<PAGE>   1
                                                                   EXHIBIT 10.40


                              ROUGE STEEL COMPANY
                            BENEFIT RESTORATION PLAN
                          (EFFECTIVE JANUARY 1, 1997)

         WHEREAS, ROUGE STEEL COMPANY, a Delaware corporation (the "Company"),
deems it desirable to adopt a supplemental benefit plan for its key employees
and respective spouses, if any, as a supplement to the Rouge Steel Company
Salaried Employee Retirement Plan (the "Retirement Plan").

         NOW, THEREFORE, the Company hereby establishes the Rouge Steel Company
Benefit Restoration Plan (the "Plan"), effective January 1, 1997, to read as
follows:

                                   ARTICLE I
                                  PLAN PURPOSE

         The purpose of this Plan is to attract and retain key management
employees by supplementing retirement benefit payments under the Retirement
Plan to those key management employees designated in writing from time to time
by the Compensation Committee of the Board of Directors of the Company (the
"Participants") and their spouses, if any, in order to provide each such
Participant and his or her spouse, if any, retirement payments which, together
with the retirement benefit payments that they are entitled to receive under
the Retirement Plan, will not be reduced by applicable laws.

                                   ARTICLE II
                              BENEFIT DESCRIPTION

         A Participant or the Participant's surviving spouse shall be entitled
to benefits under this Plan only when the Participant (i) has accrued at least
five (5) continuous Years of Service after his or her designation as a
Participant in this Plan, and (ii) is entitled to normal retirement, regular
early retirement, special early retirement or total and permanent disability
retirement benefits pursuant to the Retirement Plan; provided, however, the
Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee")  may, in its sole discretion by written resolution,
waive or reduce the five (5) continuous Years of Service requirement for
entitlement to benefits under the Plan.  Subject to Article VI of this Plan, a





<PAGE>   2


Participant entitled to benefits under this Plan shall be entitled to a monthly
benefit, upon the Participant's retirement under the Retirement Plan, payable
pursuant to Article III of this Plan, equal to the excess, if any, of:

   (a)   The amount of annual benefit which would be payable to
         or on behalf of such Participant or their spouse under said Retirement
         Plan computed under the provisions of said Retirement Plan, plus, if
         the Participant is a Group I Employee or a Group II Employee as
         defined in the Retirement Plan (a "Group I Employee or a Group II
         Employee"), the amount of additional annual benefit which would be
         payable to or on behalf of such Participant or their spouse under the
         Retirement Plan if such benefit were computed by counting those
         additional years of contributory service and non-contributory service
         with a predecessor corporation to Rouge Steel Company used to compute
         Retirement Plan benefit eligibility for a Group I Employee or Group II
         Employee as such years under the Retirement Plan, but computed as if:

         (1)      The limitations contained in Section 415 of the
                  Internal Revenue Code of 1986, as amended from time to
                  time (the "Code") were inapplicable; and

         (2)      The limitation of $150,000 ($200,000 prior to January
                  1, 1994), multiplied by the applicable adjustment
                  factor under Internal Revenue Code Section 401(a)(17) on the
                  amount of "Salary" and/or "Compensation" to be taken into
                  account for all Retirement Plan purposes in any Plan Year was
                  inapplicable;

                  over

   (b)     The amount of such Participant's or spouse's annual benefit
           under (i) the Retirement Plan and (ii) if the Participant was a 
           Group I Employee or a Group II Employee, under the Ford Motor 
           Company General Retirement Plan.

         For purposes of entitlement to benefits under this Plan, Years of
Service means years of credited service, as defined in the Retirement Plan.

                                  ARTICLE III
                                 BENEFIT PAYOUT

         The benefits under this Plan shall become payable when a Participant
retires from the Company under the Retirement Plan and begins to receive
payments, or when the Participant dies and the Participant's spouse, if any,
begins to receive payments, under the Retirement Plan.



