We've been trying to sell the integrated steel operations for a full year. And the se efforts have picked up in intensity as we implement our Asset Protection Plan. Our first choice is to sell the entire steel company in operating shape to someone who would resume operations, re-employ the people that work there and become a valuable asset to the community. If that does not occur we will have to consider other options: selling the plants separately or, in the worst case, selling off various pieces of equipment to satisfy the requirements of our creditors. Our duties as managers of the company consist of realizing the most value possible for our creditors. That's our primary duty, that's what the court charges us with, and that's what our Asset Protection Plan is designed to do.
BR: You've been trying to sell the integrated steel plants for quite some time. Now we're hearing about some buyers who are interested. Were they not interested before? Did you have other companies looking at the facilities prior to, say, November 20th?
MT: There have been a number of companies that have looked at the facilities over the past year. The fact that we have not yet received a bona fide offer for any of them, or for the company in total, would indicate that up until this date there hasn't been any serious interest. But we have a major investment banking firm by the name of Blackstone that is engaged for the purpose of selling these assets. They are putting together a professional marketing program and are reaching out literally around the world to identify any potential purchasers of the company. The steel workers are not involved in the sale of the facilities. What you are referring to is an agreement we entered into on December 7th in the bankruptcy court. We agreed to pay for a consultant that was named by the union for the purpose of pursuing a federally guaranteed steel loan in Washington. I understand that that person was just identified and appointed yesterday. We are required and will willingly cooperate with that individual in his efforts to secure the loan, and we are required under the agreement to pay him $20,000 for what will now be, I believe, a week and a half's worth of work, because the court order required the consultant to report on his progress to the court on the 19th of December.
BR: Do know what that progress has been so far?
MT: Since the consultant was just named yesterday I can only assume that there hasn't been any progress on that front, but I'm sure he'll be engaged in that activity.
BR: Is the 19th a deadline for congress to make progress securing federal assistance?
MT: I'm not aware of the 19th being a deadline for any of the congressional efforts. We are due back in court on the 19th, and the consultant is due to report to the judge on the progress of their efforts to secure a loan. Let's talk more about this loan business. I think it's important for the community to understand that the $250 million loan would be only one piece of the financial puzzle that would be required to be assembled to put LTV back into operation. From the beginning of our efforts to secure the loan we assumed, and it was built into our plan, that the banks that provided us the financing when we entered chapter 11, that they would maintain their credit availability with us. In other words, they would allow us to continue to borrow money and use money in that financing package.
BR: Which banks were those?
MT: It was a syndicate of banks. The lead managing bank was Chase Manhattan in New York City. However, given the fact the company was in the asset protection mode, the facilities are up for sale and are not operating, they are on a hot idle basis so they could be restarted. But those banks have indicated they are not willing, given the condition of the steel business and the condition of LTV, to continue making those funds available to us. Those funds totaled $470 million.
BR: When was the credit secured?
MT: What's known as a DIP loan - Debtor in Possession - the loan was secured in March, 2000. It took us from December to March to secure that financing.
BR: The west plant was shut down then?
MT: We announced the shutdown in April of the west side works of Cleveland. The actual permanent shutdown didn't occur until I believe November. The financing we had with the DIP lenders totaled approximately $470 million. Our restructuring plan, which was designed to save the company, required us to maintain that financing - the availability of that money - secure a $250 million loan from the banks, guaranteed by the government. We would also need, additionally, somewhere in the neighborhood of $180-100 million to restart the facility. The amount of money that is needed to restart the company is not $250 million. It is a number considerably higher than that.
BR: How much of that DIP money was actually borrowed and spent?
MT: The actual DIP loan was for, I believe, $650 million. But under the terms of that loan loan the amount of availability decreased over time. In other words, we were required to pay it down in three major payments. The first payment came at the end of September. We were able to do that because we sold one of companies - the VP Buildings Company. Another payment id due at the end of this year, but we're not going to be able to make that, obviously. Because of that we had to move forward with the asset protection.
