[Senate Hearing 107-345]
[From the U.S. Government Publishing Office]
S. Hrg. 107-345
THE FUTURE OF AMERICAN STEEL: ENSURING THE VIABILITY OF THE INDUSTRY
AND THE HEALTH CARE AND RETIREMENT SECURITY FOR ITS WORKERS
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
ON
EXAMINING THE FUTURE OF AMERICAN STEEL, FOCUSING ON ENSURING THE
VIABILITY OF THE INDUSTRY AND THE HEALTH CARE AND RETIREMENT SECURITY
FOR WORKERS
__________
MARCH 14, 2002
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
U.S. GOVERNMENT PRINTING OFFICE
78-296 WASHINGTON : 2002
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
EDWARD M. KENNEDY, Massachusetts, Chairman
CHRISTOPHER J. DODD, Connecticut JUDD GREGG, New Hampshire
TOM HARKIN, Iowa BILL FRIST, Tennessee
BARBARA A. MIKULSKI, Maryland MICHAEL B. ENZI, Wyoming
JAMES M. JEFFORDS (I), Vermont TIM HUTCHINSON, Arkansas
JEFF BINGAMAN, New Mexico JOHN W. WARNER, Virginia
PAUL D. WELLSTONE, Minnesota CHRISTOPHER S. BOND, Missouri
PATTY MURRAY, Washington PAT ROBERTS, Kansas
JACK REED, Rhode Island SUSAN M. COLLINS, Maine
JOHN EDWARDS, North Carolina JEFF SESSIONS, Alabama
HILLARY RODHAM CLINTON, New York MIKE DeWINE, Ohio
J. Michael Myers, Staff Director and Chief Counsel
Townsend Lange McNitt, Minority Staff Director
(ii)
C O N T E N T S
__________
STATEMENTS
Thursday, March 14, 2002
Page
Mikulski, Hon. Barbara A., a U.S. Senator from the State of
Massachusetts.................................................. 1
Wellstone, Hon. Paul D., a U.S. Senator from the State of
Minnesota...................................................... 3
Mikula, Jeffrey, steelworker, Dundalk, MD; Gertrude Misterka,
widow of steelworker, Baltimore, MD; McCall White, retired
steelworker, Ellicott City, MD; and Jerry Fallos, steelworker,
Aurora, MN..................................................... 7
Miller, Steve, Chairman and CEO, Bethlehem Steel; and Leo W.
Gerard, International President, United Steelworkers of
America, AFL-CIO............................................... 22
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.:
Steve Miller................................................. 39
Leo W. Gerard................................................ 41
(iii)
THE FUTURE OF AMERICAN STEEL: ENSURING THE VIABILITY OF THE INDUSTRY
AND THE HEALTH CARE AND RETIREMENT SECURITY FOR ITS WORKERS
----------
THURSDAY, MARCH 14, 2002
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 2:23 p.m., in
room SD-430, Dirksen Senate Office Building, Senator Mikulski,
presiding.
Present: Senators Mikulski, Dodd, Wellstone, and Clinton.
Opening Statement of Senator Mikulski
Senator Mikulski. [presiding]. The committee on Health,
Education, Labor, and Pensions will come to order.
I am Senator Barbara Mikulski, and Senator Kennedy has
designated me as the person to chair this hearing on ``The
future of American Steel: Ensuring its Viability as an
Industry'' and will focus on the retirement security of its
workers. This hearing will not focus on unfair trade practices,
although people may reference them. What we really want to know
is what is happening to the workers, and as steel looks ahead
to its future, we want to hear from those who manage the steel
companies, those who represent the workers of big steel, and
people who have lived with big steel all their lives.
I have been joined by my colleague, Senator Paul Wellstone
of Minnesota, an outstanding spokesperson of working people and
of LTV. We will be joined by our Republican colleagues--there
is a vote and other meetings on--but we will move ahead.
Some of you who are unfamiliar with testifying might be a
little nervous, but relax. We are here to listen to you. This
is the United States of America. We think that the people who
are the most affected should be heard. So we are going to be
talking about these issues, and know that our advocacy for
steel is on a bipartisan basis, and our colleagues will be
joining us.
I want to thank everyone for coming today. I know that some
of you have taken time off from work and have traveled far to
be here. The purpose of this hearing is to hear from the people
behind the phrase ``legacy cost''--the workers, the retirees,
the widows, those who represent the widows, and the executives.
I am concerned that these voices are not being heard. Their
stories are here, and they need to be told. People's lives and
livelihoods are affected. I want you to know that I am on your
side. I am on the side of steel and I am on the side of steel
workers, and I want to make sure that the issue of legacy cost
is addressed in a very serious way.
In my own State of Maryland, there are 3,700 steelworkers
who count on working for Bethlehem Steel for their jobs. That
sounds like a lot of folks, but that is down from 37,000 in
1957 when I was a college girl. There are another 23,000
retired steelworkers and their families. They rely on Bethlehem
Steel for their health care and their pensions.
Beth Steel and other American steel companies are in
trouble. Workers and retirees and their families are scared. I
am worried that if these companies go under, America will lose
an industry that is very important for our national defense,
and workers will lose their jobs, their health care and their
pensions, and retirees will also lose the same.
So we want to hear from the people who are affected and
know what legacy costs are all about. I welcome you, and we
want you to share your stories.
On a bipartisan note, I want to State that I personally
appreciate President Bush's decision to impose those temporary
tariffs. It gave steel time to breathe and to restructure.
But the road to recovery is not smooth. We need to know
what are the potholes. We need to know what does steel need to
do, and what do we need to help steel do it. That is why we are
going to be listening to Mr. Miller, the CEO of Beth Steel, and
Mr. Leo Gerard, the president of United Steelworkers of
America. They are going to share their thoughts on what
restructuring means and what steel needs to do and how
Government can help.
Congress has heard a lot about consolidation and about
plans that are in the works. But the sticking point is about
financing $10 billion in health care. What does this mean?
Often, we hear about big macroeconomic issues. I want to talk
about the macaroni-and-cheese issues. I want to know what this
means to retirees. I want to know what they will keep, what
they will lose, and whom are they going to turn to.
There are now 142,000 active steelworkers, but there are
600,000 retirees. Before everyone gasps about that, that shows
the productivity of American steel, how it has become more
efficient, how it has developed the infrastructure and
technology, how there have been labor-management agreements. To
say that there are fewer workers than retirees shows what a
great steel industry we have.
When we look at health care and pensions, those who write
columns and editorials call your benefits ``lavish''; they call
them ``goldplated.'' They imply that you have taken a free
ride. Well, I want to know about that from the companies and
the unions and the workers. I do not think they are getting a
free ride.
I did some research before the hearing. You pay higher
premiums than we Federal workers and retirees. In fact, your
premium for your health care is higher than Medicare. From what
I understand, the monthly premium for the retiree that we are
going to hear about is $78 a month; Medicare is $54 a month. So
they are certainly not ``goldplated.''
We know that people are hurting all over America, and this
is why I am firmly for a prescription drug benefit for all
seniors. But right now, we have got to talk about legacy, and
we have got to talk about steel.
I am so proud of Beth Steel and all of our steel industry.
I know that Beth Steel produced the armor to repair the USS
Kohl. And we know that steel and steelworkers have always stood
up for America. It is time now that America stands up for steel
and its steelworkers.
I now turn to my colleague, Senator Paul Wellstone, for any
comments he wishes to make, and then we will call up our
witnesses.
Opening Statement of Senator Wellstone
Senator Wellstone. Thank you, Chairwoman Mikulski.
Because I know we want to go forward and hear the
testimony, I will ask unanimous consent that my complete
statement be included in the record.
Senator Mikulski. Without objection.
Senator Wellstone. And I will recognize two people and say
one thing in 1 minute.
First of all, we will be hearing from Jerry Fallos, who is
president of Local 4108 of United Steelworkers. Jerry can tell
you all about the shutdown of LTV workers and what they are
going through. And Madam Chair, I was kidding him, saying that
I did not recognize him today in that suit--but I will tell you
something. He came all the way from the Range because he
believes that his testimony will lead to some action by us that
will make a difference in the lives of the people that he
represents in his union. He is one of the best rank-and-file
leaders in the country.
The second person is President Leo Gerard, and I want to
say to Leo that Jerry is the best of your union, and thank you
for your tremendous leadership. You are a fiery orator, but you
are a fiery leader, and you will never quit. If I were in a
fight, I would want you in my corner.
The only thing I can say--and this is my last point--is
that I want to focus on the legacy cost. I think we will have
some good ideas as to what to do. I want to make it clear as
part of the record of this HELP Committee that the action taken
by the administration leaves the iron ore workers, the taconite
workers, in my State of Minnesota out in the cold. The tariff
does not help us at all, not in the way in which this has been
defined. We cannot do it. It is up to 7 million tons before
there is any tariff. That does not help us at all.
The taconite industry, as I say to the steel industry
people today, the presidents, has always been there for you. We
need the rest of the steel industry to be there for us. Our
fight is not over, and we are going to call on everybody to
help us out now, too.
I just wanted to make that part of the record today. Thank
you, Madam Chair.
Senator Mikulski. Thank you very much, Senator Wellstone.
[The prepared statement of Senator Wellstone follows:]
Prepared Statement of Senator Paul D. Wellstone
Madam Chair, thank you for convening these hearings today.
They are being held none too soon. The hard working families of
the Iron Range of Minnesota are facing excruciatingly tough
times. Their situation is truly desperate and they need our
help.
The taconite industry in which generations of workers have
proudly labored has been ravaged by surges of semi-finished
steel slab dumped in this country by our trading partners. Many
have lost their jobs--just last year 1400 workers were laid off
when LTV Steel Mining closed its doors. Now, 10,000 former
employees, their spouses and dependents face loss of health
insurance and many are finding that they stand to lose a good
portion of the pensions the company had promised.
I am grateful that my good friend, Jerry Fallos, President
of Local 4108 of the United Steelworkers of America, has been
able to join us today. The stories he has to tell are grim
indeed:
A couple that will have to pay $600 a month for a Medicare
supplement plan--out of a monthly income of $860.
A husband whose entire monthly pension will be used for
COBRA payments to continue health care coverage for his wife
who is on oxygen waiting for a lung transplant.
As Jerry says, the people of the Iron Range are used to
hard times. They have weathered any number of challenges over
the years. They are good people, proud, hard-working--the best
you can find anywhere. They are survivors--and they will get
through these difficult times as well. They have given much to
their country--and now they need our help.
I am determined that we will give them that help. The good
people of the Range have responded to their country in its
times of needs. Over the years our nation's economy flourished
and our manufacturing industries boomed from the iron ore
produced through the labors of steelworkers on the Range.
Unfortunately, Madam Chair, although the President's recent
Section 201 decision brought relief to some segments of the
United States steel industry, it did nothing for Minnesota's
Iron Range--nor for the iron ore industry in Michigan. While
the President imposed a fairly significant tariff on every
other product category for which the International Trade
Commission--the ITC--found injury, for steel slab he decided to
impose ``tariff rate quotas.'' This brings us virtually no
relief.
Nearly 7 million tons of steel slab can continue to be
dumped on our shores before any tariff is assessed. The injury
will continue. Moreover, already some of our trading partners--
Brazil, for example--are angling for exemptions that would
drive the quota levels even higher. And, frankly, I fear this
Administration might listen too sympathetically to such pleas.
The commitment to protect domestically produced iron ore and
the blast furnace capacity to process that iron ore is
shockingly absent. We must remain vigilant.
To make matters worse, the President said not one word
about addressing the industry's serious legacy cost problem. As
worker and company representatives will testify today, there is
both a moral imperative to meeting this challenge as well as a
business necessity in doing so.
As a matter of fairness and economic justice, we must help
the working families who gave their all to this industry and
who, through no fault of their own--indeed because of the
unfair practices of our trading partners--find themselves
without jobs, health care or adequate pensions. As Mr. Gerard
points out, as of today, 32 United States steel companies have
filed for bankruptcy--and these companies represent nearly 30
percent of our domestic steel making capacity. These failures
weren't the fault of the workers at these companies. These
failures resulted from unfair and predatory practices of our
trading partners over an extended period. They deserve our
help. They deserve the President's support.
Moreover, our domestic steel industry will simply not be
able to revitalize itself and remain competitive while
shouldering the massive legacy cost burdens that exist. With on
average three retirees for every active employee, the industry
faces virtually insurmountable barriers. Government assistance
is essential and we will need the President's active support
for legacy cost legislation if we are to prevail.
We also need to reform our pension laws. The current
guarantees provided under the Employee Retirement Security Act
(ERISA) are simply not adequate. Shortly I will be introducing
a measure to correct some of the problems with ERISA's pension
provisions. In particular that legislation will (1) increase
the guarantee levels, (2) permit payment of supplemental
benefits, (3) permit full payment of benefits awarded in the
five years prior to a plan's termination, and (4) provide more
protections against employers' under-funding of pension plans.
This latter point is very important. Up until recently the
LTV retirees on the Range had believed--based on
representations by the company--that their pensions were fully
funded. Now they learn this is not the case. Indeed, some may
lose as much as half of their promised benefits. Under-funding
of pension plans is a serious problem that I intend to address
in the pension reform legislation I will introduce. I hope my
colleagues will join me in pressing for these changes.
Again, Madam Chair, thank you for convening these hearings.
The issues we are discussing today need urgent attention. I
look forward to hearing from the witnesses and to working with
my colleagues on this Committee on prompt solutions.
Senator Mikulski. Before we begin I have a statement from
Senator Kennedy.
[The prepared statement of Senator Kennedy follows:]
Prepared Statement of Senator Kennedy
I commend Senator Mikulski for organizing today's hearing
on the plight of America's steel industry and steel workers.
She has been relentless in her efforts to ensure that our
nation's steelworkers are treated fairly, and I commend her for
bringing this issue before our committee today.
For more than a century, the steel industry has been the
backbone of American manufacturing. Today, that industry is in
serious jeopardy. At risk is the future of this core industry
and hundreds of thousands of jobs. Also hanging in the balance
are the retirement and health benefits of an estimated 600,000
retirees, widows and their families. Today, we will be hearing
from those most deeply affected by the current steel crisis. I
hope that today's hearing will be the basis for action by
Congress to protect America's steel retirees.
The steel industry has been hit hard over the last several
years as steel prices have dropped precipitously. By last
December, steel prices were just 68% of the level they were at
before the steel crisis began in 1998. Since the start of the
steel crisis, nearly a third of U.S. steelmaking capacity has
fallen into bankruptcy. Last year, steel bankruptcies more than
doubled and 40 plants either shut down or stopped steel
production. As a result, 20,600 steelworkers lost their jobs.
