City wants urgent meeting with province over U.S. Steel bankruptcy

Worried Hamilton politicians are calling on upper levels of government for help after news that one of its largest employers, U.S. Steel, has filed for bankruptcy protection.

City councillors voted Tuesday to ask the province for an urgent meeting around the steel giant's announcement, which caught them off guard. It's also asked staff to rush on a report evaluating the economic impact on the city if U.S. Steel was to close its Hamilton plant altogether.

The announcement raised questions about what the move will mean to the city, particularly as it pertains to the hundreds of jobs and thousands of pensioners who live in Hamilton.

U.S. Steel’s stock has soared since the company announced it would be filing for bankruptcy protection in Canada, a move that caught the City of Hamilton off-guard.

But in Hamilton, the move has again raised questions about what the move will mean to the city and it unleashed another round of criticism: both over how the company has behaved since buying up Stelco and how Canadian governments have handled the U.S. steelmaker.

• READ MORE: U.S. Steel bankruptcy by the numbers

• READ MORE: U.S. Steel Canada files for protection from creditors

• READ MORE: U.S. Steel bankruptcy: Union promises 'long, complex' court battle

Hamilton Mayor Bob Bratina said he was shocked to learn the news U.S. Steel, formerly Stelco, filed for bankruptcy protection with the Superior Court of Ontario under the Companies’ Creditors Arrangement Act (CCAA) Tuesday after the market closed. The company also cancelled more than $800 million (U.S.) in capital investments south of the border, in Indiana and Minneapolis. 

By Wednesday morning, shares soared as much as 13 per cent (NYSE: X) to open Wednesday, going back to mid-2011 levels above $45 (U.S.). 

Pittsburgh-based U.S. Steel has said it will provide the two Canadian steel mills with $185 million of secured debtor-in-possession financing to support current operations through the end of 2015.

$2.4 billion lost since Stelco takeover

For Hamilton, it's a bit of déjà vu — Stelco Inc. went under court protection before it was sold to U.S. Steel in 2007 for $1.1 billion. 

In its bankruptcy protection filings, U.S. Steel said they've lost $2.4 billion since 2008 and that the Canadian U.S. Steel operation owes the U.S. side $204 million, and the Province of Ontario $150 million. It also says that in its internal debts, from what U.S. Steel Canada owes U.S. Steel, they will not waive interest in the debt. The filings also say the steelmaker has "significant cash needs in the fall" to build up inventory before Lake Ontario and Lake Erie freeze over to keep their operations running.

Ontario NDP leader Andrea Horwath called on the Liberal provincial government to take action.

“The Premier has many options to make sure steel jobs stay in Hamilton instead of throwing up her hands. New Democrats have long proposed a job creator tax credit, getting sky-high electricity prices under control, and an industrial investment tax credit, all of which could help keep industry in Hamilton and in the province,” Horwath said in a statement.

Bratina, meanwhile, is looking to have city staff accelerate a report on the impact the shuttering of U.S. Steel would have on the city.

He wants to see it in the next 10 days to two weeks, but staff recently advised councillors it would take until the new year to produce the report. That would be roughly 12 months before the secret deal between the feds and U.S. Steel is set to expire, a deal the two parties struck to drop a lawsuit against the new foreign owners of the steel factory after U.S. Steel began to shut down the plant.

Old debts, and old patterns

At Queens Park, Brad Duguid, the Minister of Economic Development, Employment and Infrastructure, pointed to the roughly $150-million loan the province gave to U.S. Steel to keep pensions afloat as the action the province has done to help out. 

Duvall, a Ward 7 councillor, said U.S. Steel is following a pattern of dumping losses on Canadian operations to make the foreign operations look good, while receiving bailouts north of the border. 

"Big companies and corporations are taking advantage of this loophole," Duvall said. "They get themselves into so much debt. They're foreign owned. They suck that (Canadian) company dry and then they their (foreign owned) company can look good and then they call for creditor's protection. After everybody's been honest, giving them credit, doing what they've got to do, and saying, 'Well to get back on our feet we've got to rob you a little bit.'" 

Aside from the potential partial loss of pensions for between 8,000 and 9,000 former U.S. Steel and Stelco employees, the city is looking at how the underfunded pension could affect the tax base as well as social services in the city. Another major concern is the heavy industrial land that is underused during the uncertainty.

“The City of Hamilton should not be held to ransom on lands that are critical to growth of jobs in this city,” Bratina said. “The government has to have its own conscience in how it deals, especially with foreign companies operating in Canada.”

Union head Rolf Gerstenberger, of United Steel Workers Local 1005 said the Hamilton plant is “collateral damage” to the 2008 market fall, and U.S. Steel’s strategic plans.

“The only problem with our plant is it’s in Canada,” Gerstenberger said. “We don’t think that there’s any good going to come of it as far as us.”

Gerstenberger said roughly 600 union members are working at the plant right now, as well as an estimated 150 non-union staff. The stock price was hovering around the $45 (U.S.) mark Wednesday, levels it has not seen since July 2011, a time when 900 Local 1005 members were locked out over pension disputes.

Duvall says losses will have a 'ripple effect' on Hamilton taxpayers

The mayor was not at last week’s Steel Committee, which has been pouring over the data the city plans on sending to the federal government. Gerstenberger said his latest data is that the pension is 74.3 per cent funded.

Duvall said that there could be a "ripple effect" from the potential losses to worker's rights under a restructuring at U.S. Steel.

"My biggest concern is the pensioners, at the end of the day, could eventually lose a good portion of their pensions and their benefits," Duvall said, adding the loss of benefits would be felt by all taxpayers, who would have to support increased social services.  

Mayoral candidate Brad Clark, also a current councillor for Ward 9 in Stoney Creek, issued a statement calling on Ontario Premier Kathleen Wynne and Prime Minister Stephen Harper to convene an "urgent working group" on the issue.

“Yesterday’s application by U.S Steel Canada for creditor protection under Canada’s Companies’ Creditors Arrangement Act adds to the uncertainty faced by workers and pensioners,” said Clark. “It’s also a major cause for concern to Hamilton’s City Council.”

With files from The Canadian Press