Pacific Steel Castings, based in west Berkeley since 1934, filed for Chapter 11 bankruptcy protection in Oakland on Monday. Pacific Steel, one of the largest independent steel casting companies in the U.S., has 410 employees in three separate plants at the eight-acre site off Gilman Street. There are no immediate layoffs or interruptions in payment of wages or pensions.
The company hopes the bankruptcy proceedings will enable it to restructure its liabilities and remain in operation, possibly under a different owner from the Genger family which is in its fourth generation of ownership. Pacific Steel makes carbon, low-alloy and stainless steel castings for U.S. and international customers, largely for heavy-duty trucks and construction equipment.
“Pacific Steel is not going anywhere,” said chief operating officer Chuck Bridges in a statement. “The process we have chosen is to restructure the company while preserving jobs and exploring the best way to continue making high quality castings for our customers.”
According to company spokeswoman Elisabeth Jewel, several companies have shown interest in acquiring Pacific Steel. She said the Genger family emerging from bankruptcy as owners or with a role in Pacific Steel was “definitely within the realm of possibility, but right now it’s very uncertain.”
The bankruptcy was provoked by what Jewel described as a “series of difficult financial events.”
First, Pacific Steel lost a third of its workforce in 2011 after a U.S. Immigration and Customs enforcement audit.
“One day a third of the workforce with hundreds of years of experience walked out the door,” Jewel said. “That’s hard to recover from.”
Workers’ compensation insurance costs went up four-fold following a flood of claims from those departing workers.
Second, this January the company settled a lawsuit about the timing of worker lunch breaks for around $5.4 million, which is owed to about 1,300 current and former employees. According to the bankruptcy filing, the company “was not in a financial position to immediately fund the settlement.” The lawsuit had not been supported by the union, GMP 136B, and was originally filed by a former employee, Jewel said.
“These are great jobs, great wages, great benefits,” said Jewel. “The union has been notified every step of the way what’s going on. There have been no secrets with the union. We have a good relationship with the union.”
“They’re a major employer, and a union employer,” said Berkeley Mayor Tom Bates. “We’d really like to see them continue to work in Berkeley and continue to strive to be good neighbors and clean up the plant as much as possible. They have done that in the past, and we hope they can get out of these financial problems.”
Jewel said that despite the extraordinary expenses from the legal settlement, the company was operating well.
“Business is good,” she said. “We’ve had steady orders. It’s a little ironic, but when you have the huge amounts of the settlement in particular, it makes it very difficult.”
A hearing in bankruptcy court should take place in the next month. Jewel said the company hopes the situation can be resolved this year.
Update 2:20 p.m. The bankruptcy court held a first-day hearing this morning, according to Jewel. The court agreed that Pacific Steel could access funds from a Wells Fargo loan to make payroll, pay vendors and meet operational expenses.
Peaceful Pacific Steel protest ends at west Berkeley plant (02.17.12)
Hundreds rally in Berkeley to protest Pacific Steel layoffs (02.17.12)
Pacific Steel accused of labor violations in lawsuit (12.27.11)
200 undocumented Pacific Steel workers lose their jobs (12.19.11)
Pay raise, no added health costs in Pacific Steel contract (03.28.11)
Workers at Berkeley’s Pacific Steel accept new contract (03.25.11)
Negotiations resume in Pacific Steel strike (03.23.11)
Workers from Berkeley’s Pacific Steel go on strike (03.21.11)
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