Key U.S.S.C. workers offered bonuses

Company says it needs to offer the costly incentive to retain employees for the sale of Hamilton and Nanticoke operations

A select group of U.S. Steel Canada employees are being promised new cash bonuses to stay with the troubled company.

In a motion to be taken to court next week, the company asks for a pool of more than $1.5 million to keep 35 workers at their posts while the company restructures under creditor protection.

The new money is addition to a pool of almost $2.3 million divided among most of the same people last year and base salary raises from another pool announced earlier this money.

Bill Aziz, the company’s chief restructuring officer, said in an affidavit the Key Employee Retention Program (KERP) may be critical to ensuring a successful sale of the former Stelco as an operating business.

“U.S.S.C.’s management believes that the key employees may seek employment elsewhere if they are not incentivized to remain at U.S.S.C.,” Aziz said.

The group, he added, “occupy essential management and operational roles at the company and are considered essential to U.S.S.C.’s dayto-day operations and who will be necessary if a transition plan is to be successfully implemented in the event of a going concern sale.”

Seven are in sales, a function that used to be performed by the corporate parent.

With that support now withdrawn, the department is struggling to rebuild itself and losing those workers “would cause a direct detriment to U.S.S.C.’s ability to generate revenue.”

The special bonuses, ranging between 25 and 50 per cent of a worker’s annual salary, will be paid if the workers stay with Stelco until they are terminated without cause or until a restructuring, sale or liquidation is complete.

Salaried workers have not received a raise in two years and also lost profit-sharing payments last year.

Unionized workers protested the salary raise after the company stopped paying health benefits to retirees, pension top up contributions and city property taxes.

In a note to employees last week, U.S.S.C. president Mike McQuade said even though the company’s financial picture is improving, without those cuts totalling $268 million a year “our business would have been unable to survive to this point.”

McQuade also challenged the union’s position that salaried staff members are being enriched at the expense of hourly workers. He noted unionized workers in Hamilton have received cost of living allowances and other payments of more than $2.5 million since 2015 while workers at the Lake Erie plant in Nanticoke will have received more than $5.8 million in bonuses and profit sharing payments by October. A portion of that money goes to retirees.

In two related industry developments, leaders of the United Steelworkers union at Essar Steel Algoma have filed documents asking for the sales process of their company to be suspended so a rejected suitor can re-enter the auction.

The union is reacting to KPS Capital Partners, a private equity fund that had been selected as the bidder for the company, dropping out of the bidding. The investment fund cited its failure to reach agreement with the provincial government over pension deficit funding and environmental liabilities.

The union has signed an agreement to draft a purchase deal with Ontario Steel Investments Limited, a consortium including Essar Global, which has promised to pay off pension deficits, restore retiree health benefits and continue operating the steel mill.

It has also proposed merging Algoma and the former Stelco into a new Canadian steel company.

In another development, the Financial Times reported this week based on an unnamed source that Liberty House, the commodities trading group founded by Sanjeev Gupta, has dropped its bid for Tata Steel in Britain and set its sights on Algoma and Stelco.

If the sales processes for both companies are reopened to let Essar back into the bidding, an opportunity could be created for a new bid.

. . . Employees may seek employment elsewhere if they are not incentivized to remain at U.S.S.C. BILL AZIZ CHIEF RESTRUCTURING OFFICER