(UPDATED) RG Steel, the embattled owner of the Sparrows Point and several Midwest steel mills, has sent out WARN notices to employees in a further sign of potential large-scale layoffs and/or temporary closure of its steel operations.

Barring a last-minute reprieve by RG’s bank lenders – June 4 is the current date when operations at RG Steel are expected to close.

Several well-informed employees have confirmed this date to The Brew, which is subject to change if the company gets a cash infusion, as happened last January when Cerberus Capital Management stepped in with $130 million.

Already a small number of layoffs were put in place at the Sparrows Point cold mill this week.

Earlier today, RG Steel confirmed a report in the TimesLeader news website in Ohio that Worker Adjustment and Retraining Notification (WARN) letters have been included in paychecks mailed to employees.

Such letters do not necessarily mean that there will be massive layoffs or plant shutdowns at Sparrows Point. But they are a warning that such an occurrence is a real possibility. The notice is required by federal law 60 days before layoffs take place.

Lenders Don’t Want to Extend Credit

In a statement released this morning, the company said, in effect, that its lenders were pulling the plug on its credit line and it didn’t have time to issue the WARN notice within the 60-day time frame.

The company hopes to sell some or all of its assets, but whether that can be accomplished in the current environment is questionable.

Here is the company’s media statement:

“RG Steel has issued the WARN Notices in order to insure good-faith compliance with the law and to provide advance notice to our employees of potential layoffs. Since there is continued uncertainty regarding [the] outcome of discussions with our lenders as to the required level of funding to support the working capital necessary to sustain business operations, we felt it prudent to issue the WARN Notices at this time.”

The notices cover the 1,800 unionized workers at Sparrows Point and 1,200 workers at Warren, Ohio.

About 250 salaried employees at Sparrows Point are also being issued WARN letters.

More than 1,000 RG Steel employees will remain on long-term layoff at the former Wheeling Pittsburgh Corp. mills in the Ohio Valley.

RG Steel’s Yorkville and Martins Ferry, Ohio, facilities (the former mill rolling tinplate that was transferred  from Sparrows Point) are also set to be idled and workers will be laid off starting June 4.

Chris MacLarion, vice president of Sparrows Point USW Local 9477, has not yet responded to queries by The Brew.

Confirms Brew Reports

This website broke the news on May 14 that RG Steel was in a “liquidity crisis,” had undergone a sharp drop in customer orders and was privately seeking to sell its plants.
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“Confronted with an unexpected immediate liquidity crisis” – RG Steel official says in May 23, 2012 letter to United Steelworkers President Leo Gerard and District Director David McCall. Here’s text.
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The Brew’s reporting was met by a push-back by company and union officials, who denied the company was experiencing a liquidity problem or loss of sales. This was followed by confirmation late last week that the company’s assets were, indeed, up for sale.

In subsequent reports, The Brew has reported that layoffs began last Sunday at the Sparrows Point cold mill and that the mill’s major production unit, the L blast furnace, has been idled twice in two weeks in part because of a shortage of raw materials caused by the company’s inability to pay vendors.

Customer orders at Sparrows Point have dropped precipitously in recent weeks, and there are few sales booked after June 1. In Warren, the mill is expected to finish up its current order book by early next week.

Workers at Warren said this morning that they were informed by management to expect the Warren blast furnace to be shut down next Wednesday.

Reports are surfacing that many of the Warren workers will be laid off on or near June 4, with a few operations scheduled to remain open until June 17.

The same date of June 4 was the announced closure of the Sparrows Point mills by senior management, although some staff will remain to idle equipment and ship final orders.

The situation very much remains in flux.
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TEXT OF LETTER TO USW MEMBERS AT SPARROWS POINT:

The leadership of Local 9477 was officially notified today, 5/24/12, that a WARN notice has been issued for the Sparrows Point plant. The company has stated that a layoff will virtually affect all of Sparrows Point’s employees, commencing on 6/4/12 and continuing within a 14 day period, due to an unexpected liquidity crisis. To the extent that the layoff does not affect all bargaining unit employees, affected employees may have bumping rights based on their seniority in accordance with the basic labor agreement.

The Union is diligently working with the company to find capital to fund day to day operations and pursue a buyer to buy all or some of the company’s assets.

While the WARN act requires 60 days notice, the company is sighting the exception of “unforeseen circumstances” of the WARN act in order not to give 60 days notice.

The Local Union will have an emergency meeting on Wednesday, 5/30/12, at the Union Hall located on 540 Dundalk Ave. at 1:00 pm and 4:00 pm.

Sparrows Point people are tough and we’ve been through tough times before. Please don’t panic or react to unfound rumors. This is a fluid and dynamic situation and we will make every effort to keep you informed.

In Solidarity,
Joseph Rosel,
President
USW-Local 9477