Steelmaker to cease pension, benefit payments as part of transition
The Ontario Superior Court recently approved a plan for U.S. Steel Canada (USSC) to be severed from its parent company U.S. Steel.
The Oct. 9 ruling in USSC’s bankruptcy protection proceedings allows the company to stop contributing to pension payments, health benefits and prescription drug coverage for pensioners. More than 20,000 former USSC employees will be affected.
The company, currently restructuring under the Companies’ Creditors Arrangement Act, argued that avoiding those payments is necessary to allow it to succeed as it emerges as an independent entity.
Additionally, the court-sanctioned plan allows USSC to stop paying municipal taxes to the City of Hamilton and Haldimand County.
The decision from Superior Court Justice Herman Wilton-Siegel is less a ruling against retirees and more a ruling for the industry as a whole, according to Peter Warrian, senior research fellow at the University of Toronto and former research director for the United Steelworkers.
"At some level in this, he had to choose between the pensioners and the industry," he said. "The impact on Hamilton and Southwestern Ontario’s economy has to be understood," he said. "If you think manufacturing is important, and I do, steel is 80 per cent of manufacturing. We wouldn’t have the auto industry we do without the steel industry, and the other way around. That’s an important link. It is very important for the industry, notwithstanding the legitimate concerns about the pensions. And I think the judge, being placed in that position, exercised a choice in favour of the industry."
USSC was formed after U.S. Steel purchased Stelco in 2007. Commitments were made concerning employment, production levels and investments in the Canadian facilities, but the company argued those commitments became unattainable following the 2008 recession.
The federal government sued the company but subsequently withdrew the suit and signed another three-year deal with U.S. Steel. The details of that agreement have never been made public.
The government might once again take the company to court, according to James Moore, Canada's industry minister (as of press time).
"It is unacceptable that U.S. Steel Canada is abandoning these workers and their families. These obligations were not imposed on U.S. Steel Canada but, rather, were the result of promises made to generations of workers who helped build the company and, indeed, an entire industry in the heart of Southern Ontario," Moore said in a statement.
"While it is important that the company be given the tools it needs to become viable long into the future, this should not ever mean allowing them to wash their hands of those to whom they should be grateful."
Moore said the federal government would ensure USSC upholds its commitments to the benefits and pensions of its workers.
"We are the only government that has taken U.S. Steel Canada to court and are not afraid to do so again," he said.
Warrian, however, dismissed this threat as political speechifying in the last days before the federal election.
"Given all the stakes for the industry and for the community, it’s outrageous that this secret agreement between U.S. Steel and the government hasn’t been made public," Warrian said.
"None of us know what their obligations are or are not without seeing the agreement. U.S. Steel and Mr. Moore’s government have patently refused to release the agreement. So, this week-before-the-election claim by the minister is a little late in the day given his previous actions."
Union concerns
Gary Howe, president of USW Local 1005 in Hamilton, would like to see the attention shift away from politics and onto the people involved.
"Working in a steel plant is hot, dirty, dangerous work," Howe said. "When these workers that are now retired were on the job, they worked at a time when there were a lot of dangers and hazards."
Many former employees now suffer from work-related injuries and illnesses. Howe himself has lived with Non-Hodgkin’s Lymphoma for 15 years. He said there is "no doubt" these illnesses were caused from working in the plant.
Retirees therefore feel justified, Howe said, in calling on the company to help them pay for the often expensive medications they require. And while workers’ endangered pensions at least have a safety net in the Ontario Pension Committee, Howe said these desperately needed medical benefits do not enjoy the same support.
Because the medical benefit plan is funded by the operational budget of the company, former employees are relying on USSC’s future viability for their medical benefits. Because Wilton-Siegel’s approved transition plan for USSC leaves the company open to selling all or part of the Hamilton and Nanticoke plants in the future, Warrian said the best hope for retirees is the right partner.
"You’ve got to bring together a company in very adverse circumstance," Warrian said. "I have a tough time seeing the mill surviving as an orphan. I think it’ll find a strategic partnership somewhere. I’m hopeful. Because if there is a bidding process, I believe two kinds of bidders will emerge."
The first type of bidder, Warrian said, would be a strategic inquirer. The strategic inquirer would buy USSC altogether with the intention of making further investments into the company in the future — something Warrian said is crucial for the long-term health of the industry.
The second type of bidder, he said, would be more akin to someone trying to purchase assets in a fire sale. While Warrian said these bids for individual pieces could result in a larger upfront dollar amount, they would not contribute to the stability of Ontario’s economy.
"If you take the narrow interpretation of getting every dollar to offset the pension liabilities, you’d be tempted to take bid number two," Warrian said. "If you’re worried about the long-term health of the industry and the long-term health of the economy, you go with bid number one."
