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To resuscitate Bethlehem Steel, the second-largest steelmaker in the United States, Robert “Steve” Miller is relying on the skills he forged during his first turnaround, about two decades ago. “This is much more like the first restructuring I was involved in — Chrysler,” Miller, 60, says of his role at Bethlehem, which filed Chapter 11 in mid-October. He points to the need to juggle relationships with the business community, an often-contentious union and a sometimes plodding government to help turn the Bethlehem, Pa.-based company around. That’s roughly the same balancing act Miller had to strike while orchestrating the landmark Chrysler bailout, which has emerged as one of the marquee financial deals of the 1980s. Miller’s work, which demanded honest, forthcoming negotiations over a long period, is all the more noteworthy when viewed in the context of other headline deals in the so-called Greed Decade: Boesky’s insider trading, Milken’s junk-bond manipulations and the rapacious strong-arming by corporate raiders. The Chrysler bailout is a long way from “Barbarians at the Gate.” ‘GANG OF FORD’ Miller was part of the “Gang of Ford” poached from the big automaker to help revive Chrysler, with Miller heading financial operations and serving as point man in negotiations. Participants recall Miller as hard-working, often logging 14-hour days as he talked with Chrysler’s bankers from around the globe. But Miller also stayed approachable and even had a flair for lightening the mood during the do-or-die negotiations. In Lee Iacocca’s autobiography, the former Chrysler chief recounts a story in which Miller stuns a roomful of somber bankers — and at least one company director — with a fictitious report that the carmaker had filed for bankruptcy, only to point out a moment later that the meeting was taking place on April Fool’s Day. After the bankers regained their breath, Iacocca says the bankers in attendance agreed to the plan Miller had drawn up, clearing the way for the carmaker to stay afloat. “The lesson from Chrysler is that we have a lot to lose if we fail, but a lot to gain if we succeed,” Miller says. It will take a lot of creativity and patience to turn around 100-year-old Bethlehem Steel, which produced steel for the Empire State Building, the Golden Gate Bridge and other icons. In its bankruptcy filing, Bethlehem reported its pension was $2 billion underfunded. Add to that, Bethlehem employs about 13,000 workers. Mass firings have already ripped apart a number of Rust Belt cities. For instance, the population of steel-grown Youngstown, Ohio, has been cut in half since the 1960s, when the mills there were boarded up. The decrease has continued in recent years, with Youngstown posting the largest population decline (14.3 percent) among major Ohio cities from 1990 to 2000, according to the Census Bureau. Such concerns figure into Miller’s turnaround efforts. Restructuring “is not a theoretical financial exercise, but deals with real people,” says Miller, who holds an economics degree and an M.B.A. from Stanford University, plus a law degree from Harvard. Miller grew up in Oregon, working on his family’s timberlands and mills. “Growing up, I spent summers working in the woods. I got to know average working people, how they think and how tough things can be for them.” Miller retained the blue-collar values and empathy, even though he set his course to the white-collar world. STICKING TO YOUR WORD “Steve’s grandfather was a sawmill man — a big guy, with big hands. He made all his deals by shaking people’s hands and then sticking to it. That had to make an impression on his son and grandson. Steve certainly had good role models,” says Norm Wiener, a partner at Miller Nash, a prominent Portland, Ore., law firm that Miller’s father co-founded. (Although he briefly considered being a lawyer like his father, Miller opted for business. “But for what I’ve been doing lately, it’s very important to know how lawyers think,” he says.) Randy Miller, Steve’s brother, who represents the Portland area in the Oregon State Senate, also points to their grandfather and father as guiding influences. Most nights of the week, their father would come home from the office, eat dinner with the family and then head back to the office. Following in that vein, Steve would often stay up until 10:30 or 11 at night doing his homework. “It got to where he was assisting teachers with physics and calculus in high school, subjects I never even took,” Randy says. Randy adds that working with their grandfather in the woods gave Steve “his respect for the sense of team that makes a business thrive … [At that job] people working in the woods were every bit as valued as the four or five people who might have an office job.” Miller’s “humanistic” approach to restructuring comes in sharp contrast to some of the shutter-and-slash figures in the field. For instance, there were reports that Al Dunlap was being considered for the top post at Waste Management, where Miller was interim chief executive. The two restructuring artists met, but Miller was reportedly put off by Chainsaw Al. Instead, Miller hired Maurice Myers, who cut his teeth reviving trucking company Yellow Corp. and America West Airlines. “Steve’s certainly not a chainsaw,” says Myers, who still heads Waste Management and serves on the company’s board with Miller. “He has a relaxed style that calms everyone — employees, creditors and management. But Steve’s also fearless. He’ll basically parachute in anywhere. He’s like one of those firefighters who’ll go right into the center of the inferno.” MR. TURNAROUND After his 13 years at Chrysler, Miller has been shoring up one troubled company after another. He stepped in to run the financially shaky construction firm Morrison Knudsen in 1995, merging that company with Washington Construction Co. the following year. He then moved on to ironing out problems at Waste Management. The nation’s