The Pension Plan of Bethlehem Steel - 2001

Harvard Business School Case No.: 202-088; Teaching Note No.: 204-123

Posted: 9 Dec 2004

See all articles by Peter Tufano

Peter Tufano

University of Oxford - Said Business School; National Bureau of Economic Research (NBER); University of Oxford - Said Business School

Date Written: April 22, 2002

Abstract

SUBJECT AREAS: Bankruptcy, Compensation, Debt management, Employee benefits, Finance, Financial management, Investment management, Legal aspects of business, Liability, Pension plans

CASE SETTING: Bethlehem, PA; integrated steel; $3,334 million revenues; 13,500 employees; 2001

Bethlehem Steel's 2001 bankruptcy filing inspires an employee's daughter to evaluate her father's pension plan, weeks after September 11's tragedies exacerbated a weakening U.S. economy and just months before her father planned to retire. Battered equity markets and plummeting interest rates foretell a "pension crisis," while the daughter discovers the history and government role in U.S. private defined-benefit pension plans. She tries to apply her newly acquired finance skills as an MBA student to estimate the pension plan's true asset-liability condition and to advise her father about his upcoming retirement from a historically dominant U.S. company that has lost its competitiveness to global producers.

Teaching Purpose: To introduce: 1) defined-benefit, private pension funds; 2) characteristics of liabilities - discounting, duration, and convexity; 3) roles of risk and insurance in asset management; 4) asset-liability matching; and 5) market value balance sheets.

Suggested Citation

Tufano, Peter, The Pension Plan of Bethlehem Steel - 2001 (April 22, 2002). Harvard Business School Case No.: 202-088; Teaching Note No.: 204-123. Available at SSRN: https://ssrn.com/abstract=632921

Peter Tufano (Contact Author)

University of Oxford - Said Business School ( email )

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National Bureau of Economic Research (NBER)

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University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0) 1865 288551 (Phone)

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