The Stel Salaried Pensioners Organization wishes to
thank The Hamilton Spectator for permission to post the following article by
Reporter Joan Walters published in the September 22, 2005 edition
By Joan Walters
The Hamilton Spectator
(Sep 22, 2005)
A failure at Stelco would have struck
hard at a huge swath of the economy and created a disaster in Hamilton, making
Ontario's $100-million loan to the steelmaker a responsible move.
That's what economists and politicians
are saying in the wake of a tentative deal to see Stelco restructured.
"Economists generally say that for
the modern steel industry, there are three jobs outside the steel industry for
every job in," says Peter Warrian, executive director of the Canadian
Steel Trades Education Committee and a professor at University of Toronto's
Munk Institute. "Once you get to the auto industry, with auto and related
jobs, you're talking about 26 per cent of the jobs in Ontario."
Just as important, he said, is ensuring
Stelco resolves its pension fund, which has a liability of about $1.3 billion
now, and which the province would ultimately have to step in to fund if Stelco
failed.
"While there may be some dispute
about the size of the amount, if the company just went belly up tomorrow, the
liability is in the magnitude of $1 billion," Warrian said. "So,
that's $100 million versus $1 billion."
The McGuinty government agreed to lend
Stelco $100 million over 10 years and the steel company will use $300 million
of its own money to pay down the pension deficit. The province will receive
warrants that could be converted to Stelco shares, giving the government a
holding that could ultimately equal as much as 8 per cent of the company. If
the pension deficiency is fully funded when the Ontario loan matures, Stelco
only has to pay back $25 million of the total loan.
Hamilton's senior cabinet minister,
Marie Bountrogianni, says her government considers the loan a good investment,
given the disaster that could result if the steelmaker failed.
"The loss of Stelco, that
corporate tax base, would be atrocious for the social services of our city, for
education, as well as the tax base it provides," she said. "It was
also necessary so that people could have security again."
A study done for Stelco as the company
went into bankruptcy protection estimated that total job losses if the
steelmaker failed would be in the range of 24,537 jobs -- 7,069 direct and
17,468 indirect -- locally and across Canada. The study, released by Ernst
& Young Inc. and Datametrics Consulting Inc. in 2004, said a collapse would
threaten $1.8 billion in salaries, wages, and other employment income and
reduce government tax revenue by $1 billion.
Andrea Horwath, NDP member of the
legislature for Hamilton East, said one of the most important items is the
security that the proposed deal brings to 8,000 to 10,000 Stelco pensioners.
"One of the impacts of (a
collapse) would be losing the income of all those pensioners who are living in
our community, who would lose their homes, who would not be able to contribute
in the local economy."
It's not the first time governments
have participated in a steel company pension bailout. Ontario had to provide a
$330 million, 30-year loan to its Pension Benefits Guarantee Fund in fiscal 2004
to meet claims following an earlier bail out of Algoma Steel Inc. of Sault Ste.
Marie. The deal involved $50 million in federal loan support, Ontario pension
guarantees and job losses and wage and pension cuts.
jwalters@thespec.com
905-526-3302