largest trash hauler, which was the product of a rocky mid-1998 merger between Waste Management and USA Waste Services, faced a Securities and Exchange Commission investigation over its accounting. He then stepped in at auto parts maker Federal-Mogul Corp., which was suffering under asbestos-related liabilities. “Miller stood out among many potential executives because of his huge reputation in the turnaround field. When we looked at it, it was like a Zulu chief among a group of pygmies — he stood out that much,” says Benjamin Civiletti, a Bethlehem Steel director and former assistant attorney general who now heads Baltimore law firm Venable Baetjer Howard & Civiletti. “I think it’s unusual that a person has this set of characteristics. Usually, the CEO comes up from the financial channel, which is terrific if you’re raising money or refinancing. Or the CEO comes up from manufacturing and understands that very well, but isn’t comfortable on Wall Street or with other CEOs. We’re lucky with Steve because he’s extremely capable in both areas.” For his current assignment, Miller will certainly need all his skills as he takes on the difficulties piled up against Bethlehem Steel, which filed for bankruptcy Oct. 15. Bethlehem joins two dozen other domestic steel companies in filing for bankruptcy protection in the past two years, as steel prices have sunk to 30-year lows because of overproduction and cheap imports. Analysts caution that turning around Bethlehem won’t be easy. THE ROAD TO BETHLEHEM “Bethlehem is a very old-line company, running virtually the same assets the same way they were in the 1950s. It has a very bureaucratic culture, both in terms of how decisions are made and in general overhead,” says Lloyd O’Carroll, a steel analyst at BB&T Capital Markets. In a significant move in December, Bethlehem Steel announced the retirement of four executives — including Duane Dunham, Miller’s predecessor — who, collectively, had spent more than a century with the company. Miller is only the second person from outside the steel industry to lead the company. Clearly, the woes of Bethlehem Steel extend throughout the industry. Consider that earnings per share growth for the iron and steel industry over the past five years ranks 98th among 102 industry sectors surveyed by Crossroads, which advises distressed companies. “This is a somewhat unique situation because there are huge problems for the whole industry, as opposed to company-specific [problems] that I’ve looked at in the past,” Miller says. And the problems aren’t new. While Miller was negotiating to save Chrysler, the steel industry was suffering through a vicious downturn. Bethlehem Steel lost $1.5 billion in 1982 alone and cut its work force in half from 1982 to 1987. “There’s just too much steelmaking capacity,” says O’Carroll. “Add to that, the U.S. is the highest cost producer, on average.” World Steel Dynamics estimates it costs U.S. integrated steel producers more than $300 per million metric tons, compared to less than $250 in China and less than $200 in South America. There is also the negative effect of the strong U.S. dollar. “It’s not a simple matter of a reorganization. There’s a confluence of three or four factors that have to occur for Bethlehem Steel to be part of the future steel industry,” says Civiletti, pointing to the need for some form of steel industry consolidation in the United States. That trend has already started to play out around the globe. In February, French steelmaker Usinor said it will buy Spanish rival Aceralia Corporaci�n Sider�rgica and Luxembourg’s Arbed. The combined company, known as Arcelor, will be the world’s largest steel company. And in April, a pair of Japanese steel producers (NKK and Kawasaki Steel) said they will merge, creating the fourth-largest global producer. Despite the consolidation, the steel industry remains highly fragmented. The giant Arcelor, for instance, will account for just 4.7 percent of the world’s production, while United States Steel Corp., the largest domestic maker, accounts for just 1.7 percent. The 30 largest steel companies around the globe provide less than half the steel, according to Crossroads. IS CONSOLIDATION HEALTHY? In the United States, however, consolidation talks have moved off the front pages since U.S. Steel and Bethlehem Steel first floated the idea in early December. Other domestic steelmakers are interested in joining the consolidation, if it takes place. Characteristically, Miller is a point man in the effort. But analysts caution there are several difficulties in any combination of domestic steelmakers, such as the poor financial health of the industry, heavily unionized labor force and so-called “legacy costs.” Expenses such as healthcare coverage for ex-employees and their families have scared off suitors, who don’t want to be burdened with payments for people who don’t currently provide anything to the company. Bethlehem Steel, for instance, has about 13,000 current employees, but provides coverage for about 130,000 people. “It’s a crushing burden,” Miller acknowledges. And it’s one that is not easily removed, as the United Steelworkers of America will not easily give up retiree benefits. “There are major barriers [to consolidation]. That doesn’t mean it’s impossible, but it’s certainly going to be difficult,” O’Carroll says. “Also, it’ll have to pass muster with antitrust officials and the WTO — and that’ll be difficult.” The global trade body and other countries are almost certain to balk if the United States erects tariffs or bails out domestic steel companies on their healthcare costs. It’s almost like Miller is back at Chrysler, trying to breathe life into a moribund company while assuaging union concerns and wringing concessions from the government. Maybe his career has come full circle, but then again, there are no guarantees of success this time around. Copyright (c)2002 TDD, LLC. All rights reserved.

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