BR: When that DIP loan was secured in March what was the feeling of the company's management? What was the mood and the prognosis of where the company could go?
MT: We began this year with a very high level of optimism and confidence that we would be able to restructure the steel company and make it a viable and successful business. It's important to note that our Copperweld business has not lost money in 17 years. It's a very successful and profitable company that has a long history of growth and success. So the real problem facing LTV and the sole cause of LTV's bankruptcy are losses coming from the integrated steel business. But when we secured the financing that was a major milestone for the company because that gave us the money and the time that we could implement a restructuring plan that we had been working on since the first of the year. That restructuring plan would permanently reduce the costs to operate the compny and produce and sell steel by $800 million a year. We believed that if we could accomplish that we would also be able to qualify for additional financing through the Federal [Steel] Loan Guarantee Program. We would be able to compete against the domestic non-union mini-mills that now produce over 50% of the steel made and sold in the United States. And while we certainly wouldn't be able to compete against unfairly traded imports our costs would be low enough that we thought we could survive the periodic surges of imports that had put us into bankruptcy this most recent time.
BR: What ultimately happened? Obviously it didn't go that way.
MT: No. Most of the restructuring plan was very successful. We were ahead of our goals by mid-summer. Unfortunately the recession came into play. We saw an increasing decline in steel prices and reduction in demand that affected the whole industry, of course. And that phenomenon ended up consuming a lot of the savings we achieved with our restructuring plan. We also had a prolonged series of negotiations with the steelworkers' union and were not able to secure the kind of savings, the kind of cash savings that we needed to implement the restructuring plan, and, as it turns out, the savings we did achieve were not adequate to qualify for the guaranteed loans.
BR: This is the contract that was sewn up in July, right?
BR: Why did the company agree to it if it wasn't going to do the job?
MT: We felt there were some very good features in that contract. First of all, we didn't negotiate the contract. The union brought in the committee of unsecured creditors rather than finish the negotiations with us. The creditors brought in a labor agreement that, while it did have some long range improvements, it didn't address the critical issues of the very very high health care costs we have to pay, and it didn't provide any kind of cash saving with regard to health care benefits for employees. At that time - in July - we felt we were making enough progress with other aspects of our restructuring plan that it was woth a try. It clearly was not the savings we needed. The union knew that. They've had access to all of our documents from the beginning. In fact, the union has a representative on our LTV Board of Directors and they are part of the creditors committee, so they've been fully informed since the beginning of this bankruptcy of all the facts and all the numbes that, by law, we've had to share with al of the constituencies in this. But we felt that, in spite of that, we would present that contract into our plan, factor it in and take it to the banks and see what their reaction would be.
BR: And their reaction was...
MT: The banks hired an outside consulting Firm known as Metal Strategies International that analyzed the business plan we put forward. They, by law, have to submit to the federal loan board an underwriting analysis. In other words, the have to assure the loan board that the company has a chance of repaying these loans. The federal government will not issue a guarantee on a loan unless they believe there is a reasonable chance the company will succeed. In other words, these loans are guarantees, they are not grants. They are not gifts of money. After analyzing the labor agreement and the various factors, the banks and their consultants came back to us and said they could not support the loan. They submitted it to Washington but it contained a negative assessment of our chances to repay the loans.
BR: Is this still the DIP loan?
MT: No, this is the $250 million loan we're trying to get from National City and with the federal guarantees. The next step was to go back to the drawing board and see if we could find a way to modify the business plan in such a way as to secure a positive underwriting from the banks.
BR: And the time frame for this was when?