Over 100,000 retirees and their dependents have been left
without benefits. At the end of this month, another 82,000
retirees from LTV Steel will lose their health insurance.
The closure of steel mills both devastates local
communities and has a traumatic impact on workers across the
United States. The steel crisis jeopardizes the jobs of
thousand of workers who make the machinery and raw materials
used to produce steel.
Although President Bush recently imposed tariffs on many
foreign steelmakers, the Administration has not yet taken
action to address the high cost of retiree benefits. Addressing
these essential benefits is central to any plan to address the
financial plight of the steel industry. The steel industry has
four times as many retirees as workers--600,000 retirees versus
150,000 active workers. The average steel company has
approximately three retirees for each active employee--nearly
triple the ratio for most other basic manufacturing companies.
As a result, the seven largest steelmakers alone provide health
care to over 400,000 retirees and dependents.
The cost of retiree benefits in the steel industry far
outpaces other American manufacturing industries. Retiree
health care costs average 2.8 % of revenue in the steel
industry as compared with only 0.4% for General Electric and
0.2% for AT&T. At some steelmakers, such as Bethlehem Steel,
the situation is far more dramatic, with retiree benefits
representing 20% of the total costs of sales.
Since nearly every other industrialized nation has national
health insurance, foreign competitors do not face the same
costs of doing business. Steelmakers in these nations do not
face enormous retiree health care costs because the government
is taking care of citizens.
Without retiree health insurance, many former steelworkers
and their families would be left without access to decent
medical care. Already, many steel retirees pay between 25% and
40% of the cost of their health care benefits. Steelworkers and
retirees aren't even eligible for COBRA when their bankrupt
companies no longer offer a healthcare plan. Many of these
workers and retirees are too young to be covered by Medicare.
Even for those Medicare-eligible steel retirees, serious
gaps in coverage remain. Unfortunately, the average retiree
benefit is barely enough to cover the average cost of Medicare
supplemental insurance to close those gaps. Continuing retiree
health coverage must be a major priority for Congress.
The steel industry has been the driver of the American
economy. The cars we drive and the buildings we work in
wouldn't be possible without the backbreaking work of America's
steelworkers. We must recognize the contribution of these
workers to building America. We must not let them down in their
hour of need. Hundreds of thousands of America's workers were
promised decent health care by their companies in exchange for
years of service in the workplace. We must help to make sure
that this promise is kept.
I look forward to the ideas of today's witnesses as to what
specific action the Congress should take.
Senator Mikulski. Let us call up the first panel now--Mr.
Fallos, Mr. Mikula, Ms. Misterka and Mr. White, please come up.
Again, I know that when many fellow Americans come and
testify, they wonder what this is. This is not an
investigation. You do not have to take an oath. All you have to
do is speak your heart, your mind, and your experience.
I want to turn to Jeff Mikula and ask you to kick off,
Jeff. We are happy to see you. Then, we will go to Gertrude
Misterka, then to Mr. White. And Mr. Fallos, you are
representing former employees, and you are in a unique
situation, so we will ask you to be the wrap-up guy.
Is that okay?
Mr. Fallos. That is fine.
Senator Mikulski. So, Mr. Mikula, we really want to welcome
you. To my colleagues, Mr. Mikula is from Dundalk, MD, which is
the home of Bethlehem Steel. He has been married for 15 years;
I believe his wife Lisa is in the audience. He has been an
ironworker at Bethlehem Steel at Sparrows Point, and he works
as the financial secretary for the U.S. Steelworkers.
Why don't you go ahead and tell us how long you have been
at Bethlehem Steel and what you would like the committee to
know?
STATEMENTS OF JEFFREY MIKULA, STEELWORKER, DUNDALK, MD;
GERTRUDE MISTERKA, WIDOW OF STEELWORKER, BALTIMORE, MD; McCALL
WHITE, RETIRED STEELWORKER, ELLICOTT CITY, MD; AND JERRY
FALLOS, STEELWORKER, AURORA, MN
Mr. Mikula. Good afternoon, Madam Chair and members of the
committee.
First of all, I would like to thank you, Senator Mikulski,
as well as all of your colleagues in the House and Senate who
attended the February 28 steelworkers rally on the Ellipse to
press for the steel tariffs. Your support means a lot to every
steelworker. I was there with my 13-year-old daughter, and it
was a great day for America.
My name is Jeff Mikula, and I have lived in East Baltimore
all my life. I am 46 years old, and I am an active employee of
Bethlehem Steel's Sparrows Point plant in Baltimore, MD. I am
employed as an ironworker in the mill and now have worked for
Bethlehem Steel for 28\1/2\ years. I am married and have three
children, 19, 13, and 9. My 19-year-old son is currently
enrolled as a student at Loyola College in Baltimore where he
is studying computer engineering.
I can tell you that nearly 30 years of working as an
ironworker at the Sparrows Point plant outside in the elements
takes its toll on both your body and your mind. Jobs in a steel
mill are physically demanding, and it is not unusual to see
workers who appear older than their years. In 2 years, I will
have worked for 30 years, and would be eligible for retirement.
If I retire at that time, I am promised a pension of
approximately $1,600 a month before taxes; but I do not know if
my company will survive that long given the continuous crisis
in the American steel industry. Every day, I wonder whether my
pension will be there for me when I am ready to retire; and now
every day, I wonder whether I even have a job to go to before I
am ready to retire.
It is a far cry from where Bethlehem Steel was only about 3
years ago, when we could earn $2,000 to $3,000 a year in
profitsharing above our base wages.
Bethlehem Steel is now in bankruptcy. I participate in
Bethlehem Steel's basic HMO, Fidelity Health Care 2000. This
coverage extends to myself, my wife, and our children. Under
the plan, we pay copayments of $15 for each visit to the
doctor's office. On average, I see the doctor twice a month,
and my wife sees her doctor around three times a month. Our
children also visit the doctor a few times over the course of
the year. That is about $75 a month or $900 a year in
copayments just for going to the doctor.
We pay a 20 percent copayment for generic prescription
drugs and 30 percent for nongeneric drugs. We also have an
$1,100 annual dental allowance for our family. Our eye care
provides one care of glasses every 2 years, and my 9-year-old
has already gone through two pair of glasses in just 1 year,
which has cost our family $185 for a second pair.
I suffer from recurring kidney stones and am taking Urocrit
three times a day. I have to take Allopurinol to counter my
high level of uric acid and also Colchicine for my gout. I am
also taking Viox once every day for the pain, and the drug
Atenolol, a generic drug, for treating my high blood pressure.
I can tell you that just a person is in his late forties,
he does not worry any less about losing health insurance for
himself and his family than a retiree in his seventies. It is
truly a frightening prospect, especially when you realize that
just one accident or serious illness could wipe you out
financially.
I have worked hard all my life and have played by the
rules. But unfortunately, for far too long, we have allowed
foreign countries to target the American market, not just to
dump steel but to eliminate our capacity to produce steel. We
are cutting our capacity, but our trade partners continue to
add capacity. It is just not right, and our Government has sat
by and allowed this to happen.
The mill is running at about 65 percent capacity but needs
to run about 85 percent to make a profit. Our benefits have
been reduced. When I started 28 years ago, I thought I had a
job for life. Now, I do not even know if I will have a job
tomorrow.
Please work with our union and our companies to find a way
to secure a quality standard of living for all steelworkers,
retired and active.
Thank you.
Senator Mikulski. Thank you very much for that excellent,
excellent testimony. It is exactly what we wanted to hear.
I am going to turn now to Gertrude Misterka, the widow of a
steelworker. She has some health issues, and she is going to
talk about what it has really been like to survive. Her husband
Charlie died 5 years ago, and we know that his family and his
workers miss him very much. I had the chance to meet Charlie,
and of course, Gertrude, have been in your company many times.
You remember when I came a long time ago and knocked on your
door.
Why don't you just tell us about yourself now?
Ms. Misterka. OK. Good afternoon, Madam Chair.
My name is Gertrude Misterka. I am 65 years old, and I live
in Baltimore, MD. My late husband Charles started working at
Bethlehem Steel's Sparrows Point mill when he was 18 years old
in 1945. He served his country in the Army for 4 years before
returning to work at Sparrows Point. Charles worked for
Bethlehem Steel for 30 years in the pipe mill, where he was a
rotor machine operator.
His job enabled myself and our five children to live a
decent life and to buy our own home in Baltimore which we have
owned for 45 years. Through his steelworker union contract, he
was also able to earn a pension and health care benefits.
In 1994, at age 66, my husband suffered a stroke. He died
in 1996. I miss him very much, especially since he is not here
anymore to help me with my own health care challenges.
I am entitled to receive a $100 monthly pension benefit as
a surviving spouse. But after a $76 month deduction for my Blue
Cross Blue Shield health insurance coverage, I get only $24 a
month. That amount is in addition to my monthly Social Security
check of $800 a month.
I am a diabetic and insulin-dependent. Every day, I take 40
units of insulin in the morning and 10 units at night.
I suffer from high blood pressure and am on a prescription
for Vasotec, which I must take twice a day.
I am also being treated for high cholesterol and am taking
Lipitor, 10 milligrams a day.
I take Ativan, 0.5 milligrams, as needed, for my nerves.
I suffer from asthma, and I use an Albuterol inhaler, 90
milligrams, as needed.
I have periodic chest pains, and I am taking nitroglycerine
tablets, 0.5 milligrams, as needed.
Finally, I suffer from swelling, and I take Lasix, 20
milligrams, to deal with this problem.
I receive some help from Medicare, which pays 80 percent
for my diabetic monitoring machine. But Medicare pays nothing
for my prescription drugs, which are increasing in cost at the
same time that my income is fixed.
I worry about how I will be able to afford my prescription
medication of Bethlehem Steel cancels the prescription drug
plan which currently pays 80 percent on my prescriptions. If I
lose my insurance, my health will suffer, and I really do not
know what will happen to me.
In the past 14 months, my medications cost $936.53. If I
did not have health insurance, these medications would have
cost me $6,716.16.
Senator Mikulski. Would you repeat that number, please?
Ms. Misterka. In the past 14 months, my medications cost
$936.53. If I did not have health insurance, these medications
would have cost me $6,716.16. If the committee is interested, I
have documentation from my pharmacy on the cost of these drugs
along with my pension statement.
I am worried not just for myself but for other widows of
steelworkers and for their dependents who have nowhere to turn
for help.
Thank you for listening to my story. I hope that this
committee and others in the Congress will do whatever you can
to protect the pension and health care benefits of retired
steelworkers and their survivors.
Madam Chair, I have a copy of these if you would like to
have them.
Senator Mikulski. We will get those after the testimony. I
really thank you for your testimony.
And to my colleagues, this is the first time that Ms.
Misterka has ever spoken in public. Wasn't she terrific?
Senator Clinton. Very good. [Applause.]
Ms. Misterka. Thank you, Senator and members.
Senator Mikulski. I just want to note that we have been
joined by Senator Dodd of Connecticut and Senator Clinton of
New York.
Senator Mikulski. Now let us turn to Mr. McCall White, a
retired steelworker. He retired from Beth Steel in 1990, where
he was a ladle liner down there. He is a Korean War vet, and he
has been active in Local 2610 to represent the retired workers.
He is also member of a group called SOAR, Steelworkers
Organization of Active Retirees.
Mr. White, we welcome you and ask you to proceed now.
Mr. White. Thank you, Madam Chairman.
My name is McCall White. I am 74 years old, and I live in
Baltimore with my wife as a retired steelworker. I am very
appreciative of the opportunity to appear before this Senate
committee as a representative of many thousands of other
retired steelworker families like myself.
Senator Mikulski, many steelworkers including myself were
reassured by your appearance and comments to us at the
Steelworkers Union Local 2610 Hall in Dundalk at a community
rally on February 20 that was directed at saving our steel
industry.
Tens of thousands of retired steelworkers in the Baltimore
area are anxious about the future of our Sparrows Point mill
and whether we can count on the financial commitment by
Bethlehem Steel to continue our health care benefits plan.
I retired in 1990 as a ladle liner after 38 years at
Sparrows Point. When I was drafted to serve during the Korean
War, I willingly accepted; and when my community and union
membership needed help, I always responded. I am here today
responding again to the concerns about the future.
I was an active elected local union official at Sparrows
Point, and I continue to represent retired steelworkers as vice
president of our local union's retirees club. In addition, I am
an active member of SOAR, the Steelworkers Organization of
Active Retirees.
My wife and I have enjoyed very good health, but like many
retirees at our age, we value the fruits of our working years
and reliance on a modest pension, plus the health care benefits
plan that helps us with our prescription drugs. We rely on
prescriptions for heart, blood pressure, and arthritis
conditions, and we make copayments under the drug plan.
We do not want handouts, and we do not want the burden of
our needs to be placed on our adult children and their own
families. However, my wife and many of my co-retirees' families
are very anxious about the financial distress of Bethlehem
Steel Corporation and the dozens of other steel companies that
have been damaged by unfairly-traded steel imports and the lack
of any Government response to enforce our trade laws until
recently.
It is my hope that by coming to this Senate hearing and
expressing my concerns and those of my co-retirees, the elected
leadership of our Congress will commit to solutions that save
our pensions and health care benefits. That is our major
concern.
I thank you.
Senator Mikulski. We want to thank you very much, Mr.
White.
We would like to acknowledge the presence of Senator Arlen
Specter. Senator Specter is not a member of this committee, but
he is one of the co-chairs of our Steel Caucus. He and Senator
Rockefeller co-chair that Caucus, and as I said, our efforts
are bipartisan. He is on the Judiciary Committee, where they
are considering the nomination of Judge Pickering right now, a
very testy and complex situation, so as a Senatorial courtesy,
we will turn to you for any comments you would like to share
with us, and then we will continue, because I know that you
have to return to Judiciary.
Senator Specter. Thank you very much, Madam Chairman. I
shall be brief.
First, I thank you for extending the invitation to me to
sit with this very distinguished committee on this very
important subject.
As Senator Mikulski has noted, at this time, the Judiciary
Committee is considering the nomination of Judge Pickering, and
Senators are speaking, and we will vote on him sometime this
afternoon; the speeches are likely to be pretty long, I might
say.
I believe this is a very, very important hearing. We have
round one of the tariffs having been entered. The President
took courageous action in the face of a very difficult
situation, but that is only step one. What remains to be done
is to tackle the legacy cost.
Senator Rockefeller and I--Senator Rockefeller chairs the
Steel Caucus, and I am the vice chair; I liked it better when
our roles were reversed, but that is what is happening now--are
working on legislation as to the legacy cost. I think there is
a very unique opportunity with the agreement by labor and
business to come to terms to restructure the steel industry,
which American desperately needs not only for the jobs but for
our domestic production and most of all for our national
defense.