                                      2

<PAGE>   3


         Benefits payable under this Plan shall be payable to a Participant or
the Participant's spouse, if any, in the same form and manner as contributory
life income benefits are paid to the Participant or the Participant's spouse,
if any, pursuant to the Retirement Plan; provided, however, if Retirement Plan
benefits are paid pursuant to a contingent annuitant election for benefits by
the Participant pursuant to Article VII, Section 5B, thereof, benefits payable
pursuant to this Plan shall not be paid in the form of a contingent annuitant
election but instead shall be paid in the same form as the normal form of
benefit payment for Retirement Plan noncontributory benefits as if the only
life income benefits payable to the Participant under the Retirement Plan were
noncontributory benefits; and provided, further, that in the event of a
Participant's regular early retirement, special early retirement, or total and
permanent disability retirement under the Retirement Plan, as applicable, the
monthly benefit provided hereunder shall be reduced and/or adjusted in the same
manner as Retirement Plan contributory retirement benefits are reduced or
adjusted in the event of a regular early retirement, special early retirement,
or total and permanent disability retirement, as applicable.

                                   ARTICLE IV
                        UNFUNDED AND NON-QUALIFIED PLAN

         This Plan is completely separate from the Retirement Plan.  The
undertakings of the Company herein to each Participant constitute merely the
obligation to make payments as provided for herein, and it is the Company's
intention that the Plan be unfunded for tax purposes and for purposes of Title
I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Neither a Participant nor any beneficiary nor any other person shall have, by
reason of this Plan, any rights, title or interest of any kind in or to any
property of the Company, nor any beneficial interest in any trust which may be
established by the Company in connection with this Plan.  If the Company
transfers any property to a trust in connection with this Plan, such trust
shall not be held for the exclusive benefit of Participants, and any assets
held in such trust shall be subject to the claims of the Company's general
creditors in the event of the Company's insolvency or bankruptcy.



                                      3

<PAGE>   4

                                   ARTICLE V
                                 ADMINISTRATION

         The Plan shall be administered by the Compensation Committee of the
Board of Directors of the Company which shall have full and exclusive power to
interpret the Plan, to determine the amount and manner of any deferrals and
payments and to adopt such rules and regulations as are necessary for its
administration.  The Compensation Committee may delegate specific
responsibilities it assumes under this Plan which are administrative or
ministerial in nature by notifying a delegate as to the duties and
responsibilities delegated.  In that regard, the Compensation Committee
delegates responsibility for claims administration to the Retirement Committee
for the Rouge Steel Company Salaried Employee Retirement Plan (the "Retirement
Committee").

         Claims for benefits under the Plan shall be made in writing to the
Retirement Committee.  If a claim for benefits is wholly or partially denied,
the Retirement Committee shall, within a reasonable period of time, but not
later than ninety (90) days after receipt of the claim, provide the claimant
written notice in a manner calculated to be understood by the claimant of:

         (A)     The specific reason or reasons for denial;

         (B)     Specific reference to the pertinent Plan provisions on which
the denial is based;

         (C)     A description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary; and

         (D)     Any explanation of the Plan's claim review procedure.

         A Participant or beneficiary whose claim for benefits under the Plan
has been denied, or his or her duly authorized representative, may request a
review upon written application to the Retirement Committee, and may submit
issues and comments in writing.  The  claimant's written request for review
must be submitted to the Retirement Committee within sixty (60) days after
receipt by the claimant of written notification of the denial of the claim.  A
decision by the Retirement Committee shall be made promptly, and not later than
sixty (60) days after the Retirement Committee's receipt of a request for
review, unless special circumstances require an extension of time for
proceeding, in which case a decision shall be rendered as soon as



                                      4

<PAGE>   5


possible, but not later than one hundred twenty (120) days after receipt of the
request for review.  The decision on review shall be in writing and shall
include specific reasons for the decision, specific reference to the pertinent
Plan provisions on which the decision is based and be written in a manner
calculated to be understood by the claimant.

         The decisions of the Compensation Committee and/or the Retirement
Committee shall be final and conclusive on all persons and neither the
Compensation Committee or the Retirement Committee shall be subject to
liability thereon.

