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UPDATE 2-Rouge files bankruptcy;Russia's Severstal agrees to buy

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NEW YORK, Oct 23 (Reuters) - Rouge Industries Inc. , parent of Rouge Steel, on Thursday said it filed for bankruptcy protection and agreed to be acquired by Severstal , one of Russia's three largest steelmakers.

Rouge, the in-house steelmaking unit for Ford Motor Co. until 1989, said it filed for protection under Chapter 11 of the U.S. Bankruptcy Code on Thursday evening, but will continue to provide uninterrupted service to its customers.

No details were immediately available on the value of the deal, which is subject to bankruptcy court approval. Rouge said the terms would be included in later bankruptcy filings.

If Severstal's bid for Rouge is successful, it would be the Russian company's first investment in the U.S. steel industry. Other companies will have the opportunity to submit bids for Rouge's assets, in accordance with the bankruptcy code.

A Rouge company spokesman said Rouge has no plans to shut down any of its facilities, and has made no decision on whether it will cut jobs. The company has 2,600 employees, 2,000 of which are members of the union.

The company also said it secured a commitment for $150 million of debtor-in-possession financing, which gives the company sufficient liquidity to pay for employee salaries and benefits, materials from suppliers, and other working capital requirements.

Surging pension and retiree health-care costs, as well as the availability of cheap steel imports, has pushed more than 35 domestic steelmakers into bankruptcy since 1997.

Some companies have succeeded in lowering these costs significantly through new labor contracts. Rouge said it has opened discussions with the United Auto Workers union on a new labor agreement to improve its cost structure.

Shares of Rouge closed at 20 cents on the over-the-counter bulletin board on Thursday.