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 28, 2007 edition
The Hamilton Spectator
(Sep 28, 2007)
A Stelco union leader says pensioners are
being put at risk by the company's sale to United States Steel.
In a circular spread through the company's
sprawling Hamilton plant this week, United Steel Workers Local 1005 president
Rolf Gerstenberger accused the company of conspiring with its American
purchaser and the provincial government to take important protections away from
pensioners.
The charges were immediately rejected by the
company.
Gerstenberger condemned the sale agreement
for releasing Stelco from requirements to contribute excess cash to the pension
plan and forbidding dividends to stockholders until the pension plans are fully
funded.
"These were like safety measures for
us," Gerstenberger said. "We're saying they should either abide by
their agreement or revert to normal pension funding."
When Stelco went into bankruptcy protection
in 2004, its main pension funds were $1.1 billion short of what would be needed
to meet obligations if the company went out of business. That deficit had grown
over the eight previous years after Stelco used a clause in Ontario pension law
to stop making payments to its plans on the assumption it was too big to ever
go out of business.
Under normal rules, Stelco would have been required
to pay that shortfall over five years.
As part of its financial restructuring, it
was given 10 years to make up the shortfall.
In exchange, its new owners agreed to
contribute $400 million upfront and to pay off the balance in annual
instalments. The initial payment included a $150 million Ontario loan.
In its August offer to buy Stelco, U.S.
Steel asked for the cash sweep and dividend requirements to be cancelled in
exchange for an upfront payment to the pension plans of $32.5 million.
Ontario Finance Minister Greg Sorbara signed
off on that deal which still requires approval by Superior Court.
Gerstenberger said underlying the deal is
the assumption U.S. Steel will live up to its promises to meet all Stelco's
obligations.
While the company may be strong enough to do
that today, he worries about what might happen the next time the steel industry
slips into a down cycle.
"We can't say in this day and age that
anybody is too big to fail," he said. "I want to know where our
protection is when the steel market goes for a dump again?"
Stelco president Rodney Mott said
Gerstenberger wants to hang onto the illusion of protection when U.S. Steel is
promising real money upfront.
The cash sweep, for example, is only
triggered when Stelco has $75 million in free cash flowing through the business
-- that's after capital spending, debt retirement and other obligations -- a
target Stelco is unlikely to meet any time soon.
"What they're giving up is a token
protection," Mott said. "We're giving them something upfront rather
than the potential of something down the road."
In exchange for giving up the clauses, Mott
said Stelco will become part of a stronger company able to make the investment
in new plant and equipment Stelco can't do on its own.
"I'm not saying we're failing, but
we're still marginal," he said.
"We're funding a pension plan, holding
our own on debt and limiting reinvestment ... while the commitment you see from
USX is to fund the pension and reinvest in the facilities in a way we
can't."
Stelco's pension plans are still $900
million short, but when the sale closes the promise to fully fund them will be
backed by a much stronger company than Stelco is on its own, Mott said.
United States Steel spokesperson John
Armstrong said the company won't comment on Gerstenberger's charges.
Finance Ministry spokesperson Scott Blodgett
said the government had agreed to remove the cash sweep and dividend clauses
because they would be hard to enforce when Stelco is fully integrated into
United States Steel.
"United States Steel stands behind
these plans in their entirety and has a history of paying more into its
pensions than is required by law," he said.
"The upfront payment promises an
irrevocable guarantee that more cash will go into the pension plan now than
does some possibility in the future."
Gerstenberger and Bill Ferguson, president
of the union local for Lake Erie plant workers, are getting legal advice and
may oppose the company's application for court approval of the changes to the
contract.
That hearing is expected Oct. 30.
sarnold@thespec.com
905-526-3496
With files from Naomi Powell, The Hamilton
Spectator