Dallas-based LTV Corp. and two locals of the United Steelworkers Union have begun talks that could lead to an employe takeover of a carbon steel plant at Gadsden, Ala., union and company representatives said yesterday.

The plant is one of two facilities LTV must dispose of under the terms of a $770 million merger with the former Republic Steel Corp.

Assistant Attorney General J. Paul McGrath last March 21 approved the LTV-Republic combination, which led to the creation of LTV Steel -- the nation's second largest steel producer behind United States Steel Corp.

The government, which had at first opposed the merger, finally okayed it on condition that LTV sell off Republic's stainless steel facility at Massilon, Ohio, and its carbon steel plant at Gadsden.

The divestitures were ordered to eliminate the possibility of unfair competition in the domestic steel business, McGrath said at the time.

An LTV spokesman said yesterday that the company has until Dec. 1 to sell the plants. A court-appointed trustee will be empowered to make the sales if the company is not successful, the spokesman said.

Seventy-five percent of the Gadsden plant's production is steel plate, sheet metal and galvanized steel, mostly used in the auto and appliance industries. The other 25 percent includes specialty steels used in an assortment of fabrication businesses, LTV officials said.

As of yesterday, the plant had 2,100 hourly and 300 salaried employes on its payroll. Some 500 workers are on layoff at Gadsden.

Company talks with USW Locals 2176 and 4382 began Monday. "Basically, we haven't really done anything, yet," said Local 2176 President Gary Bone. "We are discussing the possibility of holding discussions" about an employe buyout of the plant, Bone said.

The LTV spokesman said the company has a number of plans for disposing of the plant, including the possibility of forming a separate company to operate it under employe ownership. But the spokesman said that there was no way of knowing whether that ownership, should it come about, would be partial or total.

According to the Washington-based American Iron and Steel Institute, 60 of the nation's largest steel companies are responsible for about 90 percent of the country's raw steel output. Of the companies on that list, only one, Weirton Steel in Weirton, W. Va., is completely owned by its employes, an AISI spokesman said.

Weirton's 10,000 employes took over the controls of their tin-plate mill on Jan. 11, as the result of a $386.1 million deal with National Intergroup Inc., Weirton's former owner.

Most of the money to finance the Weirton purchase was borrowed. The new employe-owners agreed to cut their pay and benefits to help defray the expense of the loans.