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Geneva Steel Bankrupt Again
VINEYARD, UTAH -- For the second time in just three years Geneva
Steel, one of the largest employers in heavily-Mormon Utah County,
has sought protection under chapter 11 of the US Bankruptcy laws. The
steel producer filed in response to its secured creditors, who
required the filing as a condition to further financing of the
company. The current agreement with the secured lenders gives the
company access to cash through May 1, 2002.
Geneva earlier filed for bankruptcy protection in February 1999, and
has had a rocky financial record for many years. It emerged from the
February 1999 bankruptcy just one year ago. The company generally
blames its troubles on 'dumping' of steel into the U.S. market by
foreign producers. The current filing was exacerbated by the economic
slowdown in the U.S. since this past summer. The slowdown has
decreased demand for the company's products and increased competition
among domestic steel producers.
The company laid off 950 employees last November, and on Thursday
shut down its coke-making operation permanently, choosing to purchase
coke to fire its blast furnaces instead. That move meant layoffs for
36 employees immediately.
At least some of Geneva's hopes for financial recovery are pinned to
changes in government policy. Local 2701 of the United Steelworkers
of America spokesman Kelly Hansen says the 'dumping' started some
time ago, "Since 1997 at least, the market has been flooded with
cheap, imported steel and domestic steel makers like Geneva have
really suffered," he said. The Bush Administration is currently
considering whether or not to impose tariffs and quotas on imported
steel in response to recommendations of the International Trade
Commission, and has until March 4th to make its decision.
But Geneva's gain may be a loss elsewhere in the country. A study by
the Consuming Industries Trade Action Coalition indicates that the
proposed tariffs and quotas would cost consumers between $1.9 billion
and $4 billion a year and cost 74,500 jobs nationwide because it
would raise the cost of steel to the firms that purchase it in the
U.S.
But Geneva also hopes to recover based on an improving market for
steel. It expects the market to recover in 2002 and points to price
increases by several domestic steel producers as evidence. Geneva
Chairman and LDS Church member Joseph Cannon said, "We are continuing
to pursue alternatives for securing the future of the Geneva mill.
This filing gives us the ability to continue those efforts with the
cooperation of our secured lenders."
Sources:
Geneva Steel LLC Commences Chapter 11 Bankruptcy Proceeding
PRNewswire 25Jan02 B4
Geneva to Stop Coke-Making Operations
Salt Lake Tribune 25Jan02 B4
By Bob Mims and Steven Oberbeck: Salt Lake Tribune
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