MT: This was taking place in late September and through the month of October. We redesigned the business plan. This time we included in it additional savings through a labor agreement. We provided all this information again to the banks and to their consultants. We also provided it to the union and to the creditors. The banks felt this plan was much more effective. They believed we had a very good chance of repaying the loans if we achieved the savings through the labor agreement. And they communicated that to the federal loan board in Washington. And again, these facts were well known and communicated to everyone involved. The first meeting the union scheduled to negotiate was the 14th of November. Obviously we did not achieve the objectives in that meeting. We scheduled another meeting for the 19th of November - well into the middle of the month where we were facing a crisis. We met with the union in the morning, I believe, early afternoon. We were not able again to secure the kinds of savings we needed to live up to the business plan that was submitted to the banks. And we made it very clear that we were going to have to convene a meeting of the board of directors on the night of the 19th, for the purpose of deciding whether we had to move forward and file the asset protection plan and ask the court for permission to cease operations. We did indeed have that meeting, and all members of the board unanimously voted for the motion and voted to cease operations - including the union's director.
BR: The union's director?
MT: It was a unanimous vote, yes.
BR: How do you explain that?
MT: I'm just reporting that it was a unanimous vote.
BR: So you can't explain the union representative on the board voting for that when the union was so vocally against...
MT: It was a unanimous vote of the board.
BR: One thing I wanted to clear up was this issue that came up during the hearing of the $125 million that folks were saying was available to fund continued operation.
MT: When we filed our motion in the court on November 20th to implement the Asset Protection plan we began to ship the last steel we had produced. We set up terms and conditions for the prompt payment upon delivery of that steel, and we also stopped purchasing raw materials, we stopped receiving orders and we stopped purchasing raw materials. We were able then to build up a significant amount of cash, which we still have, and that cash is not available to operate the company, that cash is there to implement the asset protection plan and to repay our banks who loaned us the money. So that money is not available to restart the company.
BR: Now we're up to the 20th of November...
MT: Right. The motion was filed on the 20th of November following the unanimous vote of the LTV board. We then learned that the union and the unsecured creditors were negotiating a new labor agreement for the company. We did not see that agreement until the 27th of November, and that agreement fell significantly short of the kind of savings we needed to qualify for the loans.
BR: So now we've got more LTV summits over in Dennis Kucinich's office, which the company was not a part of, I take it...
MT: No, we did have representatives at those meetings.
BR: Oh, you did?
MT: Yeah. And the next step in the story was the hearing in the bankruptcy court, which began, I believe, on December 4th. We had hearings on the fourth and fifth, and the judge ruled on the 7th that the circumstances were such that the company had made a prudent decision in its request to cease operation, and we in fact did cease operation on December 7th.
BR: So what was behind the agreement to hot-idle the plant. Because the original intention was just to shut it down cold...
MT: No, that's incorrect. The company never proposed to cold-idle any of its facilities. The papers we filed in the court - our motion for the Asset Protection Plan filed on November 20th - specifically called for 60 days of hot-idle at the Cleveland and Indiana facilities. It was very clearly stated, because our first objective is to sell this company in operating condition. That would be best for the people and best for the creditors. So if we had brought the equipment abruptly to a cold shutdown it would have sustained significant damage. So claims that w were made that we were intending a cold shutdown were absolutely inaccurate.
BR: So that time period was ultimately extended with the order that was signed?
MT: Right. The union and other parties that had opposed certain aspects of the asset Protection Plan - we negotiated with those parties and ultimately they all supported the Asset Protection Plan and removed their objections, and we agreed to extend the hot-idle period for two weeks after the 60 days. And again, that was just to give a little more time for the would-be buyer to step forward. So now the date of the end of that additional 2-week period is February 28th.
BR: So the possibility of LTV actually continuing operation of this plant is out the window, right?
MT: I think it's highly unlikely at this point.
BR: Can we talk about some of what you were mentioning yesterday about the larger story behind this particular chapter in the steel industry?
