01) THE CONTINUING TRAGEDY OF ONTARIO STEEL
By Sam Hammond, Hamilton
The Steel Company of Canada (Stelco) inaugurated what became the longest Company's Creditors Arrangement Act (CCAA) supervised restructuring, lasting from 2003 until its sale to US Steel in 2007. During that four year period, a fraud was perpetrated that would make any organized crime syndicate green with envy. But as we will see, that was only the warm‑up to the present debacle.
Under the aegis of the CCAA, hotly contested by Local 1005 USW, Stelco wiped out its shareholders, and under the adroit footwork of the chief of restructuring officer Rodney Mott (representing a cabal of vulture capitalists) was purchased by these self‑same cannibals for a measly $150 million. Eighteen months later it was purchased by US Steel for $1.1 billion. Not a bad profit for doing nothing but shuffling cards.
Later, the judge who had presided over the transaction went to work for Stelco's law firm. The Union distinguished itself throughout the whole grab by tenaciously exposing the fraud and just as tenaciously defending its members and pensioners. This short history brings us to the process that began in 2007.
In 2007 the Harper government allowed the foreign takeover of Stelco by US Steel under the guarantee of certain conditions. Imposed under the Investment Canada Act, these conditions basically guaranteed the maintenance of over 3000 jobs at two plants, the solvency of the pensions, the investment of $200 million in upgrades, and the continuing production of steel. US Steel never met these obligations. In the last seven years it shut down and resumed operations, locked out workers in Hamilton and Nanticoke three times, cut the work force, imposed concessions, and in late 2013 announced the end of steel making altogether in Hamilton.
The Investment Canada Act and US Steel were on a collision course. The Feds imposed $10,000 per day fines on US Steel. The company appealed to the Supreme Court of Canada that the fines were unconstitutional, but the Court rejected the appeal. US Steel was losing hands down. But the Harper government intervened at the eleventh hour and brokered a secret deal behind closed doors that over‑rode the original agreement and wiped out the fines. Only parts of that deal have ever been disclosed, but the government saved US Steel from the win‑win court case that would have guaranteed jobs and continued steel production, and protected the taxpayers.
Under the partially disclosed parts of the 2012 back room deal, the company agreed to keep producing steel in Canada, operate its Nanticoke and Hamilton plants until 2015, invest $50 million by 2015, keep its original pledge to invest $200 million by October 2014, and donate $3 million to community and educational projects in Hamilton and Nanticoke. The problem was (and is), the secret parts of the deal might contain escape clauses for all these grandiose commitments. This is more than a suspicion because of events unfolding since August, when US Steel filed restructuring proposals under the Canada Business Corporations Act (CBCA) to essentially ignore all previous commitments and obligations.
The proposal is to break up US Steel Canada (USSC) into six entities. Each entity would be a stand-alone company with no revenue from USSC after 2015. USSC would provide $250 million in financing until the end of 2015, at which time the six companies would stand or fall according to their own balance sheets. There would be four Hamilton companies: Hamilton Land (over 100 acres), Hamilton Coke Ovens, Hamilton Finishing and Hamilton Other. At Lake Erie Nanticoke, there would be: Lake Erie Land (6600 acres of unused land) and Lake Erie Works. In addition USSC would ask the Ontario government to forgive a $150 million loan made at 1% interest in 2007.
In mid‑August, USSC tried to involve the participation of Local 1005 in its diabolical scheme. The attempt drew this withering reply in a letter to Jodi Koch, Director of Human Resources: "Local 1005 USW hereby informs you that its Negotiating Committee is not mandated by the membership to participate in any discussions that do not address the core interests of steelworkers and pensioners ... Local 1005's Negotiating Committee and US Steel have now met several times in August ... Local 1005 notes that these meetings have also revealed what is, in the opinion of Local 1005, a CBCA conspiracy on the part of US Steel to defraud Hamilton pensioners of their pensions, the Province of Ontario of its $150 million loan it made at 1% interest in 2007, and Canadians of their right to have polluted grounds and waters cleaned up by the corporation responsible for polluting them."
This correct response from the Union is based on a true understanding of what the company is trying to accomplish, on behalf of their members, pensioners and the Canadian public. Under the proposal, the pension responsibilities could be shifted to one of the new companies that would go bankrupt. A mergers and acquisitions process could be initiated by US Steel (Pittsburgh), who would purchase Lake Erie Land and Lake Erie Works from itself, thus maintaining the newest and most profitable, while allowing 103 years of ecological damage in Hamilton to fall on the heads of the taxpayers, who would inherit the bankrupted Hamilton companies and land.
Further to the above, on Sept. 16, US Steel Canada formally filed for Creditor Protection under the Companies' Creditors Arrangement Act. This is another act in a multi‑level corporate drama. As Thomas Walkom wrote in the Toronto Star, "From the Federal government came a deafening silence."
There is so much more as this tragedy unfolds. The corporate mentality, coupled with the opaque secrecy and contempt of democracy displayed by the Harper government throughout the decade of the Steel saga, provides a frightening window into what to expect if and when the Comprehensive European Trade Agreement (CETA) deal with the EU becomes visible. Watch our pages for further on Steel in Ontario.
(The above article is from the October 1-15, 2014, issue of People's Voice, Canada's leading socialist newspaper. Articles can be reprinted free if the source is credited. Subscription rates in Canada: $30/year, or $15 low income rate; for U.S. readers - $45 US per year; other overseas readers - $45 US or $50 CDN per year. Send to People's Voice, c/o PV Business Manager, 706 Clark Drive, Vancouver, BC, V5L 3J1.)