The Stel Salaried
Pensioners Organization wishes to thank The Hamilton Spectator for permission
to post the following article by Reporter Naomi Powell published in the January
11, 2006 edition
By Naomi Powell
The Hamilton Spectator
(Jan 11, 2006)
A Stelco financier hopes to reinvigorate the company by
bringing in "fresh blood" to replace CEO Courtney Pratt.
Stelco's new controlling shareholders have asked Pratt to
step down as CEO if the company's restructuring plan is approved by the court
at a sanction hearing next Tuesday.
"In the spirit of building a new company, we thought
fresh blood would be important," said Greg Boland, portfolio manager at
Sunrise Partners LP.
"It was a long, drawn out restructuring and we felt for
the sake of everybody feeling invigorated about the new company, it would be
best to find someone new."
In exchange for bankrolling the company's exit from
bankruptcy protection, Sunrise, together with New Jersey's Appaloosa Management
LP and Toronto's Tricap Management Ltd., will have a majority interest in
Stelco and right to name its board and management.
A new slate of directors is to be announced in a couple
days.
Although stepping down as chief executive officer, the
controlling shareholders have asked Pratt to stay on as chairman of the board
and help choose his replacement.
"He's a very capable person," Boland said.
"He understands the company and as chairman he could be very
effective."
Asked about the outlook for Stelco yesterday, David Tepper,
president and founder of Appaloosa Management, was cautiously optimistic.
"I think that it's either going to be very good or very
bad depending on if we can reach a fair and comparable labour situation with
the rest of the North American industry," he said.
Hamilton Hilton Works employees, represented by Local 1005
of the United Steelworkers, will see their current labour contract expire in
August. Analysts say negotiating a new contract is among an imposing set of
challenges Stelco's new owners face if the company is to be competitive with
other North American steelmakers.
"Once they clear court, they're within six months of
another labour agreement," said Peter Warrian, a University of Toronto
professor who specializes in steel industry issues. "That's the next shoe
to drop."
Warrian says Stelco's new owners will likely be looking for
an agreement similar to one currently in place at International Steel Group in
the United States. That deal cut costs through a dramatic reduction in job
classes, a simplification of work rules and greater consultation with unions on
training and other issues.
"That deal is the benchmark for the industry,"
Warrian said. A similar agreement could be tricky to achieve at Stelco,
however, since relations between Local 1005 and management are
"problematic," Warrian added.
"The most daunting task at Stelco is changing the
culture," he said. "At the core of that is the relationship between
management and labour."
Further upgrades to finishing lines at Hilton Works and
Stelco's Lake Erie operations will also be key to the company's future, said
one Toronto steel analyst, asking not to be named.
"They've finished the financial restructuring. That's a
plus. But they still have a lot of work to do to take this company into the
next 100 years," the analyst said.
Boland and Tepper declined to comment on possible candidates
to replace Pratt, pending court approval of the deal.
Under the terms of that deal, Sunrise Partners and Appaloosa
will together own at least 34.5 per cent of Stelco. They will have the right to
appoint one director each on the steelmaker's new nine-member board.
Toronto's Tricap Management Ltd. will own at least 34.5 per
cent of Stelco and will select four directors. The remaining three directors
will have to be acceptable to all three players.
Sunrise has not yet identified its final choice for the
board, but several candidates are under consideration, Boland said.
Finding Pratt's replacement could be challenging, he said.
"But this is a new company, it's got its debt fixed,
its pension fixed. It's time to get back to making steel."
npowell@thespec.com 905-526-4620