Businessweek Archives

The Pirates' Fate? Take A Look At The Steel Mills


News: Analysis & Commentary: BASEBALL

THE PIRATES' FATE? TAKE A LOOK AT THE STEEL MILLS

Back when clubby hometown boys ran Pittsburgh's local banks and metals industries, many were blind to global trends and got pummeled in world markets. The result was a meltdown of jobs in the '70s and '80s. Now more cosmopolitan types run the likes of Alcoa, Mellon, and Westinghouse. They understand numbers, trends, and world markets. But some of them don't much care if their local ball club, the Pittsburgh Pirates, leaves town.

As the Pirates opened their season on Apr. 26, a full-blown spat over the team's future was splitting the city's corporate chieftains and its government. At issue is whether the money-losing Pirates should be shuttered and shipped south, as inefficient mill operations were a decade ago. The alternatives: for the current owners to pour more money into the 112-year-old franchise or find a buyer who will keep it on the banks of the Allegheny.

LOW VOLTAGE. The current crisis goes back to 1985, when the city and a consortium of Pittsburgh-based companies bought the Pirates for $25 million. It was a magnanimous gesture at a time of great pain in the area. The U.S. Steel unit of USX Corp. was shutting down mammoth mills. Westinghouse Electric was downsizing, Gulf Oil had itself on the block, Alcoa and Mellon Bank were axing headquarters jobs. But even as they laid off fans, these companies, in addition to PPG Industries, PNC Corp., Carnegie Mellon University, and three private investors, kept the team going.

Trouble is, the companies viewed running the Pirates as a duty, not an opportunity. The owners were slow to respond to changes in baseball, from negotiating costly stadium lease deals to free agency. The team's stars--among them Barry Bonds and Bobby Bonilla--have long since jumped to richer markets. The recent strike added to the owners' woes by failing to bring, at least for now, the salary cap, revenue sharing, and other relief small-market owners wanted. The Pirates, division winners three years ago, now are a low-budget, low-voltage assortment of rookies and journeymen.

Having lost some $60 million so far, the team's corporate backers want out. But the city and the companies can't agree on a buyer. Sources close to city government say the problem grows from a flap between Pittsburgh's mayor, Tom Murphy, and the chairman of the Pirates, former PPG Industries Chairman Vincent A. Sarni. Murphy wants the owners to sell the club to John J. Rigas, chairman of cable operator Adelphia Communications Corp. in Coudersport, Pa. Rigas, 70, has offered $85 million, enough to pay back the consortium its initial investment plus debt--though barely half the going rate for expansion franchises elsewhere. A passionate Pirate fan, he promises to keep the club in Pittsburgh. "He's made the best offer," says Mayor Murphy.

But Sarni and the other owners are soliciting offers from far-flung entrepreneurs who want to move the club south. For one, Orlando property developer Norton Herrick has said he would pay $125 million for the team.

The Orlando Pirates? "Ten years ago," says City Councilman Daniel S. Cohen, "it would have been unthinkable for any owners to consider moving the Pirates from Pittsburgh." Not all owners would support an out-of-town bid now: PNC Bank Chairman Thomas H. O'Brien vows the bank will do "whatever it takes" to keep the team in Pittsburgh. He has allies at Carnegie Mellon University and Mellon Bank.

FALSE MOVES? But USX and PPG are open to outside bidders, say sources close to negotiations. This may be a ruse to stall a sale in hopes that the Pirates will fetch more in '96. But there seems to be a strong antipathy between Sarni and Murphy, says one observer, who thinks the best thing for the Pirates would be for Sarni to get the top job at W.R. Grace & Co., a post he's being considered for, and leave the baseball negotiations. Murphy insists his relations with Sarni are "cordial." Sarni did not return phone calls.

Originally, it seemed the owners were flirting with other buyers mainly to prod Rigas to sweeten his offer. But with the strike's end, the value of small-market teams such as the Pirates plummeted. Following the strike, Rigas threatened to lower his offer, but he ended up leaving it intact. Now, says Murphy, the owners not only must negotiate a sale price but divvy up losses this year that are expected to hit $20 million.

Eventually, Murphy hopes to build a new stadium in a rejuvenated downtown, leaving the 25-year-old Three Rivers, an Astroturfed doughnut surrounded by parking lots, to the NFL's Steelers. His models are the successful new parks in Baltimore and Cleveland, two small-market teams that are now profitable. But unless he can coax one more civic gesture from Pittsburgh's corporate elite, the Pirates, like so many other Rust Belt natives, may well be shedding their industrial-black outfits for the pastel tones of the Sunbelt.By Stephen Baker in Pittsburgh


Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus