PENSION RELIEF PLAN

ArcelorMittal Dofasco scrambling to calm alarmed employees

ArcelorMittal Dofasco executives are scrambling to win support for a controversial pension funding scheme they say is critical to the company’s future.

Company president Juergen Schachler and other executives spent most of the week meeting with workers in an effort to calm fears the plan could leave employees facing drastic pension cuts if the company were to go out of business.

In a letter to employees dated Thursday, Schachler apologized for “underestimating the level of concern” around the issue of the company’s request to top up the pension fund over as much as 10 years. He stressed the company will still top up the pension funds even without worker approval for the special relief.

With the relief, however, AMD will have money to fund other projects needed to secure the Hamilton plant’s future.

“We all know we can only spend a dollar once. The new schedule of payments would provide ArcelorMittal Dofasco with some of the flexibility required to move forward in an unsettled economic en- vironment,” he wrote. “Accessing this Temporary Pension Funding Relief will help to ensure we have additional financial resources to fund projects.”

Last month employees and retirees were told the company plans to take advantage of two new provincial rules. One allows the company to combine current deficiency payments into a single contribution over a new five-year period. Another allows new shortfalls to be paid off over 10 years as long as no more than one-third of plan members do not object.

For AMD, that means almost $300 million in deficits will be paid over five years and the latest $200 million shortfall could be paid over 10 years.

The issue prompted a group of workers to purchase a full-page advertisement in The Spectator earlier this week urging members to “act now … to protect your pensions.”

The AMD pension plans covering 12,000 Hamilton workers and retirees are nearly $500 million underfunded. That means if the company were to go out of business there’s not enough money in the fund to pay all the pensions workers thought they had earned over a lifetime. In that scenario workers could face losing as much as half of their current pensions.

Schachler wrote that even with the special relief, the company will still pay about $20 million every year for a decade to cover the 2011 deficit. Without the break those payments would be $40 million over five years and could jeopardize efforts to upgrade the Hamilton plant.

Either way, he added, the company will continue paying off the deficit — it contributed $250 million to its pension plans last year and expects to pay another $100 million this year.

As current executives plead for support of the special payment plan, a retired executive has circulated a warning about the company’s financial state.

Joan Weppler, who was Dofasco’s vice-president of finance, warned the parent company has a heavy debt burden, its bonds have been branded with a “junk” rating that means lenders demand higher interest rates, and its share price has f allen more than 80 per cent since 2008.

In response the company has sold assets, cut costs, closed plants, extended debt payments and cut, but not eliminated, dividends to shareholders. Between 2008 and 2012 more than $6.5 billion was taken out of the company in dividends, and while the rate has been cut, another $312 million US will be taken out this year.

“ArcelorMittal … is now asking you to help them to improve their creditworthiness and to get through this ‘temporary’ cash crunch by increasing the risk to your pension,” she concludes. “Are you willing to provide more support based on the track record of the last five years? You have a confidential vote. This is an opportunity to say ‘not this time.’”

Workers and retirees, who all asked for anonymity for fear of company reprisals, say while they don’t like the proposal they’re afraid of what the company’s foreign owners might do if the plan is rejected.

“Is this going to be a replay of what happened at Stelco?” One asked.

Another retiree said everyone he has spoken with intends to vote against the plan out of anger at the lavish dividends shareholders have received while the pension plan was underfunded.

“We’re underfunded by less than (what shareholders) have taken out,” the retiree said. “People’s minds don’t go any farther than that.”

Many say they are angered by a process that counts them as supporting the plan unless they take action to register their opposition.

Tony Valeri, AMD’s vice-president for communication, tried to cool the concerns of workers by saying if the company’s plan to extend payments on part of the deficit is defeated “we will continue to move forward and find other efficiencies.

“We are managing this business in the environment of the day and in the interests of employees and shareholders,” he said.

The deadline for filing objections is Jan. 28.