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Governments react to U.S. Steel Canada’s bid for creditor protection

First Published:

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(Updated) With U.S. Steel Canada applying for creditor protection, the company insists it will be ‘business as usual.’

It says the 2100 employees will continue to get paid, and pension funds will continue as usual, but the company wants to review all of these issues during the restructuring process. The company was scheduled to meet with officials with the United Steelworkers union today.

The president of United Steelworkers Local 1005, Rolf Gerstenberger, said that workers have suspected for several months that “something was going to happen here.”

He said that since 2008, when the world was rocked by the economic crisis, the Hamilton plant has become “collateral damage to the U.S. Steel empire.”

If court protection is granted, U.S. Steel will explore selling all or part of its assets in Hamilton and in Nanticoke that it acquired from Stelco for $1.1 billion in 2007, after Stelco went through the same process.

U.S. Steel Canada applied for protection yesterday, declaring that it had lost $2.4 billion over the past five years. The markets reacted by driving U.S. Steel stock as much as 8 per cent higher.

In its court filings U.S. Steel Canada says its pension plans face a solvency deficiency of more than $838 million. Liabilities for other employee benefits amount to almost $788 million.

Ontario economic development minister Brad Duguid spoke today at Queen’s Park on the U.S. Steel news. A $150 million dollar loan from the province that was to aid the company in making pension payments is due at the end of 2015.

“The investment we’re talking about in U.S. Steel is a loan that was provided 8 years ago, to save 2,000 jobs that probably would have been gone at that point. So for 8 years now there close to 2,000 maybe more people that have been working in Ontario in that industry as a result of that investment.”

“Where that investment lands at the end of the day as a loan will be determined by the solvency relief approach that’s being taken now.”

The office of federal industry minister James Moore released also released this statement:

“Our Government’s thoughts are with the workers and their families during this restructuring process. While this process is ongoing, U.S. Steel has indicated that they have a plan to ensure that salaries, pensions and operations are not affected. The Government of Canada will continue to monitor this situation closely.”

The company will meet regularly with a chief restructuring officer who has been appointed to the operation. As well U.S. Steel is providing $185 million to the Canadian operations to keep them going until the end of 2015, when an agreement with the federal government expires.

Marvin Ryder of the DeGroote School of Business believes there will be major changes. “We’re not talking about selling a couple of trucks or renting out a piece of land.”

“Chances are some elements of the company will either be sold to other people, closed, changed in some way.”

But Ryder thinks this may not be the end. “When I say restructure that doesn’t mean, ‘we want to wrap up the company and leave nothing here as of January 21st 2016. My belief is there will be a U.S. Steel in Canada operating.”

Additional video: Marvin Ryder of the DeGroote School of Business explains what could happen under the U.S. Steel application.

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Additional video: Steelworkers Union Local 1005 President Rolf Gerstenberger reacts:

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