U.S. Steel was optimistic when it bought Stelco, but now it wants billions back
Hearing over debt claim begins - workers and pensioners watching closely
The first day of hearings into whether U.S. Steel Canada owes its former parent company billions of dollars began with an American executive describing the optimism that surrounded the purchase of the former Stelco.
The hearing at Ontario Superior Court in Toronto is examining the claim made by U.S. Steel that $2.2 billion it invested in the Hamilton and Nanticoke operations of Stelco should be considered debt it is owed during the bankruptcy protection proceedings.
That claim is contentious:
It's opposed by the Ontario government, by active and retired salaried steelworkers, by the United Steelworkers union, who fear a ruling in favour of the American company's claim would compromise the Canadian operation's other obligations, including pensions.
- Read More: U.S. Steel claiming $2.2 billion in debt owed by former Stelco
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The decision could give the American company considerable control over Canadian restructuring plans and its claims, if successful, could mean little is left for pensions.
The hearing wrapped up at noon Thursday after the testimony of Larry Brockway, a vice president at the Pittsburgh-based U.S. Steel company who was involved in evaluating the steel company's acquisition of the former Stelco in 2007.
"We were feeling very optimistic about the steel industry at that time," Brockway said. "Unfortunately, not like now."
Questions to Brockway on Thursday focused on various stages of financing from the U.S. Steel parent company to the Canadian operation, whose management team and board was made up of U.S. Steel employees.
U.S. Steel claims that the $2 billion were loans but opponents argue that the Canadian operation was a fully controlled subsidiary at the time the parent company put the money in and decisions about the terms of those cash infusions were made by the parent company.
The parent company also was responsible for transferring contracts from the Canadian operations to U.S. Mills, effectively idling the plants.
Representing the province, attorney Peter Ruby made the point in questioning Brockway that the larger the diversion of production from Canada to the U.S., the larger the adverse impact would be on the Canadian plants' ability to keep going.
In the courtroom Thursday were legal representatives of all of those positions, as well as about 10 steelworkers who've sat through countless hours of court hearings since the U.S. company put the Canadian operations into bankruptcy protection last fall.
Paul Miller, MPP for Hamilton East-Stoney Creek, attended the hearing Thursday. He's criticized the federal government for its secrecy surrounding the acquisition and a 2011 settlement in which the feds allowed the American company to reneg on its promises to keep steel-making operations going in Canada.
Miller, himself a former steelworker at Stelco, said during a break in the hearing that he went through a bankruptcy process with Stelco before, and doesn't like the process.
Judges "always favour the company, never the workers," he said. "It's terrible."
Thursday's hearing is "almost like an instant replay" of that former restructuring process, he said.
Outside the courtroom, representatives of the Hamilton and Nanticoke steelworkers union locals said the decisions discussed in court pointed to a pattern of assigning debt to the Canadian operations while simultaneously reassigning their projects – and any chance of repaying those debts – to American mills.
"I think that as the trial goes on, what we're going to find is that a lot of this was created," said, Bill Ferguson, head of steelworkers union Local 8782 at Nanticoke. "Everything was created in order to facilitate this bankruptcy."
"It was supposed to be a net benefit for Canadians, for this takeover of U.S. Steel by Stelco," added Gary Howe, president of USW Local 1005. "And clearly it's shown here that there was no net benefit to Canadians, at all."
Six days are scheduled for the hearing and the hearing resumes Friday.
The CBC's Kelly Bennett is covering the trial from Toronto starting Thursday. You can follow her live coverage here beginning Thursday.