I am sorry that I will not be able to be here to hear Mr.
Leo Gerard, the president of United Steelworkers, and Mr. Steve
Miller, the chairman and CEO of Bethlehem Steel, but we have a
chance now to restructure and save a very vital American
industry, and I think this hearing is a good step and start in
that direction.
So I appreciate what you are doing, and I thank you, Madam
Chairwoman, for according me this courtesy.
Senator Mikulski. Thank you very much, Senator.
We have a lot ahead of us and will share with you and your
staff the really very compelling testimony.
Senator Wellstone. Madam Chairwoman, if I could just take
the liberty of 30 seconds, I so appreciate what Senator Specter
said. I have to keep saying this as a Senator from Minnesota--I
do not think that step one was taken all the way, because the
iron ore industry, the taconite industry, was not covered by
the tariff. So from our point of view, we still have not gotten
there. The legacy cost is important, but we have an awful lot
of people in my State--and I see the steelworker here nodding
their heads--who are not covered by the tariff.
I want to make that part of the record over and over again,
because we have to somehow make that happen.
Thank you, Madam Chair.
Senator Mikulski. And Senator Wellstone, you have the
president of local 4108 exactly in that situation. Would you
like to introduce him to the committee, and then, Mr. Fallos,
you go ahead and testify? Why don't you do that, Senator.
Senator Wellstone. I actually did that earlier, and I could
go over and over again--but again, we thank you, Madam Chair.
Jerry Fallos, for my two colleagues who arrived late, is
president of Local 4108, United States Steelworkers. LTV has
pulled the plug, and we are talking about a lot of LTV workers
who are out of work.
Jerry has an incredible sensitivity to people. Every,
single day, he is dealing with people who are now out of work;
they do not know what is going to happen with their pensions;
the retirees do not know what is going to happen with the
health care costs. And frankly, people who are 57 and 58 and 59
or even in their early 50's are now out of work and have lost
their health care benefits, and some of them might have had a
bout with cancer, some of them might have had something else--
and they cannot afford any coverage at all, period, zero--zero.
COBRA costs $1,000 a month. They are out of work. And we are
being told here in Washington that we do not have the money to
do anything.
That is my introduction.
Senator Mikulski. Mr. Fallos?
Mr. Fallos. I probably do not have to say anything right
now, but thank you, Madam Chairman and members of the
committee.
Senator Mikulski. This is why we love Senator Wellstone and
want him back.
Mr. Fallos. I did not recognize him; usually, when he comes
to my town, he wears a flannel shirt and jeans.
Senator Dodd. He said he did not recognize you, either.
[Laughter.]
Mr. Fallos. I am Jerry Fallos, and I am president of Local
4108 of United Steelworkers. I represent about 3,500 former LTV
employees in Northern Minnesota.
In December of last year, the steelworkers and LTV Steel
Mining Company came to an agreement that would allow LTV Steel
to pay for retiree health insurance out of what is called a
VEBA trust fund. VEBA is an acronym for Voluntary Employee
Benefit Association. This trust fund was established in 1994 to
help LTV pay retirees' premiums if they ever went bankrupt
again and could not meet their obligations.
We came to the agreement that they could take the money out
of this fund to pay for their health premiums while they were
trying to restructure. They calculated that this fund would
last until mid-2002 and that all retirees would be covered by
insurance until mid-2002.
Last week, without any warning, they notified us that
everybody's health insurance will be terminated on March 31.
Although there are 3,500 employees just on the Iron Range, if
you take into account dependents and spouses, that number
swells to about 10,000 people just on the Iron Range in
Northern Minnesota. If you take into account all the people who
depend on LTV for their health insurance across the country,
that number would swell to over 200,000 people.
You cannot imagine the devastating effect this is having on
these people. I want to try to put a face to some of the
problems that we are having. The members of this panel have
done an excellent job. I would like to put a perspective on it
for people who do not have insurance, and their pensions are
being slashed by the PBGC.
Just the other day, an elderly couple came into my office.
They must have been in their mid-eighties, because he said he
retired 22 years ago. He just could not understand why he was
no longer going to have health insurance. He had worked for LTV
for over 35 years, and they had promised him that when he got
done working, he would be provided with health insurance and
pension. He said that he does not know exactly where to look or
how to go about finding insurance. I said, ``Don't you have any
kids or relatives or friends who can help you with some of
these problems?''
He said, ``No. All I have is you and the union, I guess.''
So I took out a 1-800 number that is supposed to be helpful
for retirees to find out about insurance and unemployment and
things like that. He said, ``That number is not going to do me
any good. I have called that number many times already, and
they act like they are not listening to me. I ask them
questions, and they act like they do not even hear me. They
just keep telling me different buttons to push.'' He did not
even realize that he was talking to a voice-mail or a
recording.
So we got on the telephone and called a couple of different
insurance companies. It turns out that he gets $865 a month
total pension and Social Security; that is all he gets. After
we talked to some insurance companies, the premium for a
supplemental insurance policy for just prescription drugs and
office calls and different things that Medicare will not cover
would cost him and his wife $600 a month. I do not know how you
can live on $250 a month.
And I guess it makes no difference if you are old, middle-
aged, or young; you still have a lot of problem. One of my
friends is 47 years old. His wife is on oxygen right now while
she is on a waiting list for a lung transplant. His COBRA
payments are over $900 a month. His pension, after it is
slashed by the PBGC, will be exactly $900 a month. They do not
know where to turn.
I have another friend who has four teenage daughters in
school--four teenage daughters is bad enough--but he makes $400
a week on unemployment, and that is just enough to disqualify
him from any assistance for health insurance. The other day he
told me, ``Jerry, I just pray to God every night that my kids
do not get sick and that I do not get sick, that I can stay
healthy enough to finish school and find a job that will
provide some kind of health insurance.''
I could go on and on. There are 3,500 stories, and none of
them is good. Everybody is out of health insurance; the
pensions are being slashed. The fact of the matter is these
people worked for 25, 30 years, and when they retired, they
were sure they would be provided health insurance and pensions
to enjoy their so-called golden years. Instead, they are
finding that those so-called golden years are not quite so
golden right now.
The union and LTV worked for many months together trying to
salvage LTV, trying to help them restructure themselves. But
eventually, it was in vain. The fact of the matter is we could
all agree to work for nothing--no wages, no benefits, or
anything--and we still cannot compete with foreign steel
industries that have their legacy costs subsidized by their
governments.
We need help from this administration. We need legislation
like H.R. 808 or Senate bill 957, the Steel Revitalization Act.
We need help on that. We also need some help on money that is
collected from these tariffs, if it could go into some type of
a legacy fund to help pay for legacy. We need that.
The President took a step in the right direction by
imposing a 30 percent tariff on imported steel, but his
decision was more or less devastating for Minnesota and
Michigan. If they allow 5 to 7 million tons of slab steel into
the country before they impose tariffs, that is equal to over
10 million tons of pellets. That is equal to the total yearly
output of three mining companies in Minnesota. It would be the
final nail in their coffin if they are allowed to do this. We
will not survive without help.
After working as a steelworker and in the mines for 35
years, I have learned one thing. Steelworkers are survivors. We
survived the long strikes in the early seventies, and we
survived the massive layoffs in the early eighties. We even
survived the first bankruptcy of LTV Steel in the mid-nineties.
We were able to survive all these things with faith in God,
support from our families, and support from legislators like
Senator Wellstone, Senator Dayton, and Congressman Oberstar.
But in order to survive the biggest challenge we will ever
face, we need help from our Government.
We are not asking for handouts. All we are asking for is a
helping hand. We need your help badly.
Thank you for listening to me.
Senator Mikulski. That was outstanding. Each and every one
of you was absolutely outstanding.
The way we are going to operate is that every Senator will
have a chance to ask questions for up to 5 minutes, and we will
go on a first come, first served basis.
I would like to talk to you, Mr. Mikula, for a few minutes.
You are now working at Bethlehem Steel; is that right?
Mr. Mikula. Yes.
Senator Mikulski. And how much do you make now?
Mr. Mikula. I make $860 a week base salary. That comes to a
little over $40,000 a year.
Senator Mikulski. And if Bethlehem Steel were to go under,
what would happen to you?
Mr. Mikula. Well, my oldest child is in Loyola College, and
I would probably have to go out into the building trades. I
have a craft as an ironworker. I would probably have to travel
around the Baltimore-Washington Metropolitan Area, around other
States, to get a job with other local unions and survive that
way, because that is my home trade is ironworker.
Senator Mikulski. But you have some pretty big health
issues, don't you?
Mr. Mikula. Yes. With my kidney stones, it is hard for me
to go around. When attacks come--I was hospitalized three times
in 1 week this year.
Senator Mikulski. I do not want to get personal, but you
would have a hard time, wouldn't you? For a lot of workers in
their forties and fifties, do you think there would be a chance
for you to find another job at these wages and with these
benefits?
Mr. Mikula. If we were all let out together, it would be
very hard. A little at a time--you have got to realize that we
have been dropping people out of our mills for a long time. We
are down to around 3,000 people now. So a lot of employees have
already been out of work down there and are finding other jobs.
So you have to go farther out to look for work.
Senator Mikulski. But the possibility is that both
Bethlehem Steel and all the other steel mills could happen
pretty much within the same 8 weeks?
Mr. Mikula. Basically.
Senator Mikulski. So that would be pretty serious.
Mr. Mikula. Yes.
Senator Mikulski. Let me turn to you, Ms. Misterka. When
did your husband die?
Ms. Misterka. He died in 1996.
Senator Mikulski. So you were then 57 years old.
Ms. Misterka. Yes.
Senator Mikulski. And that meant that you were not eligible
for Social Security. Did you work out of the home? Did you have
to use your savings?
Ms. Misterka. Well, he died September 18, and my birthday
was the 29th, so Senator, I was lucky that he died in
September; so I did start getting is pension and so on from
down at the Point.
Senator Mikulski. Otherwise you would have been stuck.
Ms. Misterka. Yes.
Senator Mikulski. So you did not have to go to your life
savings.
Ms. Misterka. That is right.
Senator Mikulski. You said that without Bethlehem Steel and
its pension--you get $100 a month.
Ms. Misterka. Yes.
Senator Mikulski. Now, people say--and stick with me for a
minute; I am not saying this, but the editorial board are
saying this--Mr. George Will who writes for The Washington Post
says that your pension is lavish and goldplated, and so is your
health benefit.
Ms. Misterka. Oh, really? [Laughter.]
Senator Wellstone. There is the best answer I have ever
heard.
Senator Mikulski. If he were here, what would you say to
him?
Ms. Misterka. I would say let him try doing what I have to
do. [Applause.]
Senator Mikulski. So you do not have a COLA. Do you have a
cost-of-living adjustment in your pension from Bethlehem Steel?
Ms. Misterka. No. I get $100 a month. That is the pension.
Then they take $76 a month out for my Blue Cross and Blue
Shield, and after that, I get a check for $24.
Senator Mikulski. So you were paying this premium of $76
for your health insurance.
Ms. Misterka. Yes, Senator.
Senator Mikulski. Just know, colleagues, that this is more
than what we pay for Federal employee retirees--and not that we
are lavish or goldplated. We are talking about the basic
benefit; isn't that right?
Ms. Misterka. I have a copy, Senator. I will show you what
I get.
Senator Mikulski. Well, thank you. I would love to be able
to see it.
Let me ask you one more question. If Bethlehem Steel were
to go into bankruptcy and could not consolidate, or they could
not do a joint venture, or all of the other things that Mr.
Miller will tell us about, and Bethlehem Steel were to just
liquidate, where would you turn?
Ms. Misterka. Senator Mikulski, it would be very hard,
because I am on a limited income as it is, and I take lots of
medication, and it worries me. I even wake up at night, and I
go to all the meetings, and I do everything that I can to try
to save our insurance and our pension. I certainly hope it does
not happen; it just cannot.
Senator Mikulski. Do you know where you would turn?
Ms. Misterka. It would be very hard. I do not want to go to
welfare, because I want to hold my head up. My husband worked
all those years for me, and to think that this is happening to
me and all the other widows and all the other steelworkers--it
just cannot happen.
Senator Mikulski. He was a veteran, wasn't he?
Ms. Misterka. Yes, ma'am.
Senator Mikulski. So he fought for America.
Ms. Misterka. Yes, he did.
Senator Mikulski. And if he were alive, he would want
America to fight for you, wouldn't he?
Ms. Misterka. Oh, yes. He started to work for Bethlehem
Steel, and then he was called into the service, where he served
for 4 years. Bethlehem held his job for him, so he went back
there to work. He worked there for 30 years, and then he got a
disability retirement.
Senator Mikulski. But he thought you were taken care of
forever?
Ms. Misterka. Yes, yes.
Senator Mikulski. And you thought you had a job forever,
Mr. Mikula.
Mr. Mikula. Yes, ma'am. When I got out of high school, it
was like gold to work for Bethlehem Steel.
Senator Mikulski. Mr. White, I have other questions for
you, but my time is up, and I am going to give my colleagues
the time to ask questions. We want to thank all of you for your
eloquent testimony.
Senator Wellstone?
Senator Wellstone. Thank you, Madam Chair.
Let me start with Jerry. There was a story today that the
Brazilians have been talking with Mr. Zoellick, our Trade Rep,
and they want to try to--well, there are a couple of things
about what they are doing, but let me ask you about something
Minnesota-specific--they might want to try to basically get an
additional break on dumping more slab steel into our market.
If that happens, what would be the impact on the Range?
Mr. Fallos. As I explained before, we are working right on
the edge now. Any more imports of slab, it is in direct
competition with pellets. As I explained, it takes about one to
one and a half tons of pellets to make one ton of slab. So any
more imports of slab could be devastating to the Iron Range.
There are a number of small mines now that are right on the
edge of closing down, and I do not think they could take any
more.
Senator Wellstone. The second quick question is could you
explain--I think we want it on the record yet again--the
President's Section 201 decision--could you explain why it does
not help the taconite industry? I want people to be clear about
that.
Mr. Fallos. Well, because they are going to be allowed to
important 6 to 7 million tons of slabs before they put any
quotas on it at all. That is equal to about 10 million tons of
pellets. The total output of three of the mines on the Iron
Range is about 10 million tons of pellets. So unless they put a
tariff on slabs right away, it is not going to do the Iron
Range a lot of good--or Michigan.
Senator Wellstone. And actually, while the president is
here, I am going to tell President Gerard that I am hoping to
get his support for this. I have been listening, and one thing
that becomes very clear on the legacy cost, one of the things
that is so terrifying for people is that they are going to lose
their prescription drug coverage. That is really it--which of
course is terrifying for a bunch of other people in the country
already, because they were not lucky enough to work for a good
union like this, and they do not really have the coverage,
either. I think that in Minnesota, two-thirds of the people
over 65 do not have any coverage. It is unbelievable.