MT: Sure. I think the LTV situation is a particularly interesting one if taken in the context of what's happening across the United States in the steel industry. LTV is one of over 25 steel companies that filed for bankruptcy, and are fighting a very difficult fight to survive in a marketplace that has changed dramatically from the 50s and 60s and even 70s. Certainly the presence of imports in the market represents a major change. It's bee a major problem. It drove us into bankruptcy really on two different occasions. We were in bankruptcy in 1986 and again in 2000. So the role of imports driving prices ever lower is serious and it's been with industry for a very long time. The other issue, which doesn't I think receive enough recognition, is that today over half the steel made in the United States is made in mini mills. These are new companies. They have very different business model. They have a very different cost structure. They do not have fixed costs. By that I mean their costs vary based on the level of volume and the level of price they can receive for their products. They do not own iron ore mines. They recycle steel scrap. The price of their raw materials - in this case, scrap - tends to move with the price of steel. So when prices are good and the prices go up, their raw material prices increase, but so does the price they get for their finished product. Conversely, when the market is weak and steel prices fall scrap tends to decrease in price as well. So they are much more in sync with what's happening in the marketplace. The employees receive very good pay. In many cases they may even make more money at times than our employees made. They have base pay component that would be less than what the traditional integrated steel company might pay. They also receive additional income through profit-sharing when their company is successful. And they receive productivity payments based on the performance of their particular plant. So they benefit very well, enjoy the benefits of their company's success, but they also share in the down cycle as well.
BR: I thought that LTV employees had something similar to that.
MT: Under our system employees have a base wage, an incentive payment, and they have had for many years a profit-sharing plan. But the base wage, for example the median job class right in the middle - there's about 28 different job classes based on jobs and functions in the mill. The median wage in that system is about 16 dollars and hour. Then the incentive component is set somewhere in the range of $3-4 an hour. So there's a rather constant base wage in the $19-20 an hour range. Those wages don't move up and down very much. So when the price of steel falls over $120 a ton, as it did since 1998, and the company begins hemorrhaging, there is no component in the current structure for any of the integrated steel companies that allows them to scale back their direct labor costs.
BR: And the typical mini-mill has that?
MT: Yes, they have flexibility. There's another significant difference. Mini-mills do not provide guaranteed pensions. They provide a 401K-type pension, a defined contribution pension, but they do not provide a guaranteed pension based on years of service. The integrated steel companies of course do, and that requires that you have to fund these pensions, you have to be setting money aside on a long-term basis to accommodate those additional financial requirements when people retire. And the integrated companies have traditionally, under the current agreements with the union, provided company-paid health insurance for retired people. This is very unique in the world today. I think only the automotive companies still provide this. The mini-mills do not provide that. In our case, providing health insurance for retirees cost us somewhere over $150 million a year and of course that continues to increase as prescription drugs increase and as people live longer.
In fact LTV Steel, when it was operating, most recently employed 7,500 people, significantly lower than it has in past years. 7,500 people involved in the production and sale of steel. Their work and the profits it generated had to cover health insurance for 100,000 people. That would be the employees, the employees' families, retirees, the retiree's spouse, the surviving spouse of a retiree, and in cases where an employee retired at an early age after 30 years of service, it's quite possible the company would have continued to pat health care benefits for children. So that is one of the major problems facing the company. And all of the companies in the integrated business that have contracts with the steelworkers is that we have an obligation to provide very very significant health care benefits. These obviously were agreed to many many years ago when the companies were profitable and generated enough money that they could afford to pay these kinds of benfits. Now, with the industry in a sever decline it's just absolutely impossible to continue these, and in the case of LTV these benefits will be lost. We attempted to negotiate some kind of settlement or some kind of half-way reduction of some type but that was not acceptable so now the company in it's demise will end up having to cancel all of the retiree insurance.
BR: All of it?
MT: All of it. There will be no company to sustain it. It's not paid out of a fund like the pensions are. The pensions will continue to be paid out of the funds for those, but there is no funding anywhere in the industry for retiree health care benefits. So when the company ceases to exist those benefits will cease as well.
BR: Could you talk about the retention bonuses that have been quite an issue, I think, with the union folks and the congressional people?