                                   ARTICLE VI
                             TERMINATION FOR CAUSE

         Notwithstanding anything in this Plan to the contrary, if the Company
terminates a Participant's employment for Cause, then the Company shall have no
obligation to such Participant or his or her spouse pursuant to this Plan, and
no payments of any kind shall thereafter be made by the Company to the
Participant hereunder.

                 For purposes of the foregoing, "Cause" means:

                 (i)      any act or acts of the Participant constituting a
                 felony (or its equivalent) under the laws of the United
                 States, any state thereof or any foreign jurisdiction;
        
                 (ii)     any material breach, as determined by the Company, by
                 the Participant of any employment agreement with the Company
                 or the policies of the Company or any of its subsidiaries or
                 the willful and persistent (after written notice to the
                 Participant) failure or refusal, as determined by the Company,
                 of the Participant to perform his or her duties of employment
                 or comply with any lawful directives of the Board of Directors
                 of the Company;
        
                 (iii)    conduct which the Company determines amounts to gross
                 neglect, willful misconduct or dishonesty; or

                 (iv)     any misappropriation of material property of the
                 Company by the Participant or any misappropriation  of a
                 corporate or business opportunity of the  Company by the
                 Participant, all as etermined by the  Company.
        


                                      5

<PAGE>   6

                                  ARTICLE VII
                                ERISA COMPLIANCE
                               NON-QUALIFIED PLAN

         Notwithstanding any provisions of this Plan to the contrary, the
Company by written resolution of the Board of Directors or the Compensation
Committee may terminate the Plan, or may amend or modify the Plan at any time
and in any respect, including as necessary or advisable in order that the
benefits provided by the Plan shall constitute unfunded deferred compensation
for a select group of management or highly compensated employees as described
in Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.  However, no such
amendment or termination shall adversely affect the rights of a Participant or
their spouse, if any,  to the extent of any vested benefits accrued as of the
date of amendment or termination of the Plan.

                                  ARTICLE VIII
                             NO EMPLOYMENT CONTRACT

         Nothing contained in this Plan, or any amendment hereto, shall be
construed as entitling a Participant to be continued in the employ of the
Company for any period of time, or as obliging the Company to keep said
Participant in its employ for any period of time.  Furthermore, nothing
contained in this Plan, or any amendment hereto, shall be construed as
restricting in any way the right of the Company to reassign a Participant for
any reason to a new employment position at lower or higher compensation.

                                   ARTICLE IX
                                NONASSIGNABILITY

         No rights of any kind under this Plan shall be transferable, or
assignable by a Participant, spouse or any other person, or be subject to
alienation, encumbrance, garnishment, attachment, execution, or levy of any
kind, voluntary or involuntary.

                                   ARTICLE X
                             RULES OF CONSTRUCTION

         In the event that any provision of the Plan is determined by any
judicial, quasi-judicial or administrative body to be void or unenforceable for
any reason, all other provisions of the Plan



                                      6

<PAGE>   7


shall remain in full force and effect as if such void or unenforceable
provision had never been part of the Plan.  The singular herein shall include
the plural, or vice versa, wherever the context so requires.  A pronoun in the
masculine, feminine or neuter gender shall be deemed, where appropriate, to
include also the masculine, feminine or neuter gender.

                                   ARTICLE XI
                           WITHHOLDING; PAYROLL TAXES

         To the extent required by law in effect at the time payments are made,
the Company shall withhold from payments made hereunder any taxes required to
be withheld from a Participant's wages for the Federal or any state or local
government.

                                  ARTICLE XII
                                 APPLICABLE LAW

         Except as governed by ERISA, and the Internal Revenue Code of 1986, as
amended, the Plan shall be construed in accordance with, and governed by, the
laws of the State of Michigan.

                                  ARTICLE XIII
                                    HEADINGS

         Headings to the Articles of this Plan are included for convenience
only and shall not control the meaning or interpretation of any provision of
this Plan.

    IN WITNESS WHEREOF, the Company has adopted this Plan this 11th day of
September, 1997.

                                               ROUGE STEEL COMPANY



                                               By:/s/ William E. Hornberger
                                                  -----------------------------
                                                     William E. Hornberger
                                               Its:  Vice President



                                      7