Stelco Inc. employees in Nanticoke and Hamilton, Ont., are voting today and Tuesday on whether to accept a new collective agreement proposed by potential buyer Bedrock Industries Group LLC, CBC has reported.
Ontario Superior Court Justice Herman Wilton-Siegel won’t sign off on the purchase until the agreements are in place, according to the Globe and Mail. Creditors have already approved the purchase, and should Wilton-Siegel do so as well at a court hearing on June 9, Stelco could exit Companies’ Creditors Arrangement Act protection this month. It entered creditor protection in 2014 under then-parent United States Steel Corp.
The company’s troubles have in many ways centred on its pension obligations, and Marvin Ryder, a professor at McMaster University’s DeGroote School of Business, expressed surprise at the latest developments given the Hamilton local’s stance on the restructuring so until now. “The local here in Hamilton has said that when they entered the negotiation with Bedrock, they had three lines in the sand that they weren’t going to cross,” says Ryder.
“One was a guarantee of employment, so all the people who have a job keep a job. No. 2, top up the pension fund 100 per cent, and No. 3, no reduction in benefits. So that’s their position. And then Bedrock had their position which was, no, we’re not going to top up the pension fund. We don’t have $850 million lying around. And no, we’re not planning on giving you full [post-retirement benefits]. . . . And we’ll give you a guarantee on your jobs but only for two to three years.
“There seemed to be a gulf. Therefore, I was surprised that both sides reached something that could be taken to the membership. . . . My gut feeling is that likely Bedrock gave a little on the [retiree benefits] and maybe went a little further on the job guarantees. But I have a feeling that the union has had to come down on topping up the pension fund.”
Under the new collective agreement, Nanticoke employees will receive an additional $1.33 per hour once the company exits CCAA restructuring, according to a document on the union local’s website. Their cost-of-living allowance would also increase, and employees with 30 or more years of service would receive 15 weeks of extended paid vacation in addition to their regular allotment.
Read: Stelco’s long battle on the pension precipice
Significantly, Nanticoke’s collective agreement also states that “retiree benefits to be fully funded and administered by the union. No change to benefit level and out of country will be added.”
Active employees in Hamilton would also see slight increases in wages and short-term disability payments and would receive 18 months’ notice if the company decided to close a coke oven, CBC noted. However, Hamilton retirees — who can’t vote on Tuesday — would see their post-retirement health benefits only partially restored to 70 per cent.
Gary Howe, president of United Steelworkers Local 1005 representing the Hamilton workers, told CBC the issues around post-retirement benefits were simply a matter of arithmetic: Nanticoke has 800 active workers and 1,000 retirees, while Hamilton has 540 active workers and 9,000 retirees.
Read: Salaried employees, retirees approve Stelco’s restructuring plan
According to Ryder, Bedrock was clever in coming to agreements with salaried workers, the Ontario government and U.S. Steel before negotiating the collective agreements.
“You’re really putting the unions and the workers in a tough spot, because if the company goes bankrupt, there are no jobs,” he says, adding members would see pension benefits reduced by about 20 per cent.
“So clearly, bankruptcy is the worse case scenario for everybody, for creditors as well. Rather than getting 25 cents on the dollar, you might get 10 cents on the dollar. It’s in everyone’s interest to find a way to keep this company going.”