The Stel Salaried Pensioners Organization wishes to thank The Hamilton Spectator for permission to post the following article by Reporter Tara Perkins published in the July 29, 2004 edition
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Jul. 29, 2004. 12:52 AM |
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STELCO TO SLASH PRODUCT LINES |
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Expected to streamline operations, focus on
Hamilton, Lake Erie |
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By Tara Perkins |
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Stelco is expected to recommend today that it cut two-thirds of its product lines and trim operations to focus on Hamilton and Lake Erie. The company would not give any details yesterday of its strategic review, which is expected to be made public today. But sources say Stelco will probably shave its product lines to four from 14. The steelmaker now makes steel for everything from cans to automobiles. Analysts say Stelco has tried to be everything to everyone. "The day of the multi-product plant is gone," said Randy Cousins, a steel analyst. Last summer, analysts told The Canadian Press they had lost confidence in Stelco's future because the president at the time, Jim Alfano, could not say what moves the company was going to take to restructure. EXCLUSIVE Alfano left Stelco last July, days after a conference call in which he he was grilled by analysts for answers to company woes, but continually came up blank. In August, the steelmaker announced it was beginning a strategic review. After filing for bankruptcy protection in January, Stelco hired an outside consulting firm to help with the review process. Now, it's expected that Stelco will keep the high-value products, like cold rolled steel, that go to automotive companies. And the strategic review is expected to say Stelco should focus almost entirely on its Hamilton and Lake Erie operations. Stelco President and CEO Courtney Pratt recently announced the company is looking at selling the Stelpipe and Stelwire divisions. The review will probably also reiterate the need to attract money for modernization. Stelco has previously said it would like to build a co-generation plant in Hamilton, upgrade the hot strip mill at Lake Erie and build a new pickling (steel-cleaning) line in Hamilton. Those changes would cost at least $315 million. Yesterday in Toronto, Bay Street analysts cheered the idea of Stelco cutting product lines. Making large amounts of fewer products allows a company to lower costs, Cousins said. Another analyst, who did not want to be named, said scaling back products, "absolutely makes sense, in my opinion. "Most of the steelmakers in North America aren't as diversified as Stelco and they do very well. "There's something to be said for being focussed in what you do." Last week, Stelco announced that its rod mill, in north Hamilton at the harbour, will close in September. "We've said ... that Stelco operates in more product lines than the business can support," Pratt said at the time." This is an important step in the process of lowering our overall cost structure, reducing the number of product lines and focusing on our core business." He expects Stelco will begin putting together a concrete restructuring plan - outlining exact steps to fix the company - by the late fall. This strategic review is a major step towards that plan. When Stelco hired the Hatch Consulting Group in January, the steelmaker's spokesperson said the consulting firm's review would be the first major step towards a court-approved restructuring plan. That plan would detail how Stelco will emerge from bankruptcy protection. "This firm has the capability of allowing us to step back and look at our conclusions," Stelco spokesperson Tim Huxley said at the time. Hatch was expected to benchmark (Stelco) against what they are aware is going on in North America and on a global scale, and, in a sense, verify that we're on the right track. "What will come out of that ... will then allow the restructuring team - led by Hap (Stephen) - to engage in a dialogue with the various participants to come up with the overall plan or proposal that can be put before the court. "And, if supported by all the various participants, then that's where we go," Huxley said. Hatch is a global engineering consulting firm that has worked with many steelmakers, including Ivaco, Dofasco, Algoma in Sault Ste. Marie, and previous work with Stelco. In a letter to employees in April, Stelco Chief Operating Officer Colin Osborne said Stelco hired Hatch, "...in order to have an objective review and validation of the work completed to date, and to ensure that all opportunities are considered." tperkins@thespec.com 905-526-4620 |