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Bethlehem buyer eyeing Delphi Restructured steelmaker cut jobs, retiree benefits

Wilbur Ross, the billionaire investor who bought Bethlehem Steel's bankrupt operations in 2003, says he may be interested in buying Delphi Corp., raising the possibility of a Bethlehem-style restructuring of the auto components maker.

The Bethlehem sale kept steel plants operating -- including one in Hamburg -- while slashing jobs and cutting payments to retirees.

That pattern could be repeated at Delphi, which employs 4,000 people at its plant in Niagara County and pays retirement benefits to many other area residents.

"I think [Ross] will be a big concern for employees," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. "Who would you rather deal with? The leadership you know or the financial guy you don't know?"

Delphi has signaled that it will file for bankruptcy by Oct. 17, when bankruptcy rules tighten, unless talks with its unions and its chief customer, General Motors, yield substantial cost reductions. The company is seeking lower wages and health care costs from the United Auto Workers and permission to close plants.

Ross' International Steel Group acquired Bethlehem's assets in a $1.9 billion deal with then-Bethlehem CEO Robert S. Miller, the same bankruptcy specialist who now heads Delphi Corp.

In recent interviews, Ross has said he would be interested in buying Delphi if it can "resolve its relationship" with unions and GM. A spokesman for Delphi, which operates the radiator plant in Lockport, declined to comment.

In the event of bankruptcy, the $4.5 billion in capital that Ross says he has -- the amount paid for International Steel Group by buyer Mittal Steel last year -- could be used to buy out obligations to workers and loosen restrictions on closing plants.

At Bethlehem Steel, "I'm glad [Ross] came around, but I certainly wish there was someone better," said William Pienta, District 4 director of the United Steelworkers. The takeover package preserved some operations but left retirees and the federal pension agency stuck for billions in corporate obligations.

"What they [Ross and Miller] are doing is using the system to make themselves a good buck," he said. On the other hand, "no one else was willing to step up" to invest in Bethlehem and retrieve its remaining plants from bankruptcy.

However, the reappearance of Bethlehem's restructuring duo on Delphi's stage raises pressure on unions to accept a deal that will steer the company clear of bankruptcy, Cole said.

UAW officials were unavailable to comment, maintaining their silence during the negotiations with Delphi and GM.

Bethlehem's former galvanized steel mill in Hamburg now employs 203 steelworkers, down from 350 before the bankruptcy, Pienta said, and workers' income depends on profit-sharing to make up for reduced wages.

Retirees saw their health care benefits cut and their pensions capped at a federal limit after the plan was declared insolvent and handed over to the Pension Benefit Guaranty Corp.

The payment cap for pensions terminating this year is $3,800 a month, less for workers under 65, according to the pension insurance agency. Companies can terminate their pension, transferring its obligations to the agency, if a bankruptcy court agrees that pension costs will sink the company's operations.

The pension agency is funded by insurance premiums on employers, but a spate of bankruptcies has made a taxpayer bailout seem likely in order for it to continue insuring U.S. pensions.

GM, which spun off Delphi in 1999, would also be on the hook for some of its pension and retiree health care obligations in a Delphi bankruptcy.

Cole said he thinks the three-way talks will yield fruit before Oct. 17 to avert a bankruptcy filing. "Once that happens," he said, "you really let the tigers loose in the game."

e-mail: fwilliams@buffnews.com

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