What I am thinking--and we want to work on the legacy cost
separately--but what I am going to ask Mr. Gerard, and I want
to get a quick reaction from the rest of you--I now know
exactly the amendment I am going to do on the Budget Committee.
I am going to have an amendment which says that the
pharmaceutical industry, which has been making Viagra-like
profits, if you get the meaning of that, has been pushing
people around who are over 65, and the Federal Government
should become the bargaining agent for the 40 million people
who are the Medicare recipients in the same way we do it for
the veterans, and insist on a discount price.
Can you imagine the Federal Government with a bargaining
pool of 40 million people, Medicare recipients? I would think
we could do a heck of a good job of making them bring the costs
down. It would just be a straight up or down vote. I hope the
union will support me on that, because we want to work on
legacy cost, but that would be good for everybody. Maybe they
can even get it down to what they charge in Canada. Then we
would really be doing well. In my not such humble opinion, I
think it is a good proposal.
What do you guys think, in 1 minute?
Mr. Fallos. Yes.
Mr. Mikula. Yes.
Ms. Misterka. Yes.
Mr. White. Yes.
Senator Wellstone. All right. I have the support of the
steelworkers.
Senator Mikulski. Senator, in your usual modest and mellow
way--we who chair the veterans appropriations committee have
asked the Veterans Administration to give the committee their
cost containment mechanisms. We know that because of big
purchasing power on many of the drugs used particularly to
manage chronic illnesses, like our dear friends have said
today, we can get as much as 15 to 40 percent.
Senator Wellstone. That is right. There is no reason why
whatever HCFA is now called today cannot do the same thing.
Senator Mikulski. Is that it?
Senator Wellstone. Yes.
Senator Mikulski. Senator Dodd from Connecticut.
Senator Dodd. Thank you very much, Madam Chairman. This has
been very worthwhile.
I know that for many of you, including Ms. Misterka,
testifying before a Senate committee can sound like a daunting
task, but you have all done very, very well.
Mr. White, your testimony was excellent as well, and Mr.
Fallos. I did not get a chance to hear Mr. Mikula, but I
listened to you answer some questions.
I know you must wonder whether this makes any difference.
You have come a long way, Mr. Fallos, and you have got to
wonder, sitting here today, if it makes a difference. Well, it
makes a difference.
I do not come from a steel-producing State. I know your
president well, and I have spoken to the international union on
numerous occasions. I come from a consuming State; I have
industries in my State that are consumers of steel products. I
am hopeful they will get on board with what we are trying to do
here. It is important that those who produce the product and
those who consume it in this country understand that we are in
this together, and my hope is that we can do a better job at
convincing the steel constituency, if you will, that there is a
common interest here. As has been pointed out by others in the
past, for this country to have one of its basic industries
evaporate and to depend on foreign sources for this product is
a frightening prospect. We do it already in too many areas. We
do it too much in the energy area already, and to do it in this
area as well would be a travesty.
And to those who are retirees, we know the legacy costs are
expensive, but I think that doing nothing would be a far
greater cost. So I just want you to know that even though some
of us do not represent specific constituencies that have been
affected, we represent all of you. We are United States
Senators. We come from specific States and represent those
States, but when we come here, we cast votes that affect
everyone in the country. I do not represent a lot of farmers in
the sense that they exist in the Midwest, but I know that if we
are not supportive of agriculture, the country suffers. I know
that when there is a drought or a fire someplace in the
country, and it may not have affected my people directly, I
know that if we do not step up to the plate, the next time it
could be my State, it could be my industries, it could be those
people who work on the consumer side of the steel industry who
are sitting at this table, wondering whether anyone will stand
up for them.
So we are in this together as a people. I have no direct
questions for you. You have done a very good job in presenting
your testimony. But I just wanted to come here this afternoon,
Madam Chairman, to express my sense of solidarity with you and
with our witnesses here and President Gerard, for whom I have
the highest regard and what he has done on behalf of the people
he represents.
Mr. Fallos, I only have one request to make of you. You are
making some requests of me, and I want to make a request of
you. This fellow here who is sitting to my right is about as
good a fighter as this institution has. There is no one who
cares more deeply and more passionately about working people
than Paul Wellstone.
So I will make a very specific plea to you. When you pack
up and go home to Minnesota, and you take off that coat and tie
that you are not terribly comfortable in, do what you can to
send this guy back here.
Mr. Fallos. We are going to be trying our hardest, believe
me.
Senator Dodd. Thanks.
Thank you, Madam Chair. [Applause.]
Senator Mikulski. You know, we are not supposed to allow
clapping, but I do not care today. [Applause.] America has been
through so much, and we have so much that lies ahead.
Now let us turn to Senator Clinton of New York. We have
campaigned together up in the steel communities, and I know you
are a strong advocate. Please.
Senator Clinton. Thank you so much, Senator Mikulski, for
your strong advocacy on this issue and for calling this
hearing, and thanks to my colleagues as well.
It is absolutely correct that Senator Mikulski came and
campaigned for me in Buffalo. An as those of you who know
anything about the steel industry and particularly--I see some
New Yorkers in the crowd--Western New York, particularly the
area around Buffalo, in the 19th and 20th centuries was really
the industrial base for our Nation. There are a lot of reasons
why the United States is strong today because the men and women
of Western New York were committed to creating good products at
a competitive price that built this Nation.
I know that in the last two centuries, we had the Nation's
number one grain milling center; we had Bethlehem Steel near
Lackawanna, which stretched for miles on the lake. Many of the
steel plants in Western New York are closed or on the brink of
closing. We face the loss of health and retirement benefits,
just as we have heard from these eloquent witnesses, in Western
New York as well.
It is a real concern that the men and women who really
built this Nation would in their later years be so easily
forgotten. The stories that we have heard could be repeated
literally thousands and thousands and thousands of times over.
Now, solving this problem is going to require some creative
solutions working with the steel workers, working with the
steel industry, but I think it is long overdue to be addressed.
I know that with the President's Section 201 decision, there is
a kind of holding pattern, but even if that is not knocked out
in the WTO, it expires in 3 years.
So we are looking at a crisis that is nowhere near being
addressed. We really do not even have half-a-loaf, because the
loaf is not even going to be around after a while, and its
ability to help our steel industry remain competitive
diminishes over time rather quickly, plus these additional
problems which I thank Mr. Fallos for addressing which I was
not aware of, and I appreciate your bringing those to our
attention.
So I do not think there is any alternative, Madam Chairman,
but to address this legacy cost issue if we are serious about
the industrial base of our Nation and particularly our steel
industry. I hear people who say that we do not need a steel
industry, and I just do not understand what planet they are
living on, to tell you the truth.
I understand that our economy has changed. I know that more
people make their living working with computers than working in
steel mills. I know that many of the changes in the economy
have created really difficult times for a lot of good,
hardworking people. But I view this with respect to the
survival of the steel industry as also a national security
issue. I have been told by the steelworkers, by Leo, by
executives of the steel industry that we have a lot of needs
for our increased national security and homeland security that
have to be addressed that need steel to address them.
I know for a fact that when the USS Kohl was damaged by a
terrorist bomb, there was only one plant left in our country
that could make the armored steel to repair that ship. And I
just do not believe we should be looking around the world to
get the steel we need to repair our ships or our tanks or
anything else. I just have a fundamental disagreement with
those who believe that we can do without it.
In this difficult time, though, we have got to figure out
how we come up with a solution that is fair to the retirees and
really lifts the burden off of the steel industry, because as
you so well know, our steel industry is really trapped between
two different pressures. On the one hand, in the countries that
we compete with who provide universal health care and universal
retirement benefits, everybody in those countries pays for
those benefits. The countries that we compete with who do not
provide any benefits have a competitive advantage. So we are
kind of caught in the middle. We cannot figure out how we are
going to find our way out, because we do not want to lower our
standard of living to equate with some undeveloped country, but
we cannot compete with the developing countries because they
have all of these direct and indirect subsidies.
So I think you can be an absolute, positive free trader and
say ``I support trade because it creates jobs,'' and still say,
``But when are we going to go after the countries that either
do not provide any support for workers or for environmental
standards or provide it indirectly, because they basically tax
people to provide it?''
At some point, we are going to have to de-link health care
from employment anyway. It makes no sense to put these shackles
around our employers. I do not understand why employers in this
country are not up in arms, saying ``Get this burden off our
backs; make it possible for us to compete on what we know how
to do. [Applause.] We know how to make steel. We know how to
make automobiles.'' You may recall that I had something to say
about this a few years ago, and I did not often get applause,
so maybe times are changing.
But I want to work with you, Madam Chairman, on this very
important issue, because the legacy cost issue of the steel
industry and the effects on hardworking people who essentially
had a contract with their employers has to be honored, and it
cannot be honored and maintain our current steel industry. It
should be honored, and we should maintain the industry. So we
have got to figure out a way to get that done, and I thank you
for this hearing.
Senator Mikulski. I thank you very much, Senator Clinton.
When we were up in Buffalo, I remember what the people said.
They were worried that they were going to have to leave their
home to find a job. I remember you saying to them in that
wonderful Polish restaurant that Sunday morning, ``You should
not have to leave home to be able to have your job.''
What has happened is that the jobs have left home and have
gone overseas.
As we conclude this panel, you make excellent points,
Senator Dodd, Senator Wellstone. Where there is something
deemed in the national interest, we provide help. So for
example, we believe it is very important that we have
agriculture in this country. Therefore, we support the farmers.
We are looking ahead to providing a farm subsidy of about $8
billion a year. I support that, because we need to have our
farmers.
But there is more than one kind of producer. There is more
than one kind of producer to keep America strong and
independent. So $8 billion every year to farmers for at least a
decade, which I support--I am not talking about pitting one
group of working Americans against another; that is not right--
but if we can do agriculture at $8 billion for 10 years, let us
try to do $10 billion for steel once. Then, after the horrific
events of September 11, when our airline industry was on its
knees, the United States Congress passed a bailout of the
airline industry to the tune of $15 billion. And do you know
what--I voted for it. It was the right thing to do, because we
were in a national crisis.
But we are now in a national crisis with steel, and it is
important to the men and women at this table, but it is also
important to our national security, that steelplating was made
at Bethlehem Steel, one of the last to be able to do that.
So I think there is precedent for when something is deemed
in the national interest, we are ready to put up. So I think
this is very important, and we want to thank this panel. We
could talk with you all day. I just want to make the point,
though, that the majority of you are from Bethlehem Steel. They
were close, so they could come, and many people took time off
at great inconvenience for the rally. They want to be able to
have representation, and they are here, and it was really the
United Steelworkers Union that helped us find the folks and
Senator Wellstone. So we want to thank you. Even though it is
Bethlehem Steel, it is really everybody.
We want to thank the panel. You are welcome to stay. Thank
you very much, and God bless you. We are on your side.
We are now going to turn to Mr. Robert Steve Miller, the
chief executive officer of Bethlehem Steel. Mr. Leo Gerard will
also be joining us. He had to step out but will be back in just
a very few minutes.
Mr. Miller is known as, really, a bailout, turnaround
artist. He often comes in when companies are in financial
crisis. He has been at Morris and Knudsen, and he is on several
boards of directors. He is here to see what he can do to turn
Bethlehem Steel around, but he knows that he cannot turn
Bethlehem Steel around, because our solutions are not company-
specific, but have to be industry-specific.
We are very pleased to have you here. And then, of course,
we want to welcome the head of United Steelworkers of America,
which is both here and in Canada. Leo Gerard is the son of a
union miner, born in Ontario. He works for his union, he fights
for his union, and we certainly look forward to hearing his
testimony today.
Mr. Miller, why don't you start?
STATEMENTS OF STEVE MILLER, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, BETHLEHEM STEEL; AND LEO W. GERARD, INTERNATIONAL
PRESIDENT, UNITED STEELWORKERS OF AMERICA, AFL-CIO
Mr. Miller. Thank you, Madam Chair. It is a pleasure and an
honor to be here to address the committee and also an honor to
be seated next to my good friend, Leo Gerard. We have been
working closely together on helping the steel industry get
through this crisis.
The domestic steel industry is suffering under devastating
economic conditions. These conditions are the direct result of
the severe injury caused by the extraordinary volume of
disruptive and unfairly traded imports that have inundated our
shores since the 1970's. The most recent surge of imports began
in late 1997 and has forced 32 domestic steel companies,
including Bethlehem, to declare bankruptcy.
In response to overwhelming evidence of the injury done to
the domestic industry by imported steel, the ITC recommended,
and last week, President Bush implemented, safeguard tariffs on
most flat carbon steel products.
We appreciate the efforts to bring about this decision that
was made by you, Senator Mikulski, and you, Senator Wellstone,
and many of your colleagues who attended the rally and did many
other things to encourage this decision.
The effective implementation and enforcement of the
President's safeguard tariffs is essential to the recovery of
the domestic industry, but as you have observed, it by itself
is not enough. Equally necessary is Federal Government
assistance in solving the legacy problem, that is, the
obligation to pay benefits for steel industry retirees and
their dependents.
It is recognized that the steel industry must consolidate
and rationalize facilities in order to improve its
competitiveness and regain its global leadership position. Such
action would not be new for Bethlehem or indeed for the
domestic industry as a whole. But unfortunately, one of the
major and unavoidable consequences of the efforts of companies
such as Bethlehem Steel to respond to changes in the
marketplace is that our ratio of active to retired employees
has deteriorated dramatically. To date, consolidation and
rationalization have reduced the number of Bethlehem employees
from almost 90,000 people in 1980 to approximately 13,000
today.
Currently, Bethlehem provides health care coverage for
130,000 people, including about 95,000 retiree beneficiaries.
This means that for each active employee, Bethlehem provides
health care coverage for more than seven retirees. By
comparison, on a national scale, there are currently three
wage-earners for every Medicare beneficiary. In other words,
our ratio being the reverse of seven-to-one is 20 times worse.
In 2001, Bethlehem's total cash costs for health care and
other insurance amounted to $300 million, and it is growing. We
expect this expense to grow significantly as a result of
prescription drug price increases, as well as general health
care cost inflation. The net present value of Bethlehem's
legacy benefits, excluding pensions, is $3 billion. Another
aspect of the legacy problem is pension obligations, which
currently are underfunded by about $2 billion. It is
liabilities such as these that constitute the major barrier to
the necessary consolidation within the industry.
Why should Government feel any responsibility to intervene
on behalf of integrated producers, rather than simply allowing
market forces to work their will? In summary, we would cite
three important reasons from Government action. First, foreign
governments and foreign companies subsidized by them, not
market forces, are directly responsible for much of today's
problem. If we had the same level of Government support for
retirees as in other countries, we would compete very well
indeed.
