“The judge won’t care about what’s good for Hamilton, the pensioners or anyone else. The judge is only going to care about who is owed money and in what order.” — Prof. Marvin Ryder
Those words read by me in an article by Spectator business writer Steve Arnold echo in my ears as the pending decision on the restructuring of U.S. Steel Canada inches ever closer.
The judge should care because what lies in the balance is not only the life of a struggling investor company, but the lives of pensioners, employees and the host community, Hamilton.
Just as it was when, as mayor, our community was confronted by a bankrupt Stelco so many years ago, the City of Hamilton is at a crossroads again — the future of an important part of our steel industry hangs on a decision that could be made as soon as this week.
Stelco filed for creditor protection and was purchased by an asset management company. In turn, U.S. Steel Corp bought the plants that later became U.S. Steel Canada or USSC. Now this successor entity is seeking the same creditor protection under CCAA rules. Since September 2014 the legal process has been unfolding. At each turn, the pensioners and employees have been left in the legal dust by the system.
Again, it is being reported that the search for a new owner for USSC has been narrowed down to a small group that includes two general types of bidders — financial companies and long-term manufacturing entities that put themselves forward as being able to salvage what remains of the steel-making operation.
I am sure there is a lot for the judge to consider in this process, but if you are at all concerned about jobs, pension funding and the health of our local economy, the choice for Hamilton is clear — we need an owner and operator of USSC that is committed to the city, its people and the longer-term viability of steel production in Hamilton.
USSC needs a long-term, strategic buyer, not a financial wizard from Wall Street looking to turn a quick profit. Hamilton has seen that movie before.
I don’t recall all the machinations involved to get us to this point, but do remember that the old Stelco was sold and flipped to U.S. Steel. I do recall that among the first things done, the remaining workforce at the steel company was reduced through forced retirements and layoffs. U.S. Steel in turn became involved in a number of contractual reductions and forced concessions with its employees, forcing shutdowns and the reduction in production output. The Local 1005 union screamed blue murder, but to no avail.
My guess is that the investment firm that initially bought Stelco, flipped it and made money on the transaction, which included real pain for employees and pensioners who were left wondering about the solvency of their present and future incomes. This is a story Hamiltonians do not want to see repeated. My feeling is that if the Wall Street-type purchaser is successful, their first order of business will be to remunerate U.S. Steel to the detriment of the employees, pensioners and the community of Hamilton.
This cannot be allowed to be repeated again. I am hoping the sale will go to an entity that is interested in the production of steel and not just a financial return for its backers.
There are no guarantees in a CCAA restructuring process and none whatsoever in the steel business. In Hamilton, we know this better than most. We’ve been through a lot in this town. But what I know for certain is that we need a successful bidder for USSC that looks beyond the short-term, and a company that puts people and pensions first, and wants to rebuild the steel industry here in order to also make a profit.
We can’t predict global commodity prices and, at the risk of sounding like Donald Trump, whether China will continue its predatory practice of dumping steel into foreign markets to lower the price. But we do know that a strong and stable entity with committed owners will be far better positioned to weather these challenges and begin building a foundation for growth and steel production in Hamilton.
Here’s hoping the decision-makers in this CCAA process get it right, for all our sakes.
Larry Di Ianni is a former mayor of Hamilton