MT: It's unfortunate that that issue became such a rallying point because it became, I think, an excuse or a tool to use against the company and against making the kinds of changes that needed to be made. This has been very greatly overstated. There were approximately 80 people included in this, and these were critical people who were in the salaried force who had critical skills that were needed to turn the company around. These people, by the way, has many opportunities to leave this company and if we had lost them - given the financial condition of the company it would have been very difficult to replace them, if not impossible. So this retention plan was brought before the creditors, the bank and the court. It is not at all unusual - in fact it's quite typical - that the companies in bankruptcy implement retention plans primarily to keep the people in the company to turn it around. In the case of the steel company it was not a significant amount of money, and it was essential. We were losing people at three times the normal attrition rate when that was put in place. So it was necessary for the restructuring of the company. When a company is in bankruptcy, every action it takes must be reviewed by its creditors and it must be brought before the court. If there are objections they must be heard and the final say is with the court. The retention plan was brought forward and was not objected to by the banks, was not objected to by our creditors and was not objected to by the steelworkers' union. And the judge authorized it, approved it, and it was implemented. That was early in the bankruptcy, in early 2001.
BR: There's also the issue of the big bonuses. Mr. Bricker, when he resign, took a significant amount of money away from the company.
MT: Again, that was a separate employment contract entered into between LTV's former CEO and the board. But that contract, like any other contract the company would enter into, had to be brought forward to the court. It had to be reviewed by the creditors, by the union. All the parties that had an interest had an opportunity to file an objection. Those objections were not significant. In fact, I don't think there were any objections and the court approved of that contract and there was a court order authorizing that contract. So I think when these issues came up later I don't think there was an overabundance of honesty being displayed because all the parties had a full opportunity to comment. It was done in the open. It was consistent with what other companies have done in bankruptcy and it was approved by the court.
BR: So that's standard business practice?
MT: Yes, it is. One other fact that's not recognized is there was a new management team put in place here in early 2001, and there was a significant change put in place at the top of this company at the end of the year 2000. And again, this was to try to bring some people in who had the ability and were willing to take on the assignment of turning around a very very sick company. This was not a bonus that was offered to the existing management. It was developed to attract and maintain and retain the new people that wer brought in under very, very doubtful circumstances.
BR: Who were those people?
MT: Mr. Bricker was brought in from his businesses. He had served on the board but he had other businesses of his own ion Texas. The board asked him to take over as Chief Executive. He asked John Turner, who was the President of Copperweld, to leave Copperweld and take a chance with the steel company and help with the restructuring effort. John Turner had restructured Copperweld and achieved 17 years of continuous success with that company, so he understood restructuring and had been through some very difficult times with that company and was very well qualified to assist us here. We also brought in other people to head the sales organizations. We changed positions within the company and brought other people up into positions of responsibility who were capable of addressing the problems facing the company. So there was significant change in the top levels of the company.
BR: So you say those monies were not bonuses? Were they just built into the salary structure?
MT: They were part of an employment contract we made with the people to attract them to leave otherwise successful and, shall we say, less stressful settings to leave the businesses they were currently engaged and come up and try to save this company, serve the needs of this company. So we obviously needed to enter into separate contracts with them. So they came in new, inheriting nothing but a lot of difficulties, a lot of problems, and took on a very difficult assignment.
BR: Would it be unusual for a company to offer that kind of money contingent on success in bringing the company back from the brink of a bankruptcy?
MT: No. There are programs that do both. It's not unusual or unprecedented to have these as conditioned by other factors. In fact, you have to remember that at the end of last year LTV was totally out of money. Late December, around Christmas of last year we didn't have enough money to safely shut down these facilities. We had been turned down by the banks in New York for any additional credit. There was no money. The company was teetering on complete and instant collapse. That's when the board brought in these new people. They secured the loans. It took them until March to convince the banks to loan us additional money so we could keep the plant operating. The company was totally dead at the end of December. It was only because we had a new management group in who developed a plan that this company survived an additional year.
BR: What do you say, just in a philosophical sense, to the folks who are out of a job now, have been working at LTV for a number of years - I'm sure there is sympathy for their plight on the part of company management too.
