Steel Mills

US Steel Seeks Permanent Separation from US Steel Canada

October 8, 2015

The Ontario Superior Court has reserved judgment on a plan by US Steel Corporation for the company and US Steel Canada to “go their separate ways.” Justice Herman J. Wilton Siegal said it is one of the toughest decisions he has had to make from the bench and will issue a summary of his decision on Friday with more details next week.

In Wednesday’s court hearing, US Steel said it would maintain all services and arrangements for its Canadian unit for up to 24 months as part of a transition agreement. It will not make a bid for the Canadian assets.

US Steel Canada says that to continue operations it must be free of pension obligations and municipal taxes.

According to the Globe and Mail, US Steel said it will provide funds for pension contributions for the rest of 2015 but will retain the automotive contracts. US Steel agreed to inform automakers that they have the option to continue to buy their steel from Lake Erie Works.

United Steelworkers 1005 President Gary Howe said, “I think a lot of people would be happy about the company becoming Canadian again.”

Local 8782 President Bill Ferguson said, “I think it could make a go. The big problem now is steel orders being moved to the U.S. We could better keep the orders here with an independent company.”

Gord Capern, an attorney for the USW, said the “The reason we are here is because of a crisis that U.S. Steel created.”

The mayor of Hamilton, Fred Eisenberger, weighed in on the ramifications to the region if US Steel Canada is given relief on its $6 million annual tax payments and its payment of pension benefits.

“The loss of $6M a year (equivalent to a 1% tax increase) compounded year after year would have a tremendously negative impact on the City’s finances,” said Eisenberger in an open letter regarding US Steel.

He added, “There are approximately 7000 US Steel Canada pensioners living in Hamilton who are already feeling the stress and anxiety of the bankruptcy proceedings which could cut and/or eliminate their pensions and health benefits. The ripple effect of pension and benefit reductions, coupled with higher property taxes is a serious concern that cannot be ignored.

US Steel Canada Background

US Steel Canada was originally founded in 1910 as the Steel Company of Canada which was shortened to Stelco and then officially adopted as its name in 1980. The company was plagued with strikes following World War II and later by lockouts under U.S. Steel.

In the 1980s recession the company suffered job losses and plummeting share prices that continued into the 1990s. The company entered bankruptcy protection in 2004 with a $1.3 billion pension shortfall. In 2006 a shaky Stelco emerged from bankruptcy with a $150 million pension infusion from Ontario.

Stelco was bought by US Steel Corporation in October 2007 for $1.8 billion and $800 million in assumed debt. The company was renamed US Steel Canada although the Stelco name persisted.

At the end of 2008 US Steel laid off 700 employees at Hamilton works and shut down the blast furnace. In March 2009, Hamilton Works was temporarily idled along with most of Lake Erie Works with more than 2000 employees laid off. Market conditions and weak customer demand resulted in another temporarily shutdown of Hamilton in Oct. 2010. In Dec. 2013 Hamilton’s steel making and iron making operations were permanently closed.

US Steel Canada entered CCAA bankruptcy protection in September 2014.