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'We're moving on'

By Thomas Gnau

Days after losing the fight to buy the assets of bankrupt National Steel, AK Steel Corp. Chairman and Chief Executive Richard Wardrop summed up his company’s position in three words Friday: “We’re moving on.”

Wardrop on Friday offered his first widely heard public comments, outside of written statements, on AK’s failed attempt to buy the assets of bankrupt National.

“The National deal was never ‘do or die’ for AK,” Wardrop said in a conference call with industry analysts.

He was referring to the assessment of one of those analysts, J.P. Morgan’s Michael Gambardella.

Middletown-based AK offered $1.125 billion for National. But a U.S. bankruptcy court in Chicago this week approved U.S. Steel’s purchase of National’s assets for $850 million cash and the assumption of $200 million in National’s debt.

U.S. Steel reached an agreement with the union representing 8,000 National workers, the United Steelworkers of America; AK did not. But Wardrop rejected the notion that AK’s troubled relationship with the USWA was decisive in failing to win National.

“From our perspective, that was all a lot of smoke screen,” Wardrop said.

He suggested AK approached negotiations in its own way, quite different from U.S. Steel’s approach.

“Our bid was always predicated on a healthy dose of cost savings,” he said.

On U.S. Steel’s tentative pact with the USWA, Wardrop expressed skepticism, saying, “We could not make economic sense of this kind of agreement.”

At another point, Wardrop added: “We have never been a pattern bargainer. We have always right-sized as we saw fit.”

When an analyst from Prudential Securities queried Wardrop on how AK would have used National’s assets, Wardrop referred to what company leaders have presented as their time-tested approach — running “the daylights” out of facilities, but only where they feel that makes sense.

“We would not be running all those facilities wide open, I would tell you that,” Wardrop said. “And that was part of the problem.”

Whether U.S. Steel can achieve the cost “synergies” its leaders say it can in two years after obtaining National’s assets remains to be seen, Wardrop added. He questioned whether U.S. Steel will be able to cut loose facilities or bring in contractors if the company needs.

“The proof of the pudding will be in the tasting,” Wardrop said.

U.S. Steel spokesman John Armstrong said the contract allows his company to engineer a 20 percent increase in productivity and puts in place a “world-competitive cost structure.”

“That makes economic sense,” he said.

On the question of closing facilities, Armstrong said the company bought them to operate. He declined to respond to Wardrop at length.

Wardrop also seemed to hint, without elaborating, that more acquisition attempts may be in the offing for AK.

“There is no question that growth opportunities exist for AK Steel yet,” he said.

He did not say whether AK will challenge U.S. Steel’s acquisition of National’s assets in court, but AK Vice President of Public Affairs Alan McCoy, asked about that question later Friday, referred to Wardrop’s own words, saying the company is “moving on.”

Armstrong said he has seen no sign that AK will challenge the purchase.

published 04/26/03

 

   


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