US Steel Canadian operations dispute heads to court

U. S. Steel Canada Inc. has announced it is filing a motion with the Ontario Superior Court of Justice seeking an order to continue its operations and obtain further relief under Canada’s Companies’ Creditors Arrangement Act (CCAA) so it can operate beyond 2015.

“With a court order we can preserve work and meet obligations to approximately 2,200 employees and continue to deliver high-quality steel products to our customers from our two Canadian steelmaking facilities,” says Michael McQuade, president and general manager of U. S. Steel Canada. “The court order, if granted, would also provide additional time to find a consensual restructuring solution, and to conduct a new Sale and Restructuring Process when market conditions improve.”

An article in the Toronto Globe and Mail covering the legal action spells it out as having “the United Steelworkers union, the Ontario government, salaried active and retired employees and a former president of its predecessor company Stelco Inc. on one side, and U.S. Steel on the other.”

The announcement prepared by U. S. Steel Canada says despite its “best efforts under its sale and restructuring process, the unwillingness of stakeholders to agree to compromises proposed in the offers submitted, and the unwillingness of bidders to modify their conditions to be acceptable to stakeholders, has resulted in no executable offer being received to date.”

U.S. Steel Canada also cites a difficult global steel market and its parent company’s willingness to relocate operations to the United States as reasons for the filing. “The principal stakeholders in U. S. Steel Canada [have not] been able to reach a consensual restructuring agreement. These factors are further aggravated by the continued deterioration of the North American steel market and the increasing volume of offshore imports,” says the statement.

“Also contributing to the need for this court order are the steps taken by U. S. Steel Canada’s parent company, United States Steel Corp., to reallocate Canadian production to its facilities located in the U.S., including some of the highly-profitable steel production that U. S. Steel Canada had previously supplied to the auto industry.”

Without the court order being approved, U. S. Steel Canada says “it would unlikely be able to avoid ceasing operations at the end of 2015, jeopardizing employment in Hamilton and Nanticoke,” the locations of the two former Stelco mills.

U. S. Steel Canada is asking the court to:

• direct its parent company, United States Steel Corp., to continue to provide all intercompany services and goods;
• allow U. S. Steel Canada to immediately discontinue most of the current Sale and Restructuring Process (SARP);
• permit the immediate suspension of most pension funding contributions;
• suspend payment of post-employment health, medical, dental and life insurance benefits in the near term for retirees, surviving spouses and dependents; and
• immediately suspend all real property tax payments.

U.S. Steel Canada says it will continue to work with Ernst & Young Inc. “to oversee the business and financial affairs of the company during the CCAA process.” Relevant information will remain available at www.ey.com/ca/USSC, says U.S. Steel Canada.