WCI Steel bankruptcy robs workers’ pensions

Can you imagine the U.S. government swooping in and confiscating a millionaire’s mansion to pay the pensions of retired workers?

Not under capitalism, of course. But a recent New York Times article suggests a government agency may do just that to protect the pension fund of WCI Steel, an Ohio steel maker that’s been in Chapter 11 bankruptcy since 2003.

While the Pension Benefit Guaranty Corporation (PBGC)—the government agency that insures pension plans—wants a role in deciding WCI’s fate, it doesn’t have the steelworkers’ best interests at heart. It’s hard to figure out from media reports how the workers and retirees are faring in the battle to reorganize the company. But it’s worth unraveling the tangled tale.

This is an episode in a bigger story about the widespread campaign of corporations like United Air Lines, Delphi Automotive Systems and Bethlehem Steel to use bankruptcy to steal workers’ pensions.

Since WCI went bankrupt, two capitalist vultures have been circling around the company, maneuvering to get control of it: WCI’s parent company, the Renco Group, and a group of Wall Street bankers.

Ira Rennert, a market speculator who became rich buying up distressed companies, founded the Renco Group. Rennert used WCI as collateral to borrow money from the Wall Street bankers, who became WCI’s primary creditors when the company went bankrupt. Rennert and the bankers have put forth competing plans to reorganize WCI, both of which center around the pension fund. After robbing the pension fund, Renco now claims it can cover the fund’s shortfall.

PBGC says the pension plan is $117 million short of what it needs to pay benefits to about 2,000 workers and retirees. While the bankers initially agreed to fund the pension plan they reversed themselves and instead proposed putting the plan into a shell company—which is simply a way to dump the fund. They hope to leave it at the feet of PBGC. As of Feb. 7, the bankruptcy judge had not ruled whether she would accept the bankers’ plan.

That’s where the PBGC comes in. On Feb. 3, a few days before the bankruptcy judge was to consider the bankers’ reorganization plan, PBGC filed suit to block the plan to be able to go after Renco’s assets to cover the pension shortfall. The Times reported in a Feb. 3 article that these assets include a 29-bedroom ocean front estate Rennert owns in the exclusive Hamptons neighborhood on Long Island, N.Y., valued at $185 million.

The PBGC is no savior though. Even if it gets equity from Rennert’s property the money will go into its coffers rather than to the retirees. PBGC is billions of dollars in debt and will only give retirees a certain percentage of what they are owed. And as more and more companies dump their pensions, PBGC will be saddled with greater liabilities and pay retirees less and less of this percentage.

Disillusioned with Renco, the steelworkers union sided with the Wall Street bankers. That’s a risky move. There is no guarantee that the workers will get their pension money back.

Workers need to take control

The maneuverings of the banks, Renco and PBGC show how crucial it is for workers to take control when the company that employs them goes bankrupt. They must demand to be recognized as the primary creditors and appoint a trustee to run the company and protect their equity.

The workers are the true owners of WCI. It is their sweat and decades of toil in heat, smoke and soot that created the company’s wealth. It’s too late for the workers to file as creditors in WCI’s bankruptcy. But they can organize and establish alliances with the hundreds of thousands of other workers who are fighting to keep their wages, health benefits and pensions.

While corporations like United Airlines, Delta Air Lines and Delphi use the bankruptcy courts to get out of paying their pension obligations, other companies have started doing so directly, without declaring bankruptcy. IBM Corp. announced last month that it plans to freeze its pension fund for its 125,000 workers in 2008 and push them into 401k plans. And Alcoa Inc., the world’s largest aluminum company, said its new salaried employees would not receive traditional pensions.

Corporations originally set up pensions as a way to reduce workers’ paychecks. Pensions are deferred wages. Workers were willing to make the sacrifice and delay getting this pay in order to obtain some security in their older years. Now the brutal hand of capitalism wants to snatch away this hard-earned pay.

Workers everywhere cannot rely on one wing of the capitalist class to soften the blow. Nor, given the Democratic Party’s do-nothing record on this issue, can they rely on the Democrats. The workers must join together and fight to take back what belongs to them