MT: Well, there's no difference in plight between the hourly employees and the company's management. We're all out of work. The company is dying. The company will cease to exist after we've sold off these assets. So we all share the same fate. I would say, however, that the people - especially our salaried people - who have worked under extreme circumstances, who have seen their numbers be reduced significantly over the past year and the remaining people have assumed more responsibility and more work, many of these people could have left this company at earlier times and they didn't. They stayed with the company and they were committed. They wouldn't leave. And I think they have been largely ignored in the public outcry. These are very talented and educated people who did have alternatives, but they chose to stay and try to save this company, so I think they deserve appreciation and thanks. The hourly people also were suffering enormous uncertainty, very difficult for them and their families, and throughout all of this they stayed on the job, they worked very hard, they did an excellent job producing steel and serving our customers. Without that we would not have made it as long as we did. So they all did a very good job. I think the employees of this company have nothing to be ashamed of. I think they should walk out of here with their heads held high. They did an outstanding job. They're the best in this business. It is just unfortunate that we were unable to secure the kind of agreements at the international level of the union that would have given this company a chance. I do believe this company could have been saved. I do believe this company could have made it. The plans we had put in place to restructure were working but there was one critical component that we were never able to secure. And it will always be a very sad thought to think that we came so close and didn't make it.
BR: And that critical component was a suitable contract that would provide the kinds of savings you needed.
BR: What prompted Mr. Bricker's resignation?
MT: If you remember back to the 30th of November, there were a number of extraordinarily irresponsible statements made by public officials in this community concerning our plans to shut the plants down. I believe there was language even used that suggested there could be violence involved. Threats were made. Mr. Bricker told me that he believed that under these conditions it would be better if he left so as not to continue the controversy. He was becoming, I think he felt, a lightening rod that was causing influential people to become distracted from what needed to be done to save the company. He felt that by leaving at that time it would remove that issue and people could refocus on what still might be possible to save the company.
BR: What's your feeling about the city of Cleveland now, having lost a major employer?
MT: I'm a lifelong resident of Cleveland and this city. I think the situation is very, very troubling. From our perspective, even beyond the obvious immediately loss of LTV and all of it's jobs - LTV, by the way, is the largest industrial employer in the city of Cleveland. So this makes a significant dent in the economic fabric of the community. The average pay at the Cleveland Works - not counting benefits or pensions and all the excellent things the company was able to provide for years. The average W-2 earnings was around $65,000 a year. There's very little that I'm aware of in this community that would replace jobs that paid that well. So I think this is a very significant blow to the community. I think, too, that we have a difficult uphill battle in selling these facilities. I think everyone needs to focus on attracting new buyers for this company. I think we have to work hard to make people believe this is a good town to do business in, that it's the right kind of community to make a significant investment. Because whoever buys the Cleveland Works will have to invest many millions of dollars just to get the facility operating. They'll have to but raw materials. They'll have to employ a workforce. They'll have to believe that this is the kind of community where they can succeed, not only in good times but in bad times as well. And so I hope they do not perceive this to be a hostile place or a community where investment doesn't make sense, because I don't think it is. I think it is a place where people can and should make significant investments for the future. But I am, like everyone else, very concerned for the immediate future.
BR: What happens to the facility if it doesn't sell?
MT: If the facilities in Cleveland and Indiana and other places don't attract a buyer they will have to be shut down into what's known as the cold idle mode. That is the careful cooling of the furnaces down to the ambient temperature. Unfortunately when that happens in the case of bvlast furnaces significant damage is done to the linings, the brick lining of the furnace, and significant replacement or repair would be required. To completely rebuild an existing blast furnace can be as much as a hundred million dollars. So whoever would come in as a prospective buyer after the furnaces were cold would face a very significant capital investment challenge to make those repairs. That's why I think it's very important to sell it by the end of February. Unfortunately the company doesn't have the money to hot-idle beyond the end of February. So whoever comes in as a prospective buyer, they may have to begin early to maintain that hot-idle if they're serious about buying the facilities. But at this point I can't predict how our sales efforts will go except to say that we're working very hard. We have a professional organization marketing these facilities all around the world. They are very good facilities. In spite of all the troubles of the past year LTV is a very good steel company. We made excellent products for the best customers in the world. So I think whoever buys these facilities would have an immediate advantage, in that they're taking over facilities that have proven to be outstanding. So we're optimistic that we'll be able to find a buyer.
