Out of her misery. US Steel has finally pulled the plug on one of Hamilton’s storied icons, the “Steel Company of Canada’s” Hamilton Works. Gone. No prospect of redemption. Once Canada’s largest steel producer, the facility that at one point employed 15,000 workers will be reduced to coke production, specialty steel finishing and storage. The blast furnaces are now dormant. Weeds and small trees occupy the parking lots.
Invariably in a city like Hamilton there will be lots of finger pointing. So there should be. There is more wisdom at the local bars and small restaurants than boardrooms in Toronto, Ottawa and Pittsburg, about what went wrong. Terribly wrong. The roots of this historic corporate failure go back forty years. Lousy industrial relations resulted in mindless strikes and questionable productivity. Weak management failed to see the urgent necessity to innovate, re-tool and reinvest in technology as the non-union shop Dofasco did, year after year. In 1996, Stelco took advantage of changes brought in by the Ontario NDP Government to Ontario’s pension legislation that enabled employers to defer payments to employees’ pension obligations (past and present). By 2003, “the plan” was under water by $1.3 billion. Stelco’s refusal to invest in new technologies had finally caught up with the harsh facts of the global steel market reality.
They were losing almost $20 million per month. In January 2004, Stelco filed for protection from creditors under Canada’s Companies Creditors Arrangement Act (CCAA). Some say the bankruptcy was orchestrated. They may be right. Whatever the circumstance, “the arse was out of her …” Stelco was in play, vulnerable to “sharpies, scavengers and corporate hedge funds.” The CCAA status for Stelco was a dream for consultants, lawyers and solvency experts who ran up almost $80 million in fees during the 18 months that Stelco was “in the tank.” A new investment group led by Toronto-based Brookfield Investments purchased the assets “for a song” say Murray Pollitt of Pollitt and Co Inc. Stelco union head Rolf Gerstenberger called it “organized theft.” The new consortium hired Rodney Mott, a “turnaround” specialist from the US. Eventually, Mott brought Stelco out of CCAA and took the company public once again. Mott got millions of shares and options that ultimately got cashed in for over $60 million.
But “turning around” meant that over 2,000 employees either lost their jobs or were forced to take early retirement. In late 2007, Brookfield bailed on Stelco, selling to US Steel for $1.1 billion (US). Compare this to the sale of Dofasco to Arcelor for $5.6 billion. US Steel clearly were after Stelco’s Lake Erie plant which remains very viable. US Steel went through the motions in Hamilton, but no one ever took them seriously. Doors open and doors close. The future of the steel industry in Hamilton is by no means over. ArcelorMittal Dofasco remains well-positioned to be industry leaders in North America. Our specialty steel businesses are equally vibrant. National Steel Car has their order book filled for the next two years.
The finality of a decision made in Pittsburg should be a triggering event for Hamilton to push the “reset” button. Many families will be hurt by this decision. The community will step up as we do in Hamilton. The federal and provincial governments need to ensure that US Steel honours its commitments to workers and their families. A more relevant question pertains to the future of “Stelco” lands. They own hundreds of acres of industrial/ commercial lands that must be repurposed strategically for the next generation of Hamilton residents. We are owed nothing less.
By: Carl Lafong