To me it looks as if Big Steel got employees to take lower wages by promising future benefits -- which it now can't deliver.
It resembles the Dot.Com strategy of getting workers to take stock options in lieu of cash pay.
So stock options isn't a new financial invention to have workers supply working capital -- it just went bust quicker in the Dot.coms. And, sadly, it is better for workers if the thing collapses quickly. Better to find out after two or three or five years that you've been screwed, rather than work all your life before finding out.
I'll paste below a small fraction of the long story from today's (4/25) Wall St. Journal
Gene
<snip>'Legacy' Costs Drive Big Changes In Steel, and Retirees Lose OutBy ROBERT GUY MATTHEWS Staff Reporter of THE WALL STREET JOURNAL
U.S. steelmakers face an estimated $10 billion Bethlehem Steel Corp. in costs for the health care, life insurance (BS) and pensions they promised in the past to PRICE 0.39 retirees, who now far outnumber active CHANGE 0.01 steelworkers. These expenses, known as legacy U.S. dollars1:32 p.m. costs, make it harder to compete with imports and are a key reason many companies can't earn a profit. In the past four years, 31 have filed for bankruptcy, either to liquidate or United States Steel reorganize. The liquidating ones have left Corp. (X) 125,000 retirees and dependents without the PRICE 17.90 benefits they had been promised.
<snip>
Costs for retiree benefits, promised in successive labor contracts through the years, exist to some extent at all old-line U.S. manufacturers and industries with unionized work forces, such as coal, railroads and autos. But steel's situation is graver and more complex. The seeds were sown a half-century ago. The industry agreed in 1949 to labor contracts that tempered the wage boosts the union wanted by providing it with retiree benefits, such as hospital coverage and life insurance. The steelmakers saved cash by agreeing to the benefits, and the union won its members some old-age security. But steel strikes were endemic, and President Eisenhower ended one particularly severe one in 1952 by brokering a settlement. One result: better retiree benefits. Seven years later, Vice President Nixon forged a settlement to another strike, and again the result was a boost in retiree benefits for steelworkers, as well as in their pay, by then the highest of all U.S. manufacturing industries. To cover the costs, American steelmakers raised prices, which they could get away with because of their global dominance at the time. But rising U.S. labor costs changed the competitive landscape. In 1955, a ton of U.S.-made steel contained $2.72 of labor cost, compared with 43 cents in Japan. By the mid-1970s, it was $9.08 of labor in a ton of American steel and just $4.19 in Japan. The cost issue spurred both imports and the rise of new production in low-cost developing nations. Unable to match foreigners' costs, American steelmakers began closing plants and dismissing thousands of workers. The more they closed, the more the ratio of active workers to retirees became skewed. At U.S. Steel, for every active worker, there now are six retirees and retirees' dependents. At Bethlehem, there are 10 retirees and their dependents for every active worker. Compounding this, strapped steelmakers began to settle labor-contract talks by offering less in the way of wages and more boosts in retiree benefits. The contracts obliged companies to set aside funds to pay these obligations. Many said they couldn't afford to.