BR: If not, then do you move on to trying to sell individual pieces of equipment?
MT: Well, it's as little hard to predict how this would go, but in a broad sense our obligation is to maximize the value of the company's assets to repay our creditors. If that means that we have to sell off individual pieces of equipment - or maybe it's more likely that we sell individual plants. If no one's interested in buying the entire company, perhaps we could sell the mills individually. They're capable of running individually. So that would also be an acceptable outcome. But hopefully those two priorities would happen. If not, and we end up having to sell, under a worst case scenario, the physical assets of the various plants, I think that would pretty much determine that they would never operate again.
BR: How does it work with the PBGC [Pension Benefits Guarantee Corporation] in terms of pensions?
MT: LTV's pension plans are very well funded. Retirees should not be inordinately concerned over the condition of the pensions. After the company is gone the government agency known as the Pension Benefit Guarantee Corporation at its discretion would take over pension plans. I believe that most of the current retirees would not notice any change in the amount of pension they would receive. There could be some former employees who retired early whop are not of full retirement age who could experience a reduction in their monthly amount under the terms of the PBGC. But nobody will lose their pension under the PBGC. The plans are funded well and there is money there now, and the PBGC will step in and make sure there is money to cover those plans.
BR: At the hearings there were some groups that had some environmental claims against the company. What about those?
MT: Obviously when the company ceases to exist a number of issues become more important than when the company is an ongoing business. We have received comments from people who are concerned about environmental issues, usually running to the issue of who will pay for an environmental cleanup of a facility if it's necessary - including this one. And LTV and its three predecessor companies owned facilities in New York state and Pennsylvania and other parts of the country. And there was an expression at our hearings of concern for who would stand to pay these environmental claims if any should arise. The company's Asset Protection Plan does provide money for environmental cleanup and does provide a reserve fund that we believe will be adequate to handle most of the problems that we are aware of.
But all that being said, the fact is that with LTV out of business, with LTV Steel not operating there's going to be no source of money for all the people and organizations and governments who suddenly are asking the big question "Well, what about me?" Everyone is going to be hurt by the collapse of LTV. No one will benefit. We don't know what we will ultimately receive from the sale of these facilities. But that money will be used in an equitable way, under the supervision of the court, under a plan that will be reviewed in detail, to satisfy all of the claims that are brought forward. Typically, and I think it's reasonable to expect that there will not be enough money to satisfy everybody's legitimate claims or their desires. That's what happens when a company this size goes out of business. Which is why it is unbelievable that this happened. It is unbelievable. It should never have happened. This company could have been saved. It could have survived. And I think it will be a sore point for everyone who worked for so many months, and worked very hard to save this company. We did our best, but at the end there were too many factors, there were too many issues that were not resolved. There were organizations and regulations that didn't accommodate what needed to be done. It's very sad.
BR: Do you think it was the union's unwillingness to bend that sunk LTV?
MT: I think the international union - and I distinguish that from the people that work for us and their representatives - I think the international union was concerned about larger issues. In fact, we were in court in early December for the hearings about the Asset Protection Plan, where we learned that there was a public announcement that our competitors had been meeting with the union - the international members of the union - planning a massive merger, a massive consolidation of the steel industry. LTV was never consulted. We were never asked to participate. So I can only conclude that there were other forces at work, other agendas, that really didn't include us. So again, I think its very unfortunate - I don't want to say anything other than that everyone had to look at this very difficult situation through the lens of their own needs and through their own experience. And everyone made a decision as to their own role in saving LTV and what they were willing to do. The sum total of that turned out to be inadequate. So from whatever perspective - whether it was the regulations that the banks had to meet with the loan board or it was in terms of a labor agreement... there were numerous factors, and we can't forget that the company never could stop losing money with the declining market, the declining price of steel - it's very difficult to convince a bank to loan you $250 million when you're still losing $2 million a day.