Bethlehem Steel woes a lesson for industry

All bankruptcies aren't equal. Some hurt more than others. Imagine, Bethlehem Steel! How could that happen• And Polaroid Corp. The two most shocking crackups of the past week.

But let's do triage on these emergencies and take the most life-threatening and locally related.

It seems impossible that Bethlehem Steel can emerge from its Chapter 11 reorganization as a stand-alone company ever again.

The steel industry is a battlefield of bleeding bodies. Its markets are in shrinkage. Costs are huge, the overhang of a militant-labor past. Customers are merciless. They demand quality tonnage at pinchpenny prices. And get it. It is willingly "dumped" on them, industry people say, by foreign mills that have been crazily overbuilt.

The American steel industry has just got to be "rationalized." That is, combined into fewer, no more than a handful, of streamlined competitors.

In steel, antitrust ought to be viewed as yesterday's war. Aren't two dozen bankruptcies in recent years enough•

Once the second largest of this humbled army - but also, in its glory days, a mighty builder of warships, railroad cars and beams for skeletons for famous bridges and skyscrapers - poor Bethlehem climbed with all its steel industry brethren onto a high cost plateau and can't get down again.

Shrinking the work force didn't help. That only increased the retired force.

With just 13,000 active employees (forget the World War II personnel peak: 300,000) Bethlehem is carrying 74,000 pensioners. The strapped company is paying out health and retirement benefits to 130,000 people.

Unions insisted on this as the price for "permission" to get rid of so many people in steel's collapse of the early 1980s. But the result is a vessel impossibly overcrowded. Which no merger partner is likely to want to grapple onto.

Bessie's bankruptcy filing - the stock exchange nickname derived from its ticker symbol, BS - listed debts that wouldn't appear to be impossibly out of range with the company's assets, $4.5 billion to $4.2 billion.

But look again. Robert S. Miller Jr. says the legacy of decades past, when labor peace was bought by union contracts that seemed very generous at the time, makes the gap unbridgeable. Short, that is, of the radical cost-cutting a bankrupt concern is able to do with court permission.

Miller is Bethlehem's new chairman, hired just three weeks ago to try to turn this nightmare around. "We have a $5 billion liability to take care of people who aren't here anymore," is how he put the paradox.

His prescription will not go down easily. Renegotiate labor contracts. Get the government, finally, somehow (and against all pressure from steel users, like auto and appliance makers) to put a stop to import dumping at below-cost prices. Strengthen the pension funds. Control health care costs. And "consolidate," via merger or combining the best mills of various companies, shutting down the rusting losers.

Only one of these courses of treatment seemed to make sense to the United Steelworkers union: the plea for a crusher to import dumping. But that is so perennial, for decades now, that nobody except in the Pittsburghs and Burns Harbors of the land wants to hear it anymore.

The USW does not see itself as an accomplice to Bessie's perils on the high-cost wire.

The union's proposed cure: $1 billion in federal aid to the steel industry; this in the midst of wartime and countless other bids for government attention. A "wakeup call" to Washington, the union called it.

But doesn't the summons to quit dreaming ring over a far wider territory, to all basic industry workers and managements• In fact, to anybody who thinks uncompetitive labor costs somehow go away if pushed into the future as "benefits."

Government aid• Well, yes, a crippled enterprise can be kept limping a bit longer. Who knows, maybe one more steel pension fund might even be thrown to public guarantors. But this would raise the insurance premiums of healthier competitors. It also denies them the full reward, in the form of increased sales and fuller utilization of their plants, that ought to come with survival of the fittest.

If the best aren't allowed to win, you're left with a lot of ... well, Bethlehems.

When trading in Bessie's stock was halted by Monday's bankruptcy filing, the company's shares stood at a wretched $1.20. In April 1998 it had touched $16.75. That was during a brief ray of hope at a round of cost-cutting. But only two calendar quarters of the past 13 have shown a profit. In the dividend-paying days of yore the shares traded much higher, of course.

Founded in 1904, the company for decades ran a huge steel plant and other heavy operations in Johnstown; fabricating facilities at Rankin; and once employed 30,000 in its eastern Pennsylvania headquarters city. Just 700 of its people man the offices in Bethlehem now. None is engaged in steelmaking.

A wakeup call• Only to Washington•