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 September 22, 2005 edition
By Steve
Arnold
The Hamilton Spectator
(Sep 22, 2005)
Industry analysts remain cautious about
Stelco's plan to end nearly two years of bankruptcy protection, warning it
won't succeed if it doesn't solve the company's core problems.
The plan, which the company now wants
to take to its creditors and other stakeholders, would see Stelco's
restructuring ordeal finish by the end of this year.
Its key points include settling the
crushing $1.3-billion pension deficit over 10 years, starting with a $500
million downpayment that includes $100 million from the provincial government,
wiping out existing shareholders and getting $450 million from a venture
capital fund -- all without seeking wage, pension, benefit or job concessions
from workers. Unsecured creditors would be paid everything they're owed, in
stock and corporate IOUs that can be exchanged for more stock.
Bernie Wolf, economist and director of
the international MBA program at York University's Schulich School of Business,
said the fact the plan has no labour concessions is a major red flag.
"Stelco is a company with a long
history of bad labour relations, at least some of it stemming from bad
management," he said. "This is a case where all parties needed to
make some concessions."
Even without wage and benefit cuts,
Wolf said he still would have preferred to see a Stelco plan that included a
long no-strike clause and concessions on work rules and productivity
improvements.
"Those are the key things that
Stelco needs to do," he said. "If those things aren't done, it's
going to be a lot harder for Stelco to emerge as a viable and competitive
company."
Another Toronto-based analyst said
Stelco's key problems have always been a high cost of production because of
older and inefficient plants and equipment. A restructuring plan can only be
measured by how it solves those problems.
"Those problems will only be
solved by upgrading the facilities," he said. "We'll have to wait and
see if this solves the core problem for Stelco, but putting money into the
pension plan doesn't solve that core problem."
Until its capital spending program for
new plants and equipment is finished, Stelco's best hope for succeeding depends
on stable steel prices. On that point, a Dominion Bond Rating Service analyst
thinks it may in luck.
"It looks like the bottom (of the
price trough) has been reached. The environment is improving but it's not a
dramatic upswing," Jarrett Bilous said.
sarnold@thespec.com
905-526-3496