Second, the U.S. Government has played a significant role
in creating the current situation. Our Government has done much
to promote economic growth in Russia, China, Korea, and other
steel-exporting countries over the last decade and before. Many
of these countries decided to focus on steel production as a
major export product, exactly as Japan did in the 1950's. Thus,
whatever public benefits were derived for the United States,
those benefits have come at a very real cost to the domestic
steel industry.
In addition, a number of administrations going all the way
back to President Truman have actively intervened during labor
contract bargaining sessions in the steel industry.
Third, the cost of meeting the health care needs of the
enormous and unanticipated number of retirees and dependents is
preventing normal, market-driven consolidation in the industry.
As a practical matter, potential buyers of companies cannot
purchase a distressed steel company because of the existing
retiree obligations that would have to be assumed. We are like
a $100,000 house with a $500,000 mortgage--you cannot give it
away.
The alternative is the bankruptcy process, and without an
active Government role in the financing of legacy costs, this
will lead to more nightmare scenarios like that at LTV and
result in hundreds of thousands of retirees, spouses,
dependents, and widows who will lose their health care and
other retirement benefits.
Bethlehem is committed to working with Congress to craft an
appropriate response that would involve the industry, labor,
and Government, all working together. However, Congress must
act quickly, or the opportunity will be lost to help resolve
this issue.
The Government can and should assist the industry in
dealing with legacy cost. America needs a viable steel
industry. There will be further consolidation occurring in the
domestic industry, and with Government help, this process can
be fair and orderly, it can reduce the possibility of massive
short-term job losses and help prevent the destruction of a
critical basic industry.
I appreciate the opportunity to appear before you today and
would be glad to answer any questions you may have.
Senator Mikulski. Thank you very much, Mr. Miller.
[The prepared statement of Mr. Miller may be found in
additional material.]
Senator Mikulski. Mr. Gerard?
Mr. Gerard. Thank you very much, Madam Chair, Senator
Wellstone.
Before I start my testimony, I want to take the opportunity
to introduce some individuals who are sitting in the back and
to also compliment the panel of steelworkers and steelworker
retirees who were here just preceding us.
As you noted and every other Senator noted, there are
literally hundreds of thousands of people in that same
predicament, all of them just as passionate and articulate and
just as deserving of help.
But sitting in the back as Carl Dillinger. Carl is 51 years
of age, from Harrisburg, PA. He is married and is the proud
father of five children, three of them still living at home.
Carl has 28 years of service. He is a third-generation
steelworker at the Bethlehem Steelton plant. The Steelton
plant, by the way, is the last major rail producer in America,
and because of the financial crisis has not been able to
produce the next generation of highspeed rail. So if we want a
highspeed rail system in America, we will probably have to get
it from outside of America.
Norma Gaines is 48 years old. She is from Granite City, IL.
She is an industrial electrician, a wife, a mother and a
grandmother. She has 25 years' seniority. Her husband Gary also
works at Granite City Steel, and he has 29\1/2\ years'
seniority. He takes medication daily since his heart surgery,
and Norma is also on medication that she must take daily. Her
company, National Steel, recently went into Chapter 11. Gary
and Norma would lose everything that they have worked for over
almost 30 years.
Frank Hodgkiss is 53. He has been married for 30 years to
his wife Ruth. He has kids, both in college. He has worked at
Bethlehem Steel for 29 years. Frank lost his job in the mid-
eighties during the downturn in the steel industry, and he went
back to school under a TRA program and received a 2-year degree
in electronic equipment. I would say that the economy then was
a little bit better than now, but even then, the best job that
Frank could find after receiving the degree paid $7 an hour and
had no benefits.
Charlie Olson works for Hibbing Taconite. He is a 55-year-
old maintenance mechanic who has worked in the taconite mines
for 32 years. If Charlie loses his job in the taconite mines,
in that area of the country, for every taconite worker, there
are 3.5 spinoff workers; so when Charlie loses his job,
probably his neighbor, his neighbor, and his neighbor will lose
their jobs. And Charlie has no other industry in his area to
pick up the slack.
Last but certainly not least, Adrian Pinner. Adrian is 45
years old and has 25 years of service. Without legacy cost
legislation for the collapsed steel industry, she will lose her
medical benefits for herself and her family. In addition, due
to her age, she will not be eligible for a pension until age
65. She would have 20 years to wait before she could get a
pension and would have 20 years with no health care benefits.
Her company went into bankruptcy on March 6, being the 32nd
steel company in bankruptcy in the last 18 months.
Senator Mikulski. Thank you, Mr. Gerard, very much for
introducing them.
Mr. Gerard. I feel an obligation to point out that this is
not an issue of simply restoring the viability of the steel
industry, as important as that is; this is also a human tragedy
that is not of our making and not of the industry's making, but
has really been allowed to happen by our Government.
In the last 4 years, as you have heard, it has been
devastating. Thirty-two steel companies have filed for
bankruptcy, nearly 30 percent of U.S. steel capacity. Seventeen
steel companies have shut down. Twenty-one steelmaking plants
are idled. Fifteen are the so-called mini mills--and like you,
Madam Chairperson, I get pretty irritated when the cafe latte
crowd from The Wall Street Journal and The Washington Post
continually do not understand the steel industry or ignore the
basic facts. This is not a problem of simply the Bethlehem
Steels and the National Steels. This is a problem that is going
to cross industry lines, whether it is electric arc furnace so-
called mini mills, whether it has been union or nonunion,
whether it has been integrated or nonintegrated. This problem
has devastated the whole of the industry.
We want to say that we were comforted a little bit when
President Bush stepped forward and announced that he would take
some kind of action between 8 and 30 percent. But as Senator
Clinton pointed out, the 30 percent is for 1 year. After 1
year, it goes to 24 percent, and after one more year, it goes
to 18 percent. And in that process, we have a terrible
disappointment in what was done to the semi-finished or the
slabs, which is directly related to the taconite industry. In
fact, the benchmark year that was used is a benchmark year that
has given virtually no relief on semi-finished and therefore no
relief to the northern part of Michigan and Northern Minnesota
and the taconite industry. For that, we have at least 10,000
people whose jobs are at risk as well as their health care. But
we do have some breathing room.
The shutdowns that I have referred to have already
eliminated health care benefits for 20,000 active employees and
over 100,000 retirees. Those retirees' independence, 85,000 of
which will lose their health care, two of which are in the
group that I introduced, and others were here on the earlier
panel--they will lose their health care at the end of March.
The retiree health crisis in the steel industry has its
origins in the industry's modernization and restructuring in
the 1980's. Between 1980 and 1987, 42 million tons of capacity
in that period of time and over 270,000 steelworker jobs were
eliminated. Much of that capacity reduction was supported and
encouraged by the Government. And as Mr. Miller and others have
said, while we were reducing our capacity, Government policy
was encouraging other nations to increase their capacity.
On average, each company has three retirees for each
active, but some companies like LTV Steel have six retirees for
every active. Another 700,000 active steelworkers and their
dependents rely upon the domestic steel industry for health
care benefits. At the end of 1999, America's steel industry and
retiree health benefit obligations totalled $13 billion. Health
care benefits for 600,000 retired steelworkers' surviving
spouses and dependents annually cost domestic steel producers
an estimated $965 million, or roughly $9 per ton of steel
shipped.
The Steelworkers Union is proud of its record of
negotiating decent pensions and health care coverage for active
and retiree workers. During the early 1990's, our union
negotiated the establishment of a trust fund which you heard
about earlier and mechanisms to begin prefunding retiree health
care obligations. Unfortunately, not enough time passed from
the time we started those negotiations to build large enough
trust funds to pay off those retiree health care obligations.
The benefits provided to our retirees are equivalent and in
some cases more modest than benefits provided to retirees from
other basic manufacturing companies. I want to say that I also
take personal offense as well as institutional offense to the
characterizations of our members as being somehow slackers or
receiving benefits they had not earned or benefits which were
overly lavish. In fact, those benefits, for the purposes of
everyone who will notice, are no more superior than the
benefits at Alcoa--there is a distinguished Government official
who was once an employee of Alcoa--Boeing, General Motors,
Ford, Chrysler, and many other major industrial corporations.
Yet steelworker retirees pay premiums, deductibles and
copayments that range from 25 to 40 percent of the cost of
retiree health care benefits, some of which you heard about in
the earlier panel.
The USWA estimates that the average major medical premium--
I want to make sure that I stress this--the average major
medical premium during the year 2001 was approximately $200 per
month for non-Medicare-eligible couple and $150 for a Medicare-
eligible couple. In some cases, these monthly premiums were as
high as $537 for a non-Medicare-eligible couple and $214 for a
couple eligible for Medicare.
American steel's international competitors do not bear a
similar retiree health cost burden. In one form or another,
foreign producers' retiree health care costs are offset by
their government subsidies. American steelworkers now stand to
be hit twice--I would say they stand to be hit three times--by
the collapse of the steel industry. Three hundred fifty
thousand steelworkers were forced out, many prematurely, into
early retirement during the restructuring of the 1980's and
1990's. First, they lost their jobs before they were ready to
retire. Now, they may lose their health care and a significant
portion of their pensions when they are ready for retirement.
I would argue that there is possibly a third loss. There
will be a loss where people in order to protect their health
will have to sell their homes, or their children will not go to
college, or some other family event will have to be put off.
Because our Government has allowed an unlevel and unfair
trade environment to develop and consumer our industry now for
almost 30 years, the Government now, we argue, has a
responsibility to steelworkers and retirees and to our steel
industry to help craft a solution.
Why is action needed? Retirees under age 65 and older
active employees who have been displaced by plant shutdowns are
not yet covered by Medicare--and you heard from some of them
today. They cannot purchase COBRA continuation coverage because
companies are not obligated to provide COBRA when they no
longer maintain a health care plan for employees actively at
work--and even if they did, most of them could not afford it.
They cannot afford those COBRA premiums, as we heard. They
cannot afford commercially available health insurance coverage.
Many cannot meet insurability requirements, as you heard from
some of the earlier panel members. Imagine trying to go buy
that level of insurance with the level of disability that some
of our members have from 30 hard years in a hard industry.
Why is action needed for retirees over the age of 65?
Because Medicare has significant gaps in its coverage. There
are significant deductibles and copayments, and there is no
coverage for expensive outpatient prescription drugs. And these
workers, quite frankly, were promised a trust.
I would again remind this panel that these corporations
were meeting that obligation until this steel crisis drove 32
of them into bankruptcy. The average retiree receives a monthly
pension of less than $600 to $700 a month. Most surviving
spouses, as you heard from Gertrude, receive benefits under
$200 a month. Most of their husbands were forced into
retirement in the 1970's, 1980's, and early 1990's.
Let me just comment that the President's or the
administration's recent proposal for a Medicare prescription
drug card offering a discount of 10 to 25 percent for retail
drugs will in no way solve our problem, and in fact, many of us
have already negotiated similar discounts through our ability
of having a major carrier and a major purchaser like Bethlehem
Steel.
Low-income drug assistance is limited to people below 150
percent of the Federal poverty level. That is an individual
with an annual income of $12,000 or a couple with a combined
annual income of $15,000. In fact, more than half of Medicare
beneficiaries would not qualify for low-income drug assistance.
We hear that the administration is also considering tax
credits as a device for helping the uninsured. Under this
proposal, a refundable tax credit of $1,000 to $3,000 depending
on family size would be made available to individuals without
employer-provided health insurance. The problem here is that
the tax credits are too small to in any way make health
insurance affordable.
We believe that pensions and health care commitments made
to steelworkers, and made over a period of 30 years, are trusts
that need to be maintained.
Let me close by saying, Madam Chair, that I tremendously
appreciate you taking the initiative and taking the lead to put
this issue front and center. I cannot begin to tell you--and I
sometimes have to fight back tears when I got to these
communities and hold rallies, and I meet with retirees before
or after.
I was recently at an event where one of our retirees got up
and said he was going to lose his health care at the end of the
month, and he was not worried about himself. He is 74 years
old. He said, ``I am not worried about me. I am worried about
my wife. She is halfway through a chemotherapy that I cannot
afford. What am I going to do, and what are you going to do to
help me at the end of the month of March?''
I am not embarrassed to tell you that it was the longest
hour-and-a-half drive home I have ever had in my life. That
could be my dad, or someday, it could be me. We have a higher
obligation, in the richest country on Earth, than to leave
people who have given everything that they can give to this
country, have made this the most modern and efficient steel
industry in the world--and again, the cafe latte crowd can
never seem to get their facts right--this is an industry that
can produce steel at the lowest man-hours per ton, the lowest
emissions per ton, the lowest energy consumption per ton; we
improved productivity by 180 percent, and we are the most
effective industry in the world--but we cannot compete when
everybody else is not playing by the rules and we are the only
ones who are.
We are counting on you, we are counting on the members of
this committee, we are counting on a bipartisan Steel Caucus in
the Senate and the House--we are counting on you to save these
600,000 retirees and their dependents as well as saving the
industry. They deserve no less from their Government after
giving their whole lives to this country and this industry.
Thank you very much.
[The prepared statement of Mr. Gerard may be found in
additional material.]
Senator Mikulski. Thank you very much, Mr. Gerard. The
testimony of both you and Mr. Miller has been stunning--32
companies in bankruptcy through no fault of their own--32
companies. This is a national emergency. I believe you have set
a time line, and you, Mr. Miller, have been very direct about a
time line. The clock is ticking here.
I will hold my questions and turn to my colleague, Senator
Wellstone. Why don't you go first, Senator, and then I will ask
some wrap-up questions.
Senator Wellstone. I appreciate it. I want to thank the
chair for her courtesy. I am supposed to debate an amendment I
am doing with Jim Jeffords, so I am due on the floor.
First of all, for President Gerard, I appreciate your
conclusion, and I would add to the legacy cost issue again the
other issue, which is looking at Northern Minnesota. The people
who are out of work are not 65 yet--they are in their 50's--but
they cannot afford any health care coverage. They are literally
falling between the cracks, and the question is what happens to
them. That is exactly the question that you raise, and I just
cannot believe that we do not live in a country that is good
enough to do something about that.
And I would say to you that maybe ultimately, the way to go
back to legacy cost, which is of such direct interest to both
the union and the industry, it may be that you will have to
pull of the same thing you have done before, and we might have
to have the same kind of grassroots politics and activism from
all around the country again, just like you did it last time.
Before asking questions, I want to also recognize Charlie
Olson and thank him for being here. Between Charlie and Jerry,
I am reminded very clearly what this is about.
