United States Steel Corp. has issued a stern warning to locked-out workers at its Hamilton facility that its operations there have lost "massive" amounts of money since 2007 and will not be kept open by subsidies from profitable mills.
In a letter to employees, U.S. Steel Canada president Anton Jura and general counsel James Garraux wrote that Hamilton Works has lost money at times "even when other steel plants in North America have made money."
"Hamilton Works will survive only on its merits. It won't be protected or subsidized."
The warning comes amid a bitter dispute with unionized employees in Hamilton, who have been locked out since last November after they refused to accept U.S. Steel's demand to end indexing of retiree pension plans and agreed to a defined contribution pension plan for newly hired employees.
It's also another example of how the U.S. giant's $1.1-billion purchase of what was once Canada's leading steel maker has been marked by turmoil. The lockout of Hamilton Works employees came after a similar labour dispute at its Lake Erie Works in Nanticoke, Ont., and amid a court battle with the federal government, which insists U.S. Steel has not met employment and production commitments it made when the Stelco Inc. purchase was approved under the Investment Canada Act.
The operations of Stelco and neighbouring Dofasco Inc. represented for more than a century the heart of a Canadian-owned steel making industry. But they were taken over during the global consolidation of the industry in the 2000s that also led to the sale of Regina-based Ipsco Inc. and Algoma Steel Inc. of Sault Ste. Marie, Ont. to offshore interests.
The letter "is definitely a threat" to shut the Hamilton operations, said Rolf Gerstenberger, president of local 1005 of the United Steelworkers union, which represents about 750 active employees and another 9,000 retirees. "You can read between the lines."
U.S. Steel submitted what it called its final offer to the union last week.
The only changes from previous offers already rejected by local 1005's bargaining committee were a $3,000 ratification bonus, a $2-million payment to a fund that pays part of workers' wages during layoffs and a promise of 26 weeks of work for a minimum of 32 hours a week, Mr. Gerstenberger said.
He said the company has no plans to fire up Hamilton's blast furnaces again, but instead wants to get coke ovens running again as well as a finishing mill, which includes the Z-line that provides galvanized steel to auto makers. The steel to feed the finishing mill and the Z-line would be produced at Lake Erie.
U.S. Steel wants the union's bargaining committee to let employees vote on the contract, but Mr. Gerstenberger rejected that request, saying the company has simply handed out its version of contracts and not done any serious negotiating.
The letter to employees described the Hamilton Works as "a severely challenged facility in a very tough business." The offer "is more than fair given Hamilton's performance and the significant challenges ahead," it said.
The company has argued in its battle with the federal government that the 2008-2009 recession meant that if it had met the employment and production commitments it gave the federal government, the entire company would have been in danger of running out of cash to finance its operations.
Analysts raised the question Wednesday of why U.S. Steel bought Stelco in 2007 amid a global steel industry consolidation.
The most plausible answer, the analysts said, is that the Pittsburgh-based giant wanted to keep the company out of the hands of Russian steel maker OAO Severstal, which had bought Rouge Steel Inc., in Dearborn, Mich., earlier and was looking to expand its operations in the Great Lakes basin.