This is a rush transcript from "Your World With Neil Cavuto," March 29, 2010. This copy may not be in its final form and may be updated.
NEIL CAVUTO, ANCHOR: Now a Fox News exclusive for you.
The CEO who dared to question that math spelled out in detail health care reform’s early hit on his company. With me now is A.K. Steel CEO Jim Wainscott.
You might recall Mr. Wainscott was among those who wrote last week that his company, in his case, was looking at a $31 million hit as a result of this legislation that’s now law.
Mr. Wainscott, you were not, though, among those called to testify next month. Do you know why?
JAMES WAINSCOTT, CEO, A.K. STEEL CORPORATION: Neil, good afternoon. We’re not sure why. Perhaps we are one of the smaller employers that has issued any sort of guidance in this regard.
CAVUTO: All right. Now, prior to this, had you warned or had you been in contact with either your local congressman or senator that there would be a hit on you? And, for a company your size, even though you’re among the larger steel companies by sales in this country, you would be hit significantly?
WAINSCOTT: We had indicated in our 10K some general wording along the lines of the potential impacts of the federal health care legislation could adversely affect the company’s financial condition through increased costs.
And, indeed, the legislation has impacted us. And I would just, if I could, take the opportunity, Neil, to be clear about one thing. And that is that A.K. Steel’s disclosure on the tax effect of the health care reform bill was absolutely in no way a political statement.
Quite the contrary. As you know, we’re a Fortune 500, publicly traded company on the New York Stock Exchange, and we disclosed our non-cash special charge, which, for us, was $31 million, 100 percent in accordance with the accounting rules under U.S. GAAP.
And we did so because we believe that a reasonable investor would consider that to be the material information. And that’s the test. And, obviously, we don’t make the rules. U.S. GAAP requires that we take the gap against earnings in the quarter in which the law changed. And since the law changed on March 23 — and that’s within our first quarter — we made the disclosure last Tuesday.
CAVUTO: And we presage that and say that to say that this is — this new feature, where you’re not able to write off what you provide in terms of, let’s say, drug benefits to — to retirees goes away next year, so, by rules that were put in place by Congress, no doubt, you — you have to report this sort of stuff.
Now they’re coming back to demand some of these others who did the same and spell out these numbers, you know, bring supporting documents and e-mail and all of that. What do you think of that?
WAINSCOTT: Well, it sort of strikes me as odd, to say the least.
I think, again, all of these other companies, those that I have heard of that are being called to testify have to follow similar rules, as we do here at A.K. Steel, and under U.S. GAAP. So, it’s a bit odd.
I think all of us are really very concerned in the private sector about how this is going to be paid for. And we’re beginning to find out. For us at A.K. Steel, we want to continue to everything we can to control our costs. We’re a globally competitive steelmaker. We want to stay that way.
And we always look at what we can do in every aspect of our business, including employee benefits. And we will keep doing this. But there’s nothing for us, anyhow, as we look at this bill and what has come out of it that causes us to get happy in any way with respect to costs.
Our costs are going to go up. We’re going to now cover more people.
CAVUTO: But they say just the opposite in Congress, and the president does, that, over time, your costs are going to go down. You’re saying you have crunched the numbers, and, certainly, your accountants have crunched the numbers, and that’s not the case?
WAINSCOTT: Well, if you look at the bill — and we’re still trying to read all of the bill and understand all the implications — and new things come to light as you do that — for example, lifetime caps have been removed. We’re going to obviously cover more people now up to age 26. That’s a change that’s going to cost us more.
Special taxes on drug manufacturers will be undoubtedly passed through to us. Medical device manufacturers are going to be taxed specially. That will flow through. And, certainly, longer term, the so-called Cadillac plans are going to be taxed.
So, we don’t see really an area here where it reduces our costs. And, really, that’s something that we’re very focused on as we try and compete globally.
CAVUTO: All right. So, let’s say those costs stick — and you might even be conservative with the $31 million figure you that announced — you have to recoup that somewhere. How? What would you do, or what would you not do?
WAINSCOTT: Well, we will keep looking for every possible opportunity to run a better steel company. And that gets to, you know, increasing and improving our productivity and our quality.
And, of course, as I testified to the Steel Caucus last week in Washington, look, the road to recovery is one that’s full of potholes. And some are bigger than others. So, we know it’s not going to be a smooth road, but, you know, we will keep hitting on those things that we can do to control our own costs.
Beyond that, of course, we will have to seek higher prices. And we’re about that where we can.
I would just, if I could, Neil, offer one point. We’re a little bit unique in terms of steel companies. As you know, unfortunately, over the course of the last decade or so, many, many steel companies in this country went bankrupt. They dumped their pension legacies on the PBGC.
They eliminated the health care benefits of hundreds of thousands of retirees, because there’s no safety net for that. And we’re really unique in that regard. We’re very proud that, unlike a number of other steel companies, we took a tougher path, choosing instead to honor our retiree obligations to more than 30,000 retirees.
And, so, that’s what we have been trying to do. That’s what we’re going to continue to try and do, which is to take care of our people, our actives and retirees that serve our customers very, very well. But this makes it tougher to do that.
CAVUTO: All right, Mr. Wainscott, thank you very, very much. I appreciate your — your taking the time to give us a call.
By the way, the PBGC to which he was referring, the Pension Benefit Guaranty Corporation, the company — the federal entity that’s in charge of picking up pensions after companies bail out on them.
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