The Trump fac­tor with Stelco owned by Bedrock

Will hav­ing U.S. owner be Amer­i­can enough?

The Hamilton Spectator - - FRONT PAGE - MARK MCNEIL The Hamil­ton Spec­ta­tor

“An in­vest­ment in Stelco has be­come a higher risk in­vest­ment be­cause of the Trump fac­tor.” JOE D’CRUZ PRO­FES­SOR, ROTMAN SCHOOL, UNIVER­SITY OF TORONTO

OB­STA­CLES TO THE TAKEOVER of Stelco by Bedrock In­dus­tries are fall­ing fast, set­ting the stage for the Amer­i­can in­vest­ment com­pany to emerge as the steel­maker’s new owner at the end of next month.

But there is one com­pli­ca­tion out­side the closed-door ne­go­ti­a­tions that is far from be­ing set­tled — Don­ald Trump.

“I think Trump has added some new risks to the equa­tion. With his ‘buy Amer­ica, hire Amer­i­can’ slo­gans, he tends to be quite un­pre­dictable in terms of the spe­cific ac­tions he takes,” says Joe D’Cruz, a pro­fes­sor emer­i­tus of strate­gic man­age­ment at the Rotman School of Man­age­ment, Univer­sity of Toronto.

“An in­vest­ment in Stelco has be­come a higher risk in­vest­ment be­cause of the Trump fac­tor. That means there is more un­cer­tainty about the prospects of Stelco than would oth­er­wise be the case.”

McMaster Univer­sity busi­ness pro­fes­sor Marvin Ry­der says a key ques­tion over the months ahead will be the ex­tent to which the newly re­struc­tured Stelco will be viewed un­der chang­ing trade rules. Would it be seen as Amer­i­can or Cana­dian when it comes to sell­ing steel in the U.S.?

Af­ter more than two and a half years of cred­i­tor pro­tec­tion un­der the Com­pa­nies’ Cred­i­tors Ar­range­ment Act (CCAA), a re­struc­tured Stelco is pre­par­ing to re­turn to the mar­ket­place un­der own­er­ship by Bedrock In­dus­tries.

Sev­eral months of ne­go­ti­a­tions have

pro­duced a com­pli­cated plan that would, among other things, see Stelco be­come a ten­ant on a land trust. Fi­nal de­tails are be­ing set­tled about Bedrock’s obli­ga­tions with pen­sion con­tri­bu­tions.

Last week United Steel­work­ers Lo­cal 8782 (a) and 8782 (b), which rep­re­sents work­ers at the Lake Erie plant, reached a ten­ta­tive agree­ment while of­fi­cials from Lo­cal 1005 in Hamil­ton say they have a “frame­work of an agree­ment” for their mem­bers.

Col­lec­tive agree­ments are the last pieces of a mas­sive re­struc­tur­ing plan that would be put to a Toronto judge for ap­proval on June 9. If the plan is ap­proved, the com­pany is ex­pected to emerge from cred­i­tor pro­tec­tion by June 30.

But how suc­cess­ful will the new com­pany be in a world of volatile steel prices, pro­tec­tion­ism and North Amer­i­can Free Trade Agree­ment (NAFTA) rene­go­ti­a­tions? The mar­ket­place it en­ters could turn out to be vastly dif­fer­ent from the one it ex­ited back in the fall of 2014.

“We can count on a much more ag­gres­sive en­force­ment of trade laws and a strict fo­cus on the rules of na­tional ori­gin,” says Univer­sity of Toronto steel ex­pert Peter War­rian.

Ry­der says that in the re­cent past, the steel­maker has gone through dif­fer­ent per­sonas that would likely give it vary­ing stand­ings in the Amer­i­can market.

“It’s the whole ques­tion of prov­i­dence — what it takes to de­clare a com­pany Amer­i­can or Cana­dian could be­come quite in­ter­est­ing.”

When the steel­maker was a sub­sidiary of U.S. Steel, Ry­der says, the com­pany was in the best po­si­tion to ar­gue it should be cat­e­go­rized as Amer­i­can and sub­ject to the same or sim­i­lar rights steel com­pa­nies in the U.S. But more re­cently, it cut ties to its Amer­i­can par­ent and set out as an in­de­pen­dent Cana­dian com­pany, a step in the op­po­site di­rec­tion.

“When they re­named them­selves Stelco, they were clearly Cana­dian,” says Ry­der.

“Now, with an Amer­i­can owner (Bedrock), they can make a bet­ter con­nec­tion to be­ing Amer­i­can. It’s not as good as be­ing U.S. Steel Canada. But it’s bet­ter than be­ing Cana­dian owned.”

Trump has promised a mul­ti­year, tril­lion-dol­lar in­fra­struc­ture in­vest­ment which would in­volve a lot of steel. A Bedrock-owned Stelco would clearly be in­ter­ested in that.

A spokesper­son for Stelco could not be reached for com­ment to dis­cuss the is­sue. How­ever, in De­cem­ber — at a flag-rais­ing cer­e­mony to cel­e­brate the com­pany’s re­turn to the name Stelco from its for­mer moniker, U.S. Steel Canada — Michael McQuade, gen­eral man­ager and pres­i­dent of USSC, replied, “That’s a great ques­tion. I do not know the an­swer to that.”

In March of this year, he said, the in­dus­try had rea­son to be “con­cerned” with the loom­ing rene­go­ti­a­tion of NAFTA.

“While I am en­cour­aged by the po­si­tion taken by our gov­ern­ment dur­ing these early days of the new U.S. ad­min­is­tra­tion, I be­lieve our fo­cus should be on in­creased col­lab­o­ra­tion with our largest trad­ing part­ner,” McQuade said. “We should be work­ing to­gether to en­cour­age growth in man­u­fac­tur­ing in both our re­spec­tive coun­tries.”

“Who knows with Trump,” mused Bill Fer­gu­son, pres­i­dent of the 8782 lo­cals. “Any day some­thing can change with him.”

But Fer­gu­son feels “we’re much bet­ter off to­day than we were while owned by U.S. Steel.

“So far with the dis­cus­sions I’ve had with Bedrock, it looks like they are se­ri­ous about mov­ing for­ward and build­ing a good solid com­pany. But only time can tell.”

Now, with an Amer­i­can owner (Bedrock), they can make a bet­ter con­nec­tion to be­ing Amer­i­can. MCMASTER BUSI­NESS PRO­FES­SOR MARVIN RY­DER

U.S. Pres­i­dent Don­ald Trump

KAZ NO­VAK, SPEC­TA­TOR FILE PHOTO

What will hap­pen to Stelco in a mar­ket­place sway­ing with pro­tec­tion­ism and NAFTA rene­go­ti­a­tion?

SEAN KILPATRICK, THE CANA­DIAN PRESS

Prime Min­is­ter Justin Trudeau meets with U.S. Pres­i­dent Don­ald Trump in the Oval Of­fice of the White House, in Washington, D.C., on Feb. 13.

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