YOUNGSTOWN LTV's plan to pay millions to execs comes under fire
LTV said it must pay crucial employees or they will leave the company in its final months.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- A congressman's lawyer and creditors are questioning LTV Corp.'s plan to pay millions of dollars to about 200 employees during its final months of existence.
"They are asking for $10 million in golden parachutes while the coke plant in Warren is going down the tubes," Martin Gelfand, lawyer for U.S. Rep. Dennis Kucinich, a Cleveland Democrat, told Judge William Bodoh of U.S. Bankruptcy Court in Youngstown.
LTV officials told the judge Tuesday that the payments are necessary to keep key employees, who are working to sell the company's assets so the most money possible can be gained for creditors.
Without the promise of payments, these employees are likely to leave for other jobs because they know there is no future at LTV, said Heather Lennox, an LTV lawyer.
Amounts requested: Judge Bodoh is considering this request for payments in September:
* $1.7 million to the five top executives. They each would receive a bonus equal to one year's salary.
* $2.3 million to 19 other executives. They would receive between 55 percent and 100 percent of one year's salary.
* $3.2 million to 184 employees considered to be crucial or have skills that make them likely to leave the company. They also would receive between 20 percent and 50 percent of a year's pay.
Those payments total $7.2 million, but the plan has an additional $2.7 million if LTV is successful in selling its plants and paying certain amounts to its lenders.
Gelfand asked Judge Bodoh to take into consideration the effect that LTV plant closings is having on communities. LTV any day now is to turn off the furnaces at the Warren plant, which will render them inoperable in the future.
Gelfand questioned why LTV wasn't paying $1.5 million to idle the plant for the rest of this month. LTV is idling steel mills in Indiana and Cleveland until Feb. 28.
Other objections: The committees representing both unsecured creditors and note holders also objected to the bonus plan. Lawyers said they understand the need for some financial incentives, but they think too many people are included and the five top executives are to receive too much.
Joel Walker, lawyer for LTV lender JP Morgan Chase, said the committees are trying to micromanage the company. He said the company presented testimony from an executive and a consultant that showed it used reasonable business judgment in setting up the plan.
Brent Longnecker, executive vice president of Resources Connection, testified that the bonus amounts are in line with what other companies in bankruptcy court have paid. His company worked with LTV on the plan.
Frank Filipovitz, general manager of human resources for LTV, testified that employees in the plan are talented enough that they are likely to leave LTV if there are no incentives to stay.
The company has canceled severance plans, reduced vacations, restricted health insurance options and eliminated a matching contribution for its 401(k) savings plan, he said.
Poor job market: William Calfee, executive vice president at Cleveland Cliffs in Cleveland, testified for the unsecured creditors, however, that the job market is poor now. Many workers in the plan would just be happy to have a paycheck even if the company has no future, he said.
This plan would be in addition to an earlier incentive plan, which is to pay about $900,000 to company officials in June.
LTV Steel, the steel-making division of LTV Corp., has less than 600 of its 7,500 employees on the job. LTV is liquidating the company and trying to sell its plants.