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Stelco's blueprint for the future reveals a company with about 1,200
fewer workers, at least six fewer product lines and partnerships with
other North American steelmakers.
The Hamilton and Lake Erie operations will form the core of the new
Stelco and the company will seek buyers for its Stelwire, Stelpipe and
Stelfil divisions.
The goal of Stelco's reinvention is to become strong enough to form
alliances with other companies, CEO Courtney Pratt said.
He wants Stelco to be able to do that "on our terms and not
anybody else's."
"The number of product lines will be significantly reduced from
2003 levels and eight obsolete facilities or non-core businesses will be
closed or sold," the steelmaker said yesterday.
As of the end of June, Stelwire employed about a total of 400 in
Hamilton and Burlington.
Stelpipe had about 550 workers in Welland and Stelfil employed about
300 in Lachine, Que.
Many of those employees might continue to work for new companies, if
the divisions are sold.
Stelco is also looking at closing two pickling lines, which chemically
clean steel, and a Hamilton strip mill.
In a letter to employees yesterday, Pratt said "no one likes to
take these steps but they are absolutely necessary if the rest of the
company is to survive."
During an interview with The Spectator yesterday, Pratt said
management will be part of the reductions.
He did not give any specifics on how many managers might lose their
jobs and at which divisions.
The strategy released yesterday has reignited some of the union's
anger towards Stelco management.
Rolf Gerstenberger, president of Hamilton's Local 1005, said the
company showed him the plan on Tuesday.
The union now has experts going over it "with a fine tooth
comb," he added.
"We do not agree that the workers' only role in this is to bicker
over which workers retire or get laid off.''
While slimming down, Stelco hopes to inject more productivity into
some operations through capital investments.
Those include expansion of the Lake Erie hot strip mill, installing a
new pickling line in Hamilton and building electricity co-generation
plants in Hamilton and Lake Erie.
All those projects would take a year and a half to two years to
complete and cost a total of $360 million to $465 million.
Co-generation plants would mean significant emission reductions from
Stelco operations, which the company says would be good news for
Hamilton's environment.
The co-generation plants would use waste fuels generated at Stelco
plants in order to reduce its hydro use.
Stelco spends close to $700 million on energy from gas, hydro, coal
and coke.
"Stelco is unable to raise the money needed to fund these
projects," Stelco said yesterday.
The company says it must be able to show the investment community that
it is reducing costs.
"When we come out of this, we will (still) be a relatively small
producer," Pratt said yesterday.
"There's a lot of consolidation and partnering going on in the
industry, not just in North America but around the world."
Pratt did not say what form Stelco's industry alliances would take.
The new Stelco will focus on the hot rolled steel made at the Lake
Erie plant in Nanticoke, as well as slabs, cold rolled steel, galvanized
steel and bar.
The steelmaker said focusing on automotive steel makes sense because
Canada's major car manufacturers are all within a few hours' drive of
Stelco operations.
That's an advantage Stelco shares with its next door neighbour,
Dofasco.
About 43 per cent of Stelco's total revenue came from the automotive
sector last year, nearly the same percentage as at Dofasco.
Stelco says the two companies will emphasize different products.
Stelco's four-point strategy for 'the new Stelco'
1. Build on existing strengths that differentiate it from other steel
producers.
2. Focus on high quality products for value added markets, including
the automotive and other sectors.
3. Simplify the number of product lines, processes and facilities.
4. Invest in new facilities that strengthen Stelco's competitive
advantage.
Focus on improving energy costs
* Stelco spends $690 million year on fuels and utilities (gas, hydro,
coal and coke).
* Energy costs have escalated dramatically since 1999 and greatly
affected profitability.
* Lake Erie and Hamilton currently generate waste gas fuels which are
not being utilized.
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