President Gerard, I want to go back to a question I asked
Jerry. We are hearing already before the ink is even dry on the
President's decision that already, countries are looking for
more exemptions from slab quotas, and I have in mind particular
Brazil. Don't you think we need to stop this in its tracks, and
if more exemptions go through, won't this heap even more damage
on an already beleaguered taconite industry?
Mr. Gerard. Look, I feel very strongly. Let me just say
that the position that the President articulated through the
tariff remedy is a flashlight at the end of a very dark tunnel.
It is far from what we believe needed to be done. The reason
the union advocated 40 percent over 4 years is because we were
convinced from our dealings with the company and the companies
that that would give us sufficient time to rebuild the capital
base, to modernize the industry, and to do a consolidation.
A quota tariff, or a tariff rate quota--however it is
pronounced--that reduces by 20 percent a year and with regard
to semi-finished, increases by 20 percent a year, to a total of
7 million tons, does not guarantee that the industry will have
the time it needs to rebuild its capital base. And in the semi-
finished area, in particular with the taconite industry, I
believe it puts the whole taconite industry at risk and is
wholly inadequate.
I think we need to continue the fight. We are consulting
with our folks, and we hope to be able to consult with members
of the Senate Finance Committee and Members of the Senate and
members of different companies, and where we need to, we are
going to continue to use U.S. trade law, we are going to
continue to file complaints, we are going to continue to watch.
And if we let Brazil in, to be blunt, it turns a possible
safety net into a sieve--or it turns it into Swiss cheese.
I was promised in a private discussion that there would be
monitoring, that there would be licensing, and that there would
be a limit on exclusions so that the tariff that was put in
would actually be the tariff that was applied. So if we start
having exclusions, pretty soon, everything will be excluded,
and the tariff will be nothing more than a political flag. We
do not intend to let that happen.
Senator Wellstone. Let me ask both of you a quick question
and then a final question for Mr. Miller, and I will do it
quickly.
Maybe you could both spell out, as labor and business, what
you would consider to be the key ingredients of legislation--I
have a bill, others have bills--that you think would be the
most effective response to legacy cost.
Mr. Gerard. I will let Steve answer first so I can add on
to what he misses.
Senator Wellstone. OK. Mr. Miller?
Mr. Miller. Our most pressing need is on the health care
side for our retirees, and it starts with the fact that we have
so many retirees for every active worker. That is where the
problem principally lies.
There are two big issues with medical care. Some observers
say, ``Well, Medicare is out there. Why doesn't that solve the
problem of your retiree health care?'' The two big gaps are
that, first, many of our retirees are those who have put in 30
hard years in the steel mills and have retired and still are
not age 65 and therefore are not Medicare-eligible. Therefore,
we need to consider pulling ahead the eligibility to cover
these people.
Second, what was not contemplated was the explosive growth
in the pharmaceutical cost for retirees; that used to be a
trivial or a small amount, and today it is getting to be a very
large amount, and it is totally outside. So even after you hit
Medicare, you still have the pharmaceutical problem.
Those are the two big gaps that need to be filled in that
we just do not have the financial capability to see how we are
going to do it.
Mr. Gerard. I tend to agree with that, that there are two
slices to the pie. There is the pre-Medicare-eligible, and that
group is extremely, extremely vulnerable because of the things
that you heard from those who were giving evidence. Most of
them could not afford to buy private insurance, and they
certainly could not afford COBRA. The other is that there are
the gaps in the post-Medicare that I outlined.
The opportunity here is that, as I understand it, the OECD,
the steel-producing nations, have a consensus that we have
heard about all over Europe; we just have not heard about it in
America, that they would not pursue WTO complaints if countries
took the opportunity to protect what they call ``the social
costs of consolidation.'' I for one believe that there should
be a consolidation of the steel industry, and it should be
consolidated with an American company. I do not believe that we
should just let this happen willy-nilly through a series of
Chapter 11's and Chapter 7's.
So that any step, I think, should be a targeted program
that would be targeted to the steel industry because of the
urgency of the crisis. I think that there is a model that could
be used--and I do not want to say that this is the model, but
it is one that could be used as a benchmark--this is the Coal
Act. We could take that and redesign something that would
affect the steel industry.
I am led to believe that the tariff remedy in the first
year would bring in about $1.4 billion. There is some money
that could be used as seen money to start a process to do that.
So those are the kinds of things that we want to work on
with anybody and everybody who will work on it. I greatly
appreciated Senator Specter dropping by, because I really
believe, as Senator Mikulski and you have stated, Senator
Wellstone, that for us to succeed, it has to be bipartisan. But
anyone who does not want to step up to the plate can certainly
assume today, going forward, that there will be grassroots
events, and every time one of our members has to sell his home
or cut off his chemo, we are going to have a press conference
in somebody's congressional district.
Senator Wellstone. I thank you. In the 20 seconds
remaining, this is not so much a question, Mr. Miller, but more
of a plea to you. I understand that you have a facility in
Chicago where you process our iron ore into finished steel
products, and my request is please do not replace that iron ore
with the imported slab. And moreover, as the economy gets
better and things go better, I hope that you will even pick up
further on your purchase of iron ore. Again, we have always
been there for the industry, and we want you to be there for
us. I am not going to put the ``yes'' or ``no'' but I think you
know what I am saying to you.
Mr. Miller. Yes. We have a joint venture investment in the
iron ore mines, and we intend to keep them going.
Senator Wellstone. I appreciate that.
Thank you, Madam Chair.
Senator Mikulski. Thank you, Senator Wellstone.
Mr. Gerard. If I could, we have an 18-page slide
presentation that hopefully will be made part of the record
that you could distribute to everyone.
Senator Mikulski. I ask unanimous consent that it be
included in the record, and we will take steps for
distribution.
Mr. Gerard. Thank you.
[Information referred to was not received in time for
press.]
Senator Mikulski. Also, Mr. Miller, you had a document from
the steel industry, and I ask unanimous consent that that be
entered fully in the record. I know you made the three major
points.
Mr. Miller. Yes. Thank you, Madam Chair.
[Document referred to was not received in time for press.]
Senator Mikulski. Let me now turn to my questions. I have
some for you, Mr. Miller, and then for you, Mr. Gerard.
Mr. Miller, you are known as ``a turnaround guy.'' You did
it at Chrysler, and you have done it at other companies, and
you have been very straightforward on where we are at Bethlehem
Steel. Tell me for the record and for the committee what you
think it will take to turn around Bethlehem Steel and what is
the turnaround necessary to happen at the steel industry for
there to be the viability. We know it is legacy and so on, but
what is it specifically?
Mr. Miller. First, in the most general terms, as I have
come here to Bethlehem Steel just recently, 6 months ago, I
bring with me the playbook that I learned under Lee Iaccoca's
tutelage at Chrysler, and most basically, that was to solve a
major industrial crisis, to get business, labor, and Government
working together. And I cannot think of a better symbol of that
than right here this afternoon, with myself, with Leo, and with
you sitting here, trying to solve this problem. So thank you
for your leadership in that effort.
Specifically with respect to the steel industry, we are in
a way, ironically, the victim of all the strides we have taken
to become so productive. It now takes far fewer workers to make
a ton of steel than ever before, but we are left with the
history of when it was a much more labor-intensive activity,
and now we owe it to those people who gave their lives for
steel and for our country to take care of them the way they
were promised, and not to allow those promises to be destroyed
by the unfair imports.
So we have two problems. Half of it has been solved
temporarily with the tariff relief. It gives us some breathing
space to try to address this responsibly. But if we are going
to have an orderly consolidation of this industry, then we need
assistance from Government on legacy.
I would just point out that in other areas of the world--if
you look at Europe, they are now down to three major, giant
steel producers. In Japan, they are coalescing into two major
consortia. In Korea, there is one major producer. The reason
why the industry is structured that way is that there are
economies of scale; it is the economic way of making steel. But
here in this country, we have 50 small, fragmented companies.
Leo has been a giant supporter of trying to bring these
companies together to get economies of scale and provide a more
secure place for his members to work, and the reason we cannot
do it is because you cannot have orderly mergers as long as you
have an unrelieved legacy problem.
We need your help, and we will carry it from there.
Senator Mikulski. Well, let me ask about the help, and then
I am going to turn to Mr. Gerard. We have the temporary
tariffs, and that is what I keep emphasizing. Again, when you
read the stories, they call these tariffs, and with all the
handwriting going on around the world, you would think that we
had slammed the door shut on America and become ``fortress
America'' in terms of imports coming into our country. The
President is very specific--they are temporary, they are time-
limited, and they are already gradually phased out. I think we
need to make that point.
Let us go to the legacy cost, and I am going to use the
term ``big steel,'' meaning both Bethlehem as well as the other
major companies viable for consolidation. Do you have an
estimate of what you think it would cost the Government to do
this bridge--and I am not going to call it a ``bailout''; it is
really a bridge to the future--and would we have to do it every
year?
Mr. Miller. Well, there have been a variety of estimates.
It depends on how many companies the relief would apply to and
so on. But for talking purposes, a long-term number of $10
billion is in the ball park--but that is not the one-year
number, mind you; that is the expense that needs to be borne
over the next several decades or however many years long the
retired work force would continue to live and need this
assistance. It is not something that you have to pay right up
front.
In the case of Bethlehem Steel, our annual retiree health
care bill is about $200 million a year, and if you take that to
the whole industry, we had estimated before that with a strong
tariff remedy, you would have enough revenue coming into the
Treasury for the years that that tariff would be in effect to
entirely take care of the retiree issue of the troubled steel
companies in America. So it would not be a budget-buster.
Senator Mikulski. But you are saying that by collecting the
tariffs, if it went into a fund, it would essentially pay for
what we call the infrastructure or the bridge.
Mr. Miller. Yes. Those tariff dollars start arriving soon.
Next week, I think, is the start date for the tariff program.
Senator Mikulski. So one of the possible areas of
legislation would be to create a pool, rather than the tariff
money going into the general treasury, God knows for what, at
times. It could go into a designated pool, almost like a
compensation pool, for the jobs lost.
I remember when steel was here, your predecessor, Mr. Hank
Barnett along with others and the union, were here at kind of a
forum like this with the Steel Caucus, and they warned about
these fire sale prices that were going on in Asia and in
Russia. Now they are our new allies in fighting terrorism, and
we welcome that, but they really were, to solve their domestic
problem, illegally dumping these products here. So the warnings
were loud and clear by your predecessors.
The $10 million that you talked about as a general
estimate----
Mr. Miller. A long-term number.
Senator Mikulski. [continuing]. A long-term number--what
you are saying, though, is that what you, meaning steel, would
look to from the Government would not be a one-time-only block
grant to go somewhere, but some other, smaller amount.
Mr. Miller. Much smaller.
Senator Mikulski. Do you know what that would be annually
for a period of time?
Mr. Miller. I will get back to you with that number, but we
had originally ball-parked it at about $1 billion a year for
starters, and it is one that diminishes. As the retired work
force who are pre-Medicare age hit Medicare age, the number
begins to go down. If the Government installs a generalized
pharmaceutical program for seniors, which you have said you are
going to fight for, the cost also for taking care of
steelworkers uniquely would similarly go down. So it is a
number that is likely to diminish over time.
We will get you that study.
Senator Mikulski. What I would welcome from the steel
industry would be what it would be and for how long as the
bridge to get people to Medicare. That is what you are talking
about, the bridge to get them to Medicare.
Mr. Miller. Yes. Remember, the bridge to Medicare and we
need the pharmaceutical benefit. That is the other crunching
cost.
Senator Mikulski. And you see, this is my argument. I have
colleagues--if you would just bear with me for a moment--I have
colleagues who say, ``You cannot just do this for steel.'' The
fact is we are not talking about doing it just for steel. When
we are talking about the human, compelling need for a
prescription drug benefit, it is for everyone. It is for the
farmers I spoke about, it is for all retirees because of what
we now know.
It is true that pharmaceutical costs have exploded, and
that is another dynamic, but the fact is it keeps people alive,
it keeps people out of the hospital, and it keeps people on the
job. When you listen to Jeff Mikula and the kinds of problems
he had, he would have been out and taking disability years ago
without the medication that keeps him fit for the job.
So this $1 billion a year does not seem like a very
onerous----
Mr. Miller. We will get you the more precise number, but
the other part I want you to remember is that if we fail, and
if Bethlehem goes into liquidation, like what we have just seen
happen at LTV, a couple of things--one, our retirees and their
pensions will become the direct responsibility of the Pension
Benefit Guaranty Corporation, and to the extent we have this
shortfall in our pension funding, that will become a direct
cost to the taxpayers of America through this pension program.
And second, the notion that our retirees who are unable to keep
up with finding health insurance would not turn themselves over
to State welfare agencies and so on for assistance--you have to
also take that into account.
So the question is not what might be the direct cost of the
program, but what alternatively is going to inevitably be the
cost to the Government anyway, in the absence of this action.
Senator Mikulski. Where people lose everything; yes.
I want to come back now an ask Mr. Gerard to jump in. But
your point is that if you would have to liquidate and therefore
terminate the benefits, the pensions are by and large covered
under Pension Guaranty, but again, that is a taxpayer safety
net--I know you have contributed. But we are going to pay; the
taxpayers are going to pay. And then, essentially, with the
thousands of people you have talked about--again I ask about
Jeff, whether he could find a job or whatever--going to State
agencies--and may will not, because people own a home, they
have some CDs--they would have to go through a spend-down in
which they would have to spend down their life savings and
usually end up with a lien on their home to qualify for this.
This then pushes the family to the brink of bankruptcy because
the company has gone bankrupt. That is not the way we have to
go here. We just cannot go this way.
Mr. Miller. Senator, there is one other thing I would say
to you. When your colleagues ask you how can you contemplate
doing something for steelworkers and not at the same time do
something for every other industry, one thing we have in the
case of steelworkers is a six-to-nothing finding by the
International Trade Commission that we have had injury due to
unfair import competition, and that makes our steelworkers
unique victims. We have a remedy that is providing revenues to
the Treasury, and the combination of those two makes
steelworkers stand out differently and I believe eligible for a
unique consideration.
If it is better done in the context of a more generalized
industries-in-transition solution, I leave that to you; that is
your job as to how best to get about this. But as to whether
steelworkers deserve this, I think it goes without question.
Senator Mikulski. Thank you.
Mr. Gerard. I just want to compliment Steve for that last
comment, because there is every reason that the Nation should
do something for everyone. I actually believe that there ought
to be a single-payer health care system, and I do not believe
that health care should fall on the backs of employers and be
an employer-based system--but that is for another day. We have
made the case, and I would only add one other piece to what
Steve said. We made the case through a Commerce Department
report that has been endorsed by both the previous and current
administrations that documented 30 years of ``market-distorting
trade practices by our trading partners in steel.''
