Esmark: Time To ‘Right-Size’ Wheeling-Pitt

CEO James Bouchard says it's time to work with the United Steelworkers to make Wheeling-Pitt a profitable, productive part of Esmark.

WHEELING, W.Va. (AP) — With a long-anticipated merger now behind him, Esmark Inc. CEO James Bouchard says it's time to work with the United Steelworkers to ''right-size'' the former Wheeling Pittsburgh Steel and make it a profitable, productive part of the larger company.
At a nine-minute shareholder meeting in Pittsburgh on Tuesday, Wheeling-Pitt officially merged with Illinois-based steel distributor Esmark, whose new shares began trading Wednesday.
Stocks closed down less than 1 percent at $19.24 after opening at $19.40 on the Nasdaq Stock Market and trading as high as $19.58.
The merger was the culmination of a yearlong effort by Bouchard and brother Craig to add a steel producer to their distribution network, which serves 2,000 customers in the Midwest. Esmark had seized control of Wheeling-Pitt in a proxy fight last fall.
Twice-bankrupt Wheeling-Pitt has struggled financially for years and was mired in $525 million in debt — a figure the Bouchards say will now be reduced to $275 million by year's end. The newly combined company has a debt-equity ratio of 60 percent equity and 40 percent debt, and $167 million in liquidity.
''The most urgent need is working with the United Steelworkers to right-size this operation, to accentuate its capabilities and run a very successful company long term,'' James Bouchard said. ''Those are discussions that are going on at the international level and at the local level, and it's really going to determine the future of the company.''
Some industry analysts have long criticized Wheeling-Pitt for having a bloated work force and an expensive cost structure.
Bouchard has previously said the company may relocate a bridge-decking facility in Sharon, Pa., that operates in leased space at the former Wheatland Tube Co. Employees would be given the opportunity to transfer.
However, he declined Wednesday to elaborate on talks with the USW, characterizing initial conversations as ''productive.''
''We're reviewing strategic options for all of our assets,'' he said. ''That's an ongoing thing. We are in conversations with them on these activities. We have a plan — and a well laid-out plan — to get this company profitable.''
Ken Aspenlieter, president of USW Local 1190 in Steubenville, Ohio, said he's still waiting to see that plan. The current contract expires Sept. 1, 2008, he said, so negotiations will likely begin in earnest early next year.
''I really can't comment on anything until I see what their business plan actually is,'' Aspenlieter said.
Analyst Michael Locker, president of New York-based Locker Associates Inc., said many steel industry watchers are waiting to see what kind of business model Esmark intends to use. Wheeling-Pitt, he noted, was not successful even in a strong steel market.
''They lost their shirt,'' he said. ''There is no other steel mill in North America that has that bad a performance.''
Bouchard has said the company would spend $125 million on a new cold mill and galvanizing complex at the Steubenville plant, and that changes are also planned for the operations in Martins Ferry, Ohio, and Beech Bottom.
''It's difficult when the facilities are dotted all over, up and down the Ohio River,'' he said. ''It's a tough configuration for transportation, logistics, for movement for the steel, which affects the quality issues.''
The streamlining ''will start in the new year and move rapidly,'' Bouchard said. ''At the end of the day, I promise you, we're going to have a company that's profitable, and it's going to survive the long term.''
The headquarters of the newly combined company will remain in Wheeling, while about 100 finance and human resources employees will work out of new offices in Sewickley, Pa., starting next spring.
Mill operations will continue to operate in Steubenville, and the steel services subsidiary will remain in Chicago.
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