Bethlehem Steel Corp., which has agreed to be bought by International Steel Group Inc. for $1.5 billion, won court permission Monday to eliminate health-care and life insurance benefits for its retirees.
U.S. Bankruptcy Court Judge Burton Lifland approved the plan, which affects about 90,000 retirees and their spouses. Benefits will end Monday.
Without the ruling, Bethlehem would have had to liquidate to escape its $20-million-a-month costs, and the deal with International Steel would have collapsed, company attorneys said. Bethlehem sought Chapter 11 protection in October 2001, after years of losses from cheap imported steel, slowing demand and increasing retiree costs.
"From day one, the public message has been that this company could not survive under the burden of its legacy costs," Bethlehem attorney Mark Jacoby told Lifland.
Bethlehem has $3 billion in health insurance liabilities for retirees and has paid $300 million in benefits since the bankruptcy filing.
The company said in December that the federal Pension Benefit Guaranty Corp. terminated its employee pension fund and took over responsibility for making payments to Bethlehem retirees. The agency assumed payments of about $3.7 billion, the most in its 28-year history.
The agency, which is funded by employer premiums, insures pensions of about 44 million Americans. It assumes control of plans if they remain underfunded and uses employers' assets to help make payments.
Of Bethlehem's 90,000 retirees and spouses, 60,000 union members who belong to the United Steelworkers of America had agreed to the termination of health benefits, Jacoby said. The request was opposed by the remaining 30,000 retirees, including mineworkers who sought an extra month of benefits while they made alternative arrangements.
"We have a lot of old people out there who don't know what to do," said Dennis Terrell, an attorney representing the retirees.