The
Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator
for permission to post the following article published in the August 27, 2007
edition
U.S. Steel bid for Stelco should bring
steelmaker needed investment:observers
The Canadian Press, 2007
TORONTO (CP) - Fresh capital will likely
come to steelmaker Stelco Inc. (TSX:STE) as it joins with a bigger player used
to competing in the global market, money to help it deal with pension
liabilities and outdated operations, observers say.
The C$38.50-per-share offer from United
States Steel Corp. (NYSE:X) includes a commitment from the provincial
government with regard to Stelco's main pension plans and operations in
Ontario, as well as a voluntary contribution of about US$31 million to Stelco's
pension plans.
The company's outdated Hamilton operations
and between US$1.3 billion and $1.5 billion in pension and health-care
liabilities were the two main sources of skepticism ahead of the deal, with
many analysts expressing doubt that the company would find a suitable buyer
when it put itself up for sale in June.
But according to New York steel analyst
Chuck Bradford, the pension issue "should be pretty well taken care
of" as a result of the deal, which he considers good news for Stelco's
workers.
"It's pretty clear that they (U.S.
Steel) intend to invest in Stelco, they plan to utilize Stelco's facilities, do
some upgrades, so all that should be very good for the workforce at
Stelco," he said.
"You don't buy a company to shut it
down and it's pretty clear that one of the big benefits U.S. Steel expects to
get out of owning Stelco is about 900,000 tonnes of slabs, most likely coming
from Hamilton, that will be available for U.S. Steel's plans in the U.S."
U.S. Steel has said it does not plan to
reduce Stelco's workforce of about 3,600, or close operations.
The proposed sale follows extensive
restructuring efforts after Rodney Mott took over from Courtney Pratt as CEO.
Pratt oversaw the company's emergence from
bankruptcy protection in 2006, after a two-year restructuring effort under
court protection, with the company's management and its major unions at
loggerheads through most of the period.
Mott had always been clear about his
interest in making Stelco part of a bigger firm, announcing plans last year for
increased steel production volumes, as well as changes to product mix and
pricing and voluntary job reductions.
He put the company up for sale in the
spring, in a move that was widely expected after a frenzy of consolidation in
the steel sector, saying he hoped to sell the entire company to another
steelmaker rather than break it up and began shedding non-core assets to make
the enterprise as attractive as possible.
In its second quarter, Stelco showed
improved productivity and a profit of $5 million before taxes and one-time
charges.
BMO Nesbitt Burns Inc. steel analyst Randy
Cousins said future investments in the company's operations and job security
for its workers will largely depend on how U.S. Steel sees Stelco fitting in to
its business.
"The Stelco that you and I know as a
standalone business with executives making independent decisions for the
individual assets within the company - that won't happen anymore," he
said.
"If it makes sense to put money into
Hamilton rather than put it into the Gary Works (plant on Lake Michigan), or to
put money into Hamilton rather than into Mon Valley ( one of U.S. Steel's five
integrated steel making facilities) - then someone at U.S. Steel will make
those decisions... on the basis of a larger entity."
Given the ongoing consolidation in the steel
industry, he added, being part of a larger organization is likely to be
beneficial for workers, but, he said, "the impact on the workers at Stelco
will be a function of how U.S. Steel sees those assets fitting into its overall
corporate strategy."
Stelco's main operations, in Hamilton and at
Nanticoke on Lake Erie, produce hot-rolled, cold-rolled, coated sheet and bar
products.
The company's shares traded up 40 per cent,
or $10.81, at $37.74 Monday - slightly below the offer price.