NEW YORK (CNNfn) - In yet another setback for LTV Corp. – the No. 3 U.S. steelmaker currently struggling under bankruptcy protection – its largest customer, General Motors Corp., said it will end business with the supplier at the end of the year, according to the world's largest automaker.|
Separately, LTV said it had approved a tentative agreement between its creditors and the United Steelworkers of America about the status of LTV's health-care plan and other issues, averting for the moment the possibility of a crippling strike.
According to GM (GM: up $0.51 to $62.35, Research, Estimates) spokesman David Barnas, the automaker notified LTV of its decision late last month, saying it is trimming the number of its suppliers. LTV's protracted financial woes the concerns about the reliability of its future deliveries played a role in the decision, Barnas said.
A scene from a GM assembly line. The world's largest automaker confirms it will stop buying steel from troubled LTV Corp. after the end of the year, due partly to concerns about the bankrupt steelmaker's reliability.|
"While we're sympathetic to LTV's situation, our decisions are what's best for GM," Barnas said. "I can't say it's all about the Chapter 11 bankruptcy filing. But all of our sourcing decision are based upon four key metrics. Delivery is one of those four."
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LTV could not be reached for comment on GM's action Monday.
Barnas said that GM will phase out LTV by the end of the year. He said the company had bought about 500,000 tons of steel a year from LTV. That represents about a sixth of U.S. steel purchases and accounts for about 8 percent-to-10 percent of its worldwide steel purchases. Barnas said he had seen estimates that GM accounts for just less than 10 percent of Cleveland-based LTV'S $4.93 billion in annual sales.
LTV filed for Chapter 11 bankruptcy protection at the end of December, citing widening losses in an economic downturn and price competition from cheap imported steel. The company also warned it could be forced to shut down all of its plants and lay off all 18,000 employees.
LTV reaches tentative labor deal
Last month, LTV asked a bankruptcy court to void its labor contract with the United Steelworkers union in an effort to shift some of its health-care costs to its employees and retirees and save more than $250 million a year. The union voted to fight the move, raising the possibility of a strike.
Last Friday, the union and LTV's unsecured creditors reached a tentative deal on a new contract covering 9,000 workers and about 65,000 retirees.
LTV's approval of the agreement – which must be ratified by LTV workers and the bankruptcy court – means LTV will temporarily abandon its efforts to void the work contract.
The agreement allows LTV to cut 1,300 jobs, use its Voluntary Employee's Beneficiary Association (VEBA) trust fund to pay for retirees' health care, and defer pay raises for active workers.
Pension funding, employee profit sharing and equity ownership plans and employee health-care administration will be revamped as part of the deal.
LTV had earlier announced plans to shut its Cleveland plant, affecting about 900 employees, but dropped those plans at the 11th hour after an agreement with the union and creditors. Instead, according to the agreement, the plant will remain on "hot idle" status until Oct. 31.
LTV said the agreement would clear the way for its banks to apply for a $250 million government guaranteed steel loan to support its reorganization.