By Mike Boyer
The Cincinnati Enquirer

AK Steel on Thursday said it still wants to acquire National Steel Corp. for $1.13 billion and will ask National to abrogate its contract with the United Steelworkers of America to complete the deal.

The Middletown company's agreement to acquire National, which sought Chapter 11 bankruptcy a year ago, called for it to reach a contract agreement with the USWA, which represents most of National's 8,600 employees.

United States Steel Corp., which also wants to acquire Mishawaka, Ind.-based National, on Wednesday announced that it reached a comprehensive agreement with the union extending to 2008 and including both its and National's USWA-represented workers.

In a statement Thursday, AK Steel chairman Richard M. Wardrop Jr., said, "Unfortunately we could not reach a new labor agreement with the USWA that was economically feasible to profitably operate National Steel.''

Despite weeks of negotiations with the Steelworkers, Wardrop said "meaningful differences'' remain.

He said AK proposes that National use sections 1113 and 1114 of the U.S. Bankruptcy Code to resolve its differences with the union.

Those sections of the bankruptcy code, among other things, allow a company to file a motion in bankruptcy court to reject an existing labor contract.

The provisions also allow a company to seek immediate relief from labor contracts if it can prove the company will experience collapse or irreparable damage if immediate relief isn't obtained.

Doug Whaley, professor of law at Ohio State University in Columbus, said using the bankruptcy code to try to renegotiate labor agreements isn't unusual.

"The bankruptcy code is written in such a way that you can do anything you can talk the bankruptcy judge into agreeing to,'' he said.

But whether a company is successful hinges on the ability of their lawyers to convince the court, he said.

AK Steel remains the lead bidder for National under its purchase agreement, which topped USX's $950 million offer in February.

The auction of National's assets is set for Wednesday , with a court confirmation hearing set for April 21.

The USWA said late Thursday that it was "outraged'' by AK Steel's decision.

"This confrontation can only produce horrible results for National Steel, its creditors and the communities where it operates,'' said Leo Gerard, USWA president.

Charles Bradford, an independent steel analyst in New York City, said U.S. Steel might still be in a better position because it has a tentative agreement with the Steelworkers.

"The question is, did USX get as good a deal as it said it got'' with the Steelworkers, he said.

The USX agreement, which is patterned after a similar agreement between the union and International Steel Group, which acquired Cleveland's LTV Corp., would mean the elimination of 20 percent of jobs (5,700 workers) at both National and USX, according to the company.

But Bradford said ISG has said its agreement would eliminate about a third of LTV's jobs.

"The question is, did USX give up something, to get a deal, that will make it a higher cost (operator)?'' he said.

Given the current depressed state of steel stocks, Bradford said, either AK or USX could probably acquire both the other bidder and National for what each is now proposing to pay for National alone.

AK Steel's shares closed Thursday at $3.73, down 16 cents, while USX closed at $11.50, down 18 cents.

E-mail mboyer@enquirer.com