LTV Case. A. Alfred Taubman & Sotheby's Case

In early 2002, financial analysts, government officials and thousands of current and former employees of a once-strong American company were in an uproar over that company's spectacular collapse. Participating in an industry subject to international influence and with a relatively few number of competitors, the company's slide toward bankruptcy and ultimate failure was portrayed by many as the ultimate failure of management to protect shareholders and employees, while management sought to portray the situation as one over which they had little control. The company in question is not Enron, which garnered the media's attention, but a company with a much longer history in that all-American industry, steel. LTV Corporation, itself the result of a mid-1980s merger, had suffered through difficult times before, including a previous bankruptcy filing, but had emerged successful. This time, the company's failure was drawn out over the course of 2001, and complete. As with Enron, current employees lost their jobs, former employees lost their pensions, and management is struggling to defend its actions. This research considers the company's performance, the factors contributing to its downfall, and the lessons that might be learned by others in similar situations.

LTV filed for bankruptcy protection in early 2001. At that time, LTV was a mainstay of the Cleveland economy, which was already suffering from years of major industrial employers relocating t

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ith the problems encountered in 2000 and 2001, company management singled out foreign imports as being problematic, but also indicated that domestic competition was fierce, an admission which was lacking in the more recent proceedings (Thompson, 1985). Analysis Part of the reason that the banks felt the company would be unable to repay the loan proposed as part of the 2001 package was that the price of steel had dropped from $350 per ton of hot rolled steel in early 2000 to $200 per ton ("Tough," 2002). LTV's management maintained that they could not have foreseen this drop in price and that the drop had a severe effect on the company's revenue. While it is true that the drop in price affected the company's revenue, it affected the revenue of all steel companies, and price volatility has long been a problem in the steel industry. LTV was particularly vulnerable to the decline in prices because of its management (the company was hit similarly hard during the 1980s when prices also declined sharply). Other American steel companies also faced the same downturn in prices that LTV faced, but did not have the same financial setbacks that LTV did because the companies were run differently. Thus management's suggestion that the c

Category: Business - L