Decision day:
Local 1005’s contract vote on Tuesday will be crucial to success of Stelco’s restructuring deal. Story
The stage is being set for a historic contract vote on Tuesday by United Steelworkers Local 1005 members, a decision that is crucial to a major restructuring plan for Stelco that will be presented to a Toronto judge three days later.
Justice Herman Wilton-Siegel has said collective agreements at both of Stelco’s operations in Hamilton and Nanticoke need to be ratified before he will approve a Bedrock Industries takeover bid.
A “sanction hearing” has been scheduled for Friday that will see the massive restructuring deal laid out before court.
A deal with support from all stakeholders would be easily endorsed. But the lack of a key collective agreement could lead to time extensions or a binding arbitration order from the court. The company has suggested that a failure to negotiate new contracts — after more than two and a half years of creditor protection — could unravel the entire restructuring plan.
In motion documents from May 16, Stelco pointed to a collective agreement with Local 1005 as being one of the final obstacles and “... if such support is not forthcoming, Stelco will require a brief period of time to consider other alternatives, including a liquidation.”
Friday, though, a statement from the company was more optimistic.
“I appreciate the constructive engagement from the local USW leadership teams. The restructuring has been challenging for many stakeholders, with Stelco’s employees at the top of that list,” said the statement from Bill Aziz, Stelco’s chief restructuring officer.
“Pending the outcome of ratification votes, these new collective agreements will bring certainty and help position Stelco for future success. With all key stakeholders on board, we are significantly closer to completing a transaction with Bedrock and Stelco emerging from its restructuring as a strong, independent Canadian steel producer,” he said. Yet there are new problems. Hamilton Mayor Fred Eisenberger has sent a letter to Premier Kathleen Wynne calling for the redrafting of a land trust arrangement that would administer Stelco property and turn the steelmaker into a tenant.
The city is not happy about being left out of the negotiating process and fears former Stelco lands will be sold in a “fire sale” fashion with little regard for future potential.
Members of Local 8782(a) and 8782(b) voted Friday at polls that closed at 8:30 p.m. Results were not available Friday evening but most feel the contract — which is being recommended by the union’s bargaining committee — will receive a healthy endorsement.
The outcome, however, is not so certain in Hamilton.
Gary Howe, the president of Local 1005, says the bargaining committee is not endorsing the deal one way or the other.
“We’re not recommending. We’re neutral. People can take the information and decide themselves.”
The key irritant is Hamilton retirees will end up with less benefit coverage than their counterparts in Lake Erie. In Hamilton, the company has agreed to pay $20 million per year for OPEBs (other post-employment benefits). That’s substan- tially less than the $28 million that was paid in 2014 — the last full year before the court suspended the plan.
The tentative deal calls for a kind of trust fund to run the benefits, focusing on providing complete coverage for drug, dental and vision care whereas other benefits such as semiprivate rooms in hospitals may have to be limited.
The 8782 locals — because there are f ar less retirees to draw on the plan — will see no reduction.
“Benefits for retirees are not going to be as good in Hamilton as they are in Lake Erie. There is no denying that. And what has happened is wrong. But the problem is there are so many more retirees in Hamilton than there are Lake Erie,” Howe said.
Local 1005 has 500 active members with nearly 15,000 pensioners (including dependents). The 8782 locals have 1,100 members with about 800 retirees.
As well, the deal for 1005 would see the company contribute more than $300 million over 20 years to the pension plan but the shortfall is closer to $800 million.
“Retirees aren’t happy,” said pensioner Jake Lombardo, who retired two years ago after more than 37 years working at Stelco in Hamilton.
“There is no guarantee for us that we are always going to receive our full amount of pensions,” Lombardo said.
“There is not enough money going into these pension plans going forward. And we don’t think it’s fair that we are not getting full benefits like Lake Erie,” he added.
Retirees don’t get a say. Instead, it will be a decision by 500 active members, people who still have jobs at a massively downsized operation in Hamilton.
“I think we should get a vote. We should be stakeholder like the rest of them,” said Lombardo. “How do you have 500 people deciding what happens to all the pensioners?” So where does it all lead? “My sense is that this will be a very easy deal to ratify in Nanticoke,” Hamilton business professor Marvin Ryder said Friday before the outcome was known.
“If the 500 workers in Hamilton focus on the fact that they have a job and there is a way to go forward, they may very well ratify it.
“But if they really focus on the retirees, it might be harder for them to ratify it. And that will be where the drama will happen on Tuesday, June 6.”