Then we made the case unanimously, one of the few unanimous
decisions to ever come out of the ITC since its creation; and
then, we made the case to the President that there should be
some form of tariff relief, and it is not the tariff relief
that we were hoping to get, but it is a flashlight at the end
of the tunnel. That tariff relief is going to generate revenue
to the general Treasury of America. It would be a tragedy if
that revenue----
Senator Mikulski. I just want to say to my staff that we
need to get the estimate on that revenue.
Mr. Gerard. Yes. We have that, and we would be happy to
give it to you. Our trade lawyers are working on it, and when I
get back to the office, I will put it in the mail to you.
Senator Mikulski. Terrific.
[Information referred to was not received in time for
press.]
Mr. Gerard. The last piece of that is that it would be a
tragedy if that revenue to the general Treasury was not used to
take care, at least in the initial phase, of the victims. This
is literally a victims' fund. This is not a bailout of the
bosses, by the way. That is also for the cafe latte crowd. No
one is asking you to bail out the bosses. We are asking you to
take care of the victims of illegal trade.
Senator Mikulski. That was very well-said. You have heard
me say consistently throughout this hearing that there are
those who talk about these lavish, goldplated benefits. We have
heard, of course, from the people who were here earlier about
those benefits. Do you want to talk about that?
Mr. Gerard. Sure.
Senator Mikulski. In fact, I know you want to talk about
it. I invite you to tell me, Mr. Gerard, as president of the
Steelworkers of America and representing Canadian workers, are
these benefits goldplated?
Mr. Gerard. Absolutely not. To try to put it in
perspective, the reality is that 52 percent of the people who
are currently on retirement were retired involuntarily as a
result of the modernization and the closure. The benefits that
our members have are similar to the benefits that most major
U.S. industries have. They are inferior, let me say, to the
benefits that Alcoa workers have, which we proudly negotiated
as well. Part of that is that it has been extremely difficult
for the last 10 years to make improvements in the benefit
package, because for the last 15 years, companies in the steel
industry have been fighting continuously against import surges
and plant closures and so on, and actually went through a 3-
year period in the last 10 years where they were in some ways
replenishing their capital base.
Senator Mikulski. So that was part of the way you
cooperated with them in terms of what we could call viability.
When they kept saying we need concessions, we need cooperation,
when you really looked at how to--I know that, again, meeting
with the guys from Bethlehem, they were always looking for ways
to be more efficient, kind of tips from the mill--and what you
are saying is there was a kind of foregoing----
Mr. Gerard. One of the things that we have had to wrestle
with in the last 15 years is the industry's inability to
generate sufficient ongoing cash so that when we got to the
bargaining table, we would generally forego wage increases for
benefit protection, and we would forego wage increases to try
to enhance pension plans so that people could retire with some
dignity.
Steve's point is exactly right. Part of the catch-22 in
America is that as you modernize your industry, and you create
an environment where you can produce more steel with fewer
people, and people can exodus with some dignity and some
pension protection, the whole issue of health care falls on the
employer, so as you become more productive, you end up with
more people who retire, and you end up with more obligation for
pensions, which puts more pressure on us to keep our benefits
modest.
That is one of the reasons why Alcoa's benefits are
substantially better than the steel industry's benefits,
because they have not had to deal with that consolidation. They
have gone out and bought up the rest of the industry.
Alcoa has been able to consolidate the rest of the domestic
aluminum industry because they have not had to deal with the
issue of legacy cost.
Senator Mikulski. That is an excellent point.
Mr. Gerard. I am using Alcoa very deliberately.
Senator Mikulski. Yes, I know, I believe because Alcoa's
former president and executive director is now in a very
important position in our Government.
What is the timing? You used the term ``the end of March.''
I am concerned that there might not be the sense of urgency in
the Congress that is really required. I am very concerned about
that.
Mr. Gerard. I think there are two time lines, and clearly,
there is in excess of 100,000 people whose benefits will expire
at the end of the month of March. Many of those are pre-
Medicare-eligible, so they will have zero health care. I feel
for them and I also feel for their communities, because Senator
Wellstone knows that up in the Iron Range, when the LTV mine
closed, those workers are not going to find jobs of equal
value; they will not be able to buy COBRA, they will not be
able to buy private health insurance, and they will be in the
most tragic situation that a person who works all his life
could find himself in. They will literally have to choose
between their health and their future.
If we go to Cleveland, which is in an equally tragic
circumstance--school boards are cutting back, the City of
Cleveland is cutting back its police force, its municipal
workers, the school system is in disarray, the health car
system is being cut back--and when the people there lose their
health care, roughly 40,000 people in that regional area, I do
not know what will happen to the public health care system, the
community hospitals. They may get overloaded, because that is
the only place people will be able to go.
So to Steve's point that unless we find a way to step in
and help those people, society will somehow have to bear the
cost, but it will be at a cost that dismantles our set of
values as a Nation. So the sense of urgency is profound.
Senator Mikulski. It is going to be crushing on
communities. People are going to go into the emergency rooms.
If you are a diabetic, like Ms. Misterka--my mother was a
diabetic--you have got to take your insulin, you have got to
have your medicine. This is lifeline. This is not an option. It
is not an option.
Mr. Miller, what is the time line from your perspective?
Mr. Miller. On the time line, to continue with the sense of
urgency I have talked to you about before, as I said, we would
have to make our decisions and get on with it by the end of
March, and that is what we are doing.
Based on the President's decision on tariffs, which gave us
breathing room but the absence of any clear direction on legacy
cost relief, we have abandoned what we called Plan A, which was
the grand merger with United States Steel and with several
other companies to create a strong, healthy company, which was
Leo's version that I shared, we have said that we cannot wait
for that; we need to get on with something else.
We have studied putting together a number of the bankrupt
companies to see if we could make two plus two equal five;
again, we decided that would not work.
We are now on to what we call Plan C, which is a series of
joint ventures where we will take each of our facilities, find
the strongest, most logical partner that can bring capital and
market access and technology to improve the success of those
enterprise and hope that at the end of the day, we have enough
left over to try to keep up with the needs of our retirees. And
unless you help us, we will fall way short of meeting the needs
of our retirees.
There is one other point I would like to make. We have just
seen at LTV what is the value of a dead, cold steel plant. All
the facilities of LTV, the third-largest integrated steelmaker
in America, were sold to an investor named Wilbur Ross for $80
million. That will barely pay the legal fees of the bankruptcy
process, and it leaves nothing for the former workers of that
facility. And that is an American industrial tragedy, both the
loss of the industrial asset that we had as well as the tragic
impact on the retirees. And I do not know what can be recovered
in that situation.
I have been working night and day to avoid that result
happening at Bethlehem Steel. I want to make sure that our
operating facilities are placed in safe hands before they go
cold to take care of our active workers, and then to do it in a
way that I can reasonably take care of the needs of our
retirees. Whatever it is will fall short of their full
expectations, but anything you can do to help will help us make
America's promise back to them.
Senator Mikulski. Well, let us conclude by talking about
that. Let us talk about our time line along with your time
line. That is pretty dramatic, and I was glad that we had
someone speak today from LTV.
Congress will adjourn for the Easter/Passover break. They
will do that next Friday. When we get to March 31, as Mr.
Gerard mentioned, the end of March, which is Easter Sunday,
Passover season, we will be out. We will be back on April 8,
which means that we are going to be in our States; it is a good
time to talk to members, and I would encourage you all to do
what you have been doing in communication.
Also, Senator Dodd's presence was really most welcome--this
is not only about those of us who are in steel-producing
States. All of America is affected, and we would hope that
members could be talked to.
When we come back, there are some legislative opportunities
or venues. While we work on legislation--and I would say that
over the break, our mutual staffs really need to be coming to
closure on some legislative options; I know they are in the
works. But here are the two options. One, there is the budget,
and we have that venue. The other, there will be issues coming
up related to trade and expanding trade authority and also
trade adjustment assistance, to which of course this would be
germane. I believe all this is going to happen before the end
of April.
I know you have decisions to make and so on, but this is
not something that is going to be put off until the election,
and I believe that is what we need to be ready for. We need to
be able to present a rational approach to this.
I think you have made excellent cases that if we had a
prescription drug benefit and Medicare, it would take an
enormous burden and yet meet our human responsibility, and
parallel our competitors--it would parallel our competitors.
Also, the costs are, in the scheme of the Federal budget,
modest, to be this bridge, and they are time-limited as well.
So I think we can do it, but we have to all work together, and
I think we can do it.
Mr. Gerard. If I could, Madam Chair, just make one modest
point. With aggressive leadership by yourself and others like
you, hopefully, in a bipartisan fashion, there has to be a
principled decision that an American industry and the workers
in that industry are deserving of being saved. And my modest
point is that to take care of 600,000 retirees, dependent
spouses and dependents, is less costly than the retroactive tax
break that was going to be given to General Motors and Enron,
one of which, quite frankly, does not need it, and one of
which, quite frankly, does not deserve it. The workers do.
Senator Mikulski. On that note, the committee is adjourned.
Thank you very much.
[Additional material follows.]
ADDITIONAL MATERIAL
Prepared Statement of Robert S. Miller, Jr.
Thank you, Chairman and members of the Committee. I am pleased to
have the opportunity to address the Committee on the importance of
Congressional help in solving the legacy problem in the steel industry.
Bethlehem Steel is the second largest integrated steel manufacturer in
the United States and has been in business since 1904. Our principal
facilities are located in Sparrows Point, Maryland; Bums Harbor,
Indiana; and Steelton, Conshohocken and Coatesville, Pennsylvania. Our
products include flat rolled products, including plate and tin
products, rails, and line pipe.
The domestic steel industry is suffering under devastating economic
conditions. These conditions are the direct result of the severe injury
caused by the extraordinary volume of disruptive and unfairly traded
imports that have been inundating our shores since the 1970s. The
recent surge of imports that began in late 1997 has forced 32 domestic
steel companies, including Bethlehem, to declare bankruptcy. As
documented by the findings of the U.S. International Trade Commission
and the U.S. Department of
Commerce, this imported steel has resulted in massive and pervasive
injury to the domestic steel industry. This massive flow of foreign
steel is the direct result of excess foreign steelmaking capacity--more
than 250 million metric tons--that has been created and maintained
through market distorting practices, such as closed markets, subsidies,
cartels, and other market protection policies.
In response to overwhelming evidence of the injury done to the
domestic steel industry by imported steel, the ITC recommended, and
last week President Bush implemented under section 201 of the Trade Act
of 1974, safeguard tariffs on most flat carbon steel products. These
tariffs, which range up to 30 percent, will give the domestic steel
industry temporary breathing room to rationalize and restructure its
operations to compete more effectively in response to these
circumstances. We are grateful to the Administration for recognizing
the domestic steel industry as a basic building block of our domestic
economy and critical to our national security. We likewise appreciate
the efforts to bring about this decision made by you, Senator Mikulski,
Senator DeWine Senator Wellstone, and other members of the Senate, as
well as the efforts of members of the House.
The effective implementation and enforcement of the President's
safeguard tariffs is essential to the recovery of the domestic steel
industry, but even this by itself is not enough. Equally necessary is
federal government assistance in solving the ``legacy'' problem, which
we define as benefits for retirees and their dependents. Many of these
retirees lost their jobs as a result of restructuring driven by unfair
trade.
It is recognized that the steel industry must consolidate and
rationalize facilities in order to improve its competitiveness and
regain its global leadership position. Such action would not be new for
Bethlehem or, indeed, the domestic industry as a whole. Bethlehem has a
record of taking action to consolidate and eliminate non-competitive
facilities. Since the early 1980s, significant consolidation and
rationalization has taken place--Bethlehem has sold or closed a number
of operations including: the Bethlehem, Johnstown, and Williamsport,
Pennsylvania plants; most of the Lackawanna, New York plant;
shipbuilding and ship repair businesses; coal and limestone operations;
fasteners; fabricating works and coke ovens. The most recent
consolidation efforts include our merger with Lukens in 1998. As a
result of merging these two companies, our plate mill at Sparrows
Point, Maryland was shut down.
Unfortunately, one of the major and unavoidable consequences of the
efforts of companies such as Bethlehem to respond to changes in the
marketplace is that our ratio of retired to active employees has risen
dramatically, while the relative costs of retiree health and other non-
pension benefits have risen even more dramatically. To date,
consolidation and rationalization have reduced the number of Bethlehem
employees from almost 90,000 people in 1980, to approximately 13,000
today. And Bethlehem has reduced its steelmaking capacity from 22
million tons in the early 1980s to 11 million tons today.
Further consolidation and rationalization will continue to
exacerbate the legacy cost problem. With our significantly reduced
workforce of fewer than 13,000 people, Bethlehem provides health care
coverage for 130,000 retirees, employees and dependents. Of these
130,000, about 95,000 are retiree beneficiaries. This means that, for
each active employee, Bethlehem provides health care coverage for more
than seven retiree beneficiaries. As a point of reference, Medicare has
three active employees for each current beneficiary.
In 2001, Bethlehem's total cash costs for health care and other
insurance amounted to $300 million, and this expense is expected to
grow significantly as a result of the upward trend in prescription drug
prices and usage, as well as general health care cost inflation. The
net present value of Bethlehem's legacy benefits, excluding pensions,
is $3 billion. Another aspect of the legacy problem is pension
obligations, which currently are underfunded by $2 billion. These types
of liabilities constitute the major barrier to necessary consolidation
within the industry.
Even though we have downsized our capacity and modernized many
facilities, these legacy obligations constitute an extraordinary
burden, having a major impact on the ability of integrated producers
such as Bethlehem to compete and, indeed, to survive.
One might ask why the government should feel any responsibility to
intervene on behalf of integrated producers, rather than simply allow
market forces to work their will.
We have submitted for the record a document prepared for us that
provides extensive background on this subject, ``America's Steel Crisis
and the Burden of Legacy Costs.'' In summary, there are three important
reasons for government action.
First, foreign governments, not market forces, and foreign
companies, not U.S. producers, are directly responsible for much of
today's problem. If comparative advantage of companies were the
standard, we would compete very well indeed. American steel producers
are among the most productive in the world, with 3.6 man hours per ton
of steel produced.
Second, the U.S. government has played a significant role in
creating the current economic situation in which Bethlehem and other
domestic integrated steel producers find themselves. We have documented
in our trade cases the nonstop attack by foreign producers seeking
market share in the U.S. by violating our trade laws. However, also of
importance is that our government, over the last decade, has done much
to promote economic growth in Russia, China, Korea and other steel-
exporting countries. It is not for us to question whether the foreign
policy and economic goals of these U.S. policies were wise or whether
they were attained. However, it is crystal clear that many of these
countries decided to focus on steel production as a major export
product--exactly as Japan did in the 1950s. Tbus, whatever ``public
benefits'' were derived for the United States, those ``benefits'' have
come at a very real cost to the domestic steel industry.
