Four days before, on July 17, 1986, LTV had filed for Chapter 11 protection in New York City. At the time, it was the largest bankruptcy filing in the United States. Even so, it was overshadowed by the message Carol McMahon got in her mailbox that morning. The company maintained it was not "permitted" to cover the benefits under the bankruptcy code. More than 65,000 former employees would be affected.
"People were being sent out of the hospital because they didn't have insurance," says McMahon.
Outraged, LTV retirees like Jim McMahon gathered for demonstrations at the company's facilities in Pennsylvania, Ohio, and Indiana. At LTV's most profitable mill, the Indiana Harbor Works in East Chicago, Indiana, the United Steelworkers Union went on strike. Within days, LTV began to backtrack. By mid-August, the benefits were reinstated.
Fifteen years after that debacle, LTV seems to have learned its lesson. When the company again filed for bankruptcy protection on December 29, it was quick to announce that retiree benefits would not be halted. "We obviously think . . . that it is absolutely critical for LTV going forward that it has the loyalty and support of its workforce," attorney Richard Cieri told Judge William T. Bodoh at an initial hearing in U.S. Bankruptcy Court in Youngstown.
Despite assurances, many LTV retirees still worry about the future of their health and pension benefits. Not without reason. While the LTV of 1986 was a vastly different company from what it is today, one thing hasn't changed: The huge liability of retiree benefits remains among the most vexing obstacles in the company's struggle for survival.
"We are aware of our responsibility to our retirees and employees under these programs, but we simply do not have the cash to support them," said Chairman and CEO William H. Bricker, when he announced the bankruptcy filing.
Indeed, while LTV's pension funds are in far better shape than they were 15 years ago, the company estimates there are 100,000 people -- 70,000 retirees and their dependents -- who count on it for health-care benefits. The annual tab: $125 million.
"The pension is less of a concern than it was," says Gerald Dickey, an LTV retiree who now works at United Steelworkers headquarters in Pittsburgh. "It's not the same concern it was in 1986, but the health benefits . . . are a major, major concern."
Echoes John Donovan, who toiled at LTV for 36 years before retiring 11 years ago: "The health benefits, we're all watching. If they shift the cost onto the retiree, it could be devastating."
Some of that fear has been mitigated by legal changes that came in response to LTV's first foray into Chapter 11. In 1987, the federal bankruptcy code was amended to bar companies from unilaterally terminating medical and life insurance benefits. Under current law, benefits cannot be modified without a court hearing and approval by a bankruptcy judge.
Even that provision, however, has given some retirees pause. Bankruptcy judge Bodoh has been criticized for favoring business interests at the expense of workers.
The charge stems from the 1990 bankruptcy of General Fireproofing Co., a Youngstown firm that made metal office furniture. For years the company had been operating on borrowed money and had virtually no assets without liens. After it filed for bankruptcy, it abruptly stopped paying retiree health benefits. When Bodoh allowed the business to borrow money to stay open rather than pay for retiree health insurance, critics charged he had ignored the law. U.S. Senator Howard Metzenbaum wrote him a letter saying the judge was making a "mockery" out of the bankruptcy code.
"Any retiree should keep his or her hand on their wallet when they walk into Judge Bodoh's courtroom," says Staughton Lynd, a Niles attorney who worked on the GF case.
Bodoh, however, says there was simply no money to pay for the benefits. Eventually, all retirees were paid for medical claims incurred after GF terminated coverage, though it took several years in some cases. "Frankly, it wasn't until the debtor was able to sell assets and get money into the case that we were able to pay retiree medical benefits," he says.
Even with laws to protect retirees, some former workers are still wary of counting on LTV, largely because of the company's behavior during its first bankruptcy.
Five months after it was pushed to reinstate health-care benefits, LTV tried to dump its pension plans on the federal government. The pensions, which had unfunded liabilities in excess of $2 billion, were among the major factors for filing bankruptcy, the company said. As a result, it terminated the plans and turned them over to the Pension Benefit Guarantee Corporation (PBGC), a quasi-governmental agency that is the insurer of last resort for retirement plans.
But because the PBGC does not cover supplemental benefits like early retirement bonuses -- which LTV handed out so that it could trim its workforce and shut down outmoded facilities -- thousands of retirees saw their pensions reduced by several hundred dollars each month.
The ensuing legal battle landed before the U.S. Supreme Court, which forced LTV to resume three of its four pension plans. When it emerged from its first bankruptcy in 1993, the company began funding the plans again. In 1997, LTV announced that the plans had become fully funded. Eventually, affected retirees recouped some of the money they lost when the PBGC controlled the plans.
"I just prayed every night the retirees would get what they deserved, and they did," says Carol McMahon, who spent years writing letters, collecting signatures, and haranguing members of Congress so that people like her husband could be assured the benefits they were promised.
But now she worries that everything is in jeopardy again, and she's in no mood to fight this time. "It's taken a toll on my health," she says. "That's why I just can't go through a full-blown thing again. I just can't do it. It just beat me down too bad."
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