Ottawa seeks court order to force U.S. Steel’s hand
July 17, 2009
By Naomi Powell
Hamilton Spectator
http://www.thespec.com/News/BreakingNews/article/601966
The Canadian government is asking a federal court to force U.S. Steel to live up to the promises it made when it bought the former Stelco.
Industry Minister Tony Clement said he is “not satisfied” with U.S. Steel’s response to a demand letter asking the firm to comply with its commitments on production and employment levels.
“I have carefully reviewed U.S. Steel’s response to my letter,” Clement said in a release. “I remain of the view that U.S. Steel is not complying with its undertakings, and I am not satisfied by its explanations for non-compliance.”
Clement will ask the court to order “appropriate measures” to remedy the situation.
He has said Canada can pursue a number of remedies, including "unwinding the deal" that led to its $1.9 billion purchase of Stelco in 2007. It could also seek court penalties of $10,000 a day.
In a statement, U.S. Steel said it had received the court documents and would “vigorously defend” its record at U.S. Steel Canada.
“We are disappointed that the Minister has apparently decided to pursue the matter in the courts while ignoring our numerous requests to meet with him on these issues and while disregarding the Ministry’s own guidelines with respect to foreign investment,” said Jim Garraux, General Counsel at U.S. Steel.
Clement sent a demand letter to U.S. Steel in May, shortly after the Pittsburgh steelmaker shut down its plants in Hamilton and Nanticoke due to a worldwide slump in demand for steel. The firm subsequently laid off 2,190 Canadian employees.
Clement has said that the shutdown violated a set of undertakings the firm made when it bought Stelco in 2007. Industry Canada has not disclosed the specific commitments made by the firm and full details of the firm's agreement with Canada have never been released.
But in a filing to American securities regulators in 2008, U.S. Steel identified promises to "maintain employment levels" at the former Stelco and commit $200 million in capital expenditures. About $100 million of that investment was to be spent at Hamilton Steel.
Though U.S. Steel has gradually ramped up steel production at plants in Indiana and Illinois, it has not restarted any steelmaking operations in Canada.
The firm recently recalled 800 Hamilton workers, though union leader Rolf Gerstenberger has said the move was made in order to avoid setting aside about $15 million in severance pay for workers. The payments become mandatory under Ontario labour law when workers are laid off more than 35 weeks.
U.S. Steel’s Hamilton coke ovens are now the only Canadian facility in operation. The firm recently shut down cokemaking at Lake Erie Steel in Nanticoke - where it is in the midst of renegotiating a labour contract that expires on July 31.
“It’s long overdue,” said Tony De Paulo, area coordinator for the United Steelworkers union. “We’ve been waiting for someone to take them on and this will only make negotiations more interesting.