In addition, a number of Administrations, beginning with President
Truman's, actively intervened during labor contract bargaining
sessions. Not only did presidents call on the companies to end or avert
strikes, they also pressured the companies to avoid price increases. As
a result, costs for wages and benefits increased, while at the same
time price improvements to cover these added expenses were strongly
discouraged.
Third, the cost of meeting the health care needs of this enormous
and unanticipated number of retirees and dependents is preventing
normal market-driven consolidation in the industry. As a practical
matter, potential buyers cannot purchase a distressed steel company
because the existing retiree obligations that would have to be assumed
could not be serviced while sufficient cash flow is generated to meet
debt and equity interests. The alternative is the bankruptcy process,
which without an active government role in the financing of legacy
costs, will lead to more LTVs--and result in hundreds of thousands of
retirees, widows and other beneficiaries losing health care and other
retirement benefits. While PBGC offers a partial safety net for pension
benefits, there is no comparable safety net for the health care
benefits that would be lost.
The current high ratio of retirees to active workers was not
something Bethlehem or other affected companies could have reasonably
anticipated. As a result of protracted adverse impacts on our financial
condition, Bethlehem cannot develop a satisfactory longterm solution
without federal assistance. Trade relief alone will not be sufficient
to reverse the current situation, since it has been created largely by
foreign governments, foreign companies and federal government policies
over time. Under current circumstances, it is inevitable that there
will be a dramatic, probably involuntary, reduction in domestic steel
production capacity and the concomitant loss of jobs. If the government
does not help, more domestic steel producers will surely be forced into
liquidation. Even if some facilities are eventually re-started, steel
retirees will still lose their health care benefits. If the government
helps with these costs now, before these benefits are lost, much pain
and chaos can be avoided.
There is an additional consideration that is relevant to this
discussion: steel is critical to our national security, and it would
not be in the best interests of our nation to be fully reliant on
imported steel during a crisis. Steel is used not only in the
construction of ships, tanks and other military applications, but is
critical to our infrastructure--highways, seaports, airports and the
delivery of major forms of energy--which also are vital to national
security. Integrated producers, including Bethlehem, provide the
highest quality steel for special applications. In fact, Bethlehem is
the only domestic company with the capability to provide the special
steel plate that was required to repair the USS Cole.
While I am not here today to propose a specific legislative
solution, I believe the industry is committed to working with Congress
to craft an appropriate response that would involve the industry, labor
and government. Bethlehem looks forward to working with you and your
staff in this process. However, if Congress decides to address this
issue, it must act quickly. The options available to Bethlehem and
other domestic steel companies are rapidly diminishing. Without prompt
action, Congress will cease to have any effective opportunity to help
with the resolution of this issue.
To summarize: the recovery of the steel industry is dependent on
the President's steel program. The first element of that program,
temporarily preventing imports from continuing to injure the U.S.
industry, has now been put in place. Two other elements -negotiations
to reduce foreign over-capacity and negotiations to eliminate foreign
market distorting practices--are being addressed. The final element--
assisting with the major burden of legacy costs--has yet to be
addressed, and unless it is addressed, the other parts of the program
will not be adequate. As a result of large-scale restructuring in the
1980s, the domestic integrated industry faces a crippling problem with
health care related legacy costs. Generally, our foreign competition
does not have this problem. Not only have they avoided significant
restructuring, but most of our principal international competitors do
not bear a burden for employee and retiree health costs that is
remotely comparable to that which currently confronts the domestic
steel industry.
This inequity needs to be addressed. The government can and should
assist the industry in dealing with legacy costs. America needs a
viable steel industry. There will be further consolidation in the
domestic industry, and with governmental help this process can be fair,
orderly, reduce the possibility of massive job losses over short
periods of time, and help prevent the destruction of a critical basic
industry.
Prepared Statement of Leo W. Gerard
Madam Chair and distinguished members of the Committee, thank you
for your invitation to appear before you today to discuss the health
care and pension crisis facing several hundred thousand steelworkers
across the nation.
While the United Steelworkers of America was pleased that the
President took a step toward reigning in steel imports by imposing
variable tariffs on various steel products in the recent Section 201
case, the President pointedly chose not to address the matter of the
retirement and health security of steelworkers and our retirees. He
apparently intends to leave this unfinished business in Congress'
hands.
By every measure, the American steel industry is in crisis. As of
today, 32 U.S. steel companies representing nearly 30 percent of U.S.
steelmaking capacity have filed for bankruptcy. Twenty-one steelmaking
plants are idled or shutdown representing the loss of 25 million tons
or 19 percent of this nation's steelmaking capacity.
Some analysts mistakenly believe that minimills (which produce
steel by melting scrap in electric arc furnaces) haven't been hurt by
unfair trade and record low prices, it is noteworthy that fifteen of
these 21 shutdowns are minimills. In fact, shut down steel capacity is
almost evenly divided between integrated steelmakers and minimills.
Steel prices have fallen to the lowest levels in twenty years. The
December, 2001 composite average of steel prices published by
Purchasing Magazine had declined by $140 per ton or 33 percent from the
average between 1994 and 1997. The industry posted a combined operating
loss of $1.3 billion during the first nine months of 2001.
How did this happen?
The USWA warned our policymakers as early as 1997 that the Asian
economic crisis and the collapse of the Russian economy would, if not
dealt with correctly, lead to a flood of imported steel. The delay by
our own government in responding to the crisis made matters
considerably worse. The events of 1997 and 1998 were only the latest in
what the U.S. Department of Commerce has identified as thirty years of
predatory unfair trading practices and government subsidies by many of
our trading partners.
Some today suggest that the American steel industry must be
restructured, as if this had not already happened before. Between 1980
and 1987, the American steel industry underwent a painful
restructuring, eliminating 42 million tons of steelmaking capacity.
Over 270,000 jobs were eliminated. Many workers were forced to take
early retirement based on the promise of a pension and continued health
care benefits. The tax base in steel communities in Pennsylvania, Ohio,
Indiana, West Virginia, Minnesota, and elsewhere shrank as workers went
from earning paychecks to collecting unemployment benefits. Some local
communities have never recovered from the last steel crisis.
Yet at the same time that our American steel industry has been
contracting and downsizing, our foreign competitors have been adding
additional steelmaking capacity. OECD data indicates that foreign steel
producers had excess raw steel production capacity amounting to over
270 million metric tons. That is more than twice the total annual steel
consumption in the United States. Recent multilateral talks in Paris on
reducing global overcapacity have revealed that despite the reductions
in U.S. capacity, our trading partners fully expect the U.S. steel
industry to continue to downsize even further. The Paris talks are
instructive for they illustrate yet again that multilateral
negotiations are no substitute for strong enforcement of our own trade
laws, including Section 201 and our antidumping laws.
The testimony which you have heard today from steelworkers and
retirees from Maryland, Pennsylvania, and Minnesota illustrates the
depth of concern across the nation by our active members and retirees.
They have worked hard and given the best years of their lives to this
industry. Now, they are simply asking that promises made become
promises kept.
At the end of 1999, American steel's retiree health care benefit
obligation totaled an estimated $13 billion. Health care benefits for
600,000 retired steelworkers, surviving spouses, and dependents
annually cost domestic steel producers an estimated $965 million or $9
per ton of steel shipped. Another 700,000 active steelworkers and their
dependents rely upon the domestic steel industry for health care
benefits. The average steel company has approximately 3 retirees for
every active employee--nearly triple the ratio for most other major
basic manufacturing companies. Several steel companies have retiree
health care costs that are substantially higher than the industry
average. Our active members and retirees are concentrated most heavily
in Pennsylvania, Ohio, Indiana, Maryland, Illinois, West Virginia,
Minnesota, and Michigan, but they live all across the nation.
In the U.S. up to now, we have made a public policy choice in favor
of employment-based health insurance coverage rather than guaranteed
national health insurance. This means that when an employer goes
bankrupt or liquidates its operations, absent a social safety net,
workers are at risk of losing their health insurance and access to
health care services. Regrettably, thousands of steelworkers from Acme,
Laclede, Gulf States, CSC, Northwestern Steel and Wire, and various
other steel companies are now facing this terrible prospect.
The USWA is very proud of its record in negotiating decent health
care coverage for both its active workers and its retirees. In 1993,
our union made history when we negotiated pre-funding of retiree health
care in the iron ore industry. Benefits provided to steel industry
retirees are equivalent and, in some cases, more modest, than benefits
provided to retirees from other basic manufacturing companies, such as
Alcoa, Boeing, and General Motors.
These plans typically include cost containment provisions, such as
deductibles, co-payments, pre-certification requirements, coordination
with Medicare, and incentives to utilize managed care. Most of our
retirees pay monthly premiums from 25 to 40 percent of their retiree
health care benefits, plus several hundred dollars a year in
deductibles and copayments. Retiree premiums for major medical coverage
vary by employer due to differences in demographics, regional health
care costs, utilization, and design of the plan. The USWA estimates
that the average major medical premium during 2001 was approximately
$200 per month for a non-Medicare eligible couple and $150 a month for
a Medicare-eligible couple.
American steel's international competitors do not bear a similar
burden. In one form or another, foreign producers' retiree health care
costs are offset by government subsidies.
In Japan, the government provides government-backed insurance
programs. Government subsidies cover some administrative costs and
contributions to Japan's health care programs for the elderly.
In the United Kingdom, the UK's National Health Service is 85 to 95
percent funded from general taxation with the remainder coming from
employer and employee contributions.
In Germany, health care is financed through a combination of
payroll taxes, local, state, and federal taxes, co-payments, and out-
of-pocket expenses, along with private insurance. Insurance funds with
heavy loads of retired members receive government subsidies.
In Russia, de facto government subsidies exist. While Russian steel
companies theoretically pay for workers' health care, the national and
local governments allow companies not to pay their bills--including
taxes and even wages. At the end of 1998, Russian steel companies owed
an estimated $836 million in taxes. According to the Commerce
Department report, the Russian government's ``systematic failure to
force large enterprises to pay amounts to a massive subsidy.''
The U.S. is the only country in the industrial world in which the
health care benefits of retirees are not assumed by government to
facilitate consolidation in one form or another. It is now very clear
that American steelworker retirees stand to be hit twice by the
collapse of the steel industry since a majority of them were forced
into retirement (350,000)--many prematurely--during the massive
restructuring of the steel industry during the late 1970s and the
1980s. First, they lost their jobs before they were ready to retire,
and now they may lose they health care and a significant portion of
their pension now that they are ready to retire. Our own government's
inadequate enforcement of our trade laws is the principal reason that
steelworkers and steelworker retirees' health care benefits are now at
risk.
Because our government has allowed this unlevel and unfair trade
environment to develop and consume our industry, government now has a
responsibility to our steelworkers and retirees and to the steel
industry to help craft a solution to this problem.
Why is action needed?
Retirees under age 65 and older active employees who have been
displaced by plant shutdowns are not yet covered by Medicare.
They cannot purchase COBRA continuation coverage because companies
are not obligated to provide COBRA coverage when they no longer
maintain a health care plan for employees actively at work. Steel
companies which have filed for Chapter 7 bankruptcy (i.e., liquidation)
have already moved to terminate health care plans for their workers and
retirees.
They cannot afford COBRA premiums even when such coverage is
available.
They cannot afford commercially-available health insurance
coverage.
Many cannot meet insurability requirements (and may not have
continuous coverage under HIPAA).
Many have difficulty in finding new jobs that pay similar wages or
benefits.
Why is action needed for retirees age 65 and over?
Because Medicare has significant gaps in its coverage. Medicare
also has significant deductibles and co-payments. There is no coverage
for expensive outpatient prescription drugs. Also, health care
providers often do not accept Medicare reimbursement rates as full
payment, at which point they go after the retiree for full payment.
Medicare Supplemental Insurance (``Medigap'') is available, but it
is costly and has limited prescription drug coverage. The most
comprehensive of the Medigap supplements (Plan J) covers only 50
percent of prescription drug costs and limits drug benefits to $3,000
per year.
The average retiree receives a monthly pension benefit of less than
$600 to $700 per month. Most surviving spouses receive monthly benefits
under $200 per month.
Finally, Medicare HMOs (or as they are sometimes referred to
``Medicare + Choice'') are available only in limited areas of the
nation.
Some who have looked at this problem, particularly with respect to
access to prescription drugs, have said the Bush Administration's
proposed ``Medicare Prescription Drug Card'' might be a possible
solution. The proposed card would provide discounts of 10 to 25 percent
from retail drug prices.
But low income drug assistance is limited to people below 150
percent of the Federal poverty level. That's an individual with an
annual income of $12,000 or a couple with a combined annual income of
$15,000. In fact, more than half of Medicare beneficiaries would not
qualify for Low-Income Drug Assistance. The Low-Income Drug Assistance
proposal does not describe how premiums would be set nor does it
describe the level of out-of-pocket expenses (i.e., deductibles or co-
payments) to be paid by Medicare recipients. Also, states would be
required to assume 10 percent of the cost of the Low-Income Drug
Assistance proposal at a time when nearly every state is facing budget
deficits because of the recession and sharply-rising costs for their
Medicaid programs.
The Bush Administration is also considering tax credits as a device
for helping the uninsured. Under this proposal, a refundable tax credit
of $1,000 to $3,000 (depending on family size) would be made available
to individuals without employer-provided health insurance. The problem
here is that the tax credits are too small to make health insurance
affordable. A ``Family USA'' study found that a healthy 25-year old
woman pays an average of $4,734 per year for coverage under a standard
health plan, compared to the $1,000 tax credit offered.
Until the steep increases in health care costs can be contained,
the real value of any refundable tax credit will diminish year by year.
A recent report from the Centers for Medicare and Medicaid Services,
which is an arm of the Department of Health and Human Services, says
that health care costs are expected to grow at a rate of 7.3 percent
annually between now and 2011. That means that by 2011, Americans will
be spending $9,216 per person on health care, or about double what they
spent in 2000. The nation's health care bill could reach $2.8 trillion,
or 17 percent of the nation's gross domestic product, by 2011.
Clearly, this problem is not going to go away.
Let me state this very clearly. It is the view of the United
Steelworkers of America that the pension and health care commitments
made to our active workers and retirees must be honored. These issues
are every bit as important to us as the recent Section 201
determination on restraining foreign steel imports.
Our active members as well as our retirees look to you for action.
We will work with you and your colleagues in both the House and Senate
continuously until this problem is solved and we will not relent in our
efforts.
[Whereupon, at 4:26 p.m., the committee was adjourned.]