The Stel Salaried Pensioners Organization wishes to
thank The Hamilton Spectator for permission to post the following article by
Reporter Steve Arnold published in the June 4, 2005 edition
By NAOMI POWELL
The Hamilton Spectator
TORONTO (Jun 4, 2005)
It is perhaps a perfect coincidence that the hotel hosting
Stelco's mediation talks is itself in the midst of reconstruction.
The plush lobby of Toronto's Sheraton Centre is lined with scaffolding
and sheets of plastic. Workers in hardhats ride escalators past lawyers in
three-piece suits, most of whom have spent the week striding through the
mezzanine, where the key stakeholders in Stelco's restructuring are cloistered
in conference rooms.
It is in this row of conference rooms - each separated by only a
few steps, that the stakeholders - the unions, salaried employees, the
government and the bondholders and the company among them - are attempting to
mold their vastly different visions for Stelco's future into a single
restructuring plan.
On the line are jobs and pensions of thousands of retired and
active workers, the survival of Canada's largest steelmaker in terms of
exports, and arguably the economic future of a city.
"It's like a high stakes poker game," says Ontario
Superior Court Justice Warren Winkler, who mediated discussions between Air
Canada and its unions when the airline restructured last year. "People get
so exhausted from the tension they just run on adrenaline. They sleep on the
floor, they get sour. When you have a lot on the line that's just the
reality."
Negotiations, which entered their fifth day yesterday, are
scheduled to wind up on June 5.
With the steel market softening and Stelco projecting
"considerably lower" profits in the second quarter, analysts say time
is running out for the stakeholders to agree on a viable plan to pull the
company out of bankruptcy protection.
Frustratingly, the biggest thing standing between them and that
elusive plan is each other.
"What this tells you is that things have had to be ratcheted
to another level," Winkler says. "The parties have admitted they
can't do it on their own, so they've called in someone, a mediator, to help
them."
At the heart of their differences at the bargaining table, is a
curious predicament: while under the blanket of the Companies' Creditors
Arrangement Act (CCAA), Stelco has raked in record profits.
Dramatic increases in the price of steel and voracious demand from
China allowed the insolvent steelmaker to post a profit of $49 million for the
first three months of the year, its highest quarterly operating profit on
record.
It was, analysts agree, a case of terrible timing.
"It's hard to convince a union the situation is desperate,
that you need their help, when you're making money," says Charles
Bradford, head of New-York-based Bradford Research.
But the situation is desperate, Bradford insists, or will be soon.
The price for hot-rolled steel has dropped to a little more than $500 US a ton
from $756 US a ton in September.
"They can't be making much money in that climate,"
Bradford says. "They've got to be losing, but both sides tend to listen to
what they want to hear."
One Toronto analyst noted that if Stelco is not on the brink of
bankruptcy now, it certainly will be by next year if it fails to upgrade
facilities, contend with its $1.3-billion pension deficit and mend its bitter
relationship with the union.
With all that cash rolling in, however, already skeptical union
leaders have refused to accept that Stelco is even in need of bankruptcy
protection.
Rolf Gerstenberger, president of Local 1005 of the United
Steelworkers of America -- Stelco's largest union local with 3,000 members --
has refused to even take part in mediation, pointing to recent skyrocketing
profits as proof that the company is bluffing. He's called the CCAA process a
"fraud" engineered by the company to break contracts and gain
concessions from the workers.
And then there is the issue of Stelco's $1.3-million pension
deficit, the biggest bone of contention for union leaders.
The one thing everyone can agree on, is that it's been a long 16
months. In that time, the company has courted and rejected several offers to
take over Stelco. The union has brought forward a plan from Brascan-backed
Tricap managment which proposes to put $500 million into the deficit and pay
the remainder out over five years.
And Justice James Farley has ordered everyone to base their
negotiations on a widely shunned restructuring plan circulated by the company.
Negotiations have extended late into the night as mediator George
Adams tries to coax Stelco's players, who until now have remained entrenched in
their corners, into an agreement.
Not that things haven't been cordial between the warring factions
since the mediated talks began. With their strategy rooms separated by only a
few steps, stakeholders who butt heads during negotiations will often share
food afterwards.
"If we have some leftover sandwiches, we'll send them
over," a source inside the talks says. "We're all human here. We're
all tired and away from our families."
The late hours often require last-minute pizza deliveries and
catnaps in the strategy rooms.
"You often don't sleep at all because your mind is
racing," says Buzz Hargrove, president of the Canadian Auto Workers.
In the end, analysts say, what may be necessary to push the
stakeholders together is a crisis.
The alternative for Stelco, analysts say, is uncertain. The best
scenario would see all players agree on a deal that would allow the company to
upgrade its facilities, streamline its operations and mend its union relations.
"The worst-case scenario is they come out of these talks and
out of bankruptcy protection without making the necessary changes to make them
competitive," says David Phelps, president of the American Institute for
International Steel. "They go back into protection again, they liquidate
and then everybody's out of a job. The owners walk away with nothing and the
management walks away with nothing. Nobody wants that."
npowell@thespec.com
905-526-4620