Can Stelco keep the labour relations honeymoon going?

One year in under Bedrock’s control, labour looks at what lays ahead

STELCO IS KNOWN for many things from its turbulent 108-year history — but exemplary relations between the company and its unions is not one of them.

Yet, against a backdrop of decades of fist shaking, placard waving, pension protests, strikes and lockouts, many are noting an unusual detente between the company and its unions.

Nearly a year after American venture capital firm Bedrock Industries — led by CEO Alan Kestenbaum — took over Stelco, all sides are saying the new owners are trying hard to set a new course.

“Labour relations are better. That’s for sure. I would say that. We still have issues to resolve. But things have improved,” says United Steelworkers Local 1005 president Gary Howe.

“We still have issues to resolve. But things have improved.” GARY HOWE

President, United Steelworkers Local 1005

Recently retired United Steelworkers Local 8782 president Bill Ferguson said the atmosphere has been “like night and day” since Bedrock took over the company from U.S. Steel last summer after nearly three years of bankruptcy protection.

“We’ve seen big changes with Bedrock coming in. The labour relations are completely different,” said Ferguson, whose local represents Stelco workers in Nanticoke.

A $162-million infusion of cash — in two payments of $20 million and $142 million from Bedrock earlier this year — into Stelco’s struggling pension plans has gone a long way in dealing with one of the most festering union issues. The company was obliged under the restructuring deal to make payments toward the plans over time based on business results. Instead, Bedrock renegotiated with the unions to provide the money up front that made the pension plans 85 per cent funded, and released the company from future payment obligations.

Howe says the shot of cash has done much to calm pensioner fears, but he believes Bedrock will eventually do so well with its investment in Stelco that the $162 million will be seen as water under the bridge. But will the honeymoon last or will the company lapse back into labour relations as usual?

“Things seem to be surprisingly peaceful at the moment,” says McMaster University labour studies professor Wayne Lewchuk. “I’m sure going through a neardeath experience (through the court-supervised bankruptcy protection process) had some influence and I guess a lot of bad history got washed away with that.”

Lewchuk notes that labour relations got off to a horrible start with the bitter 1946 strike that saw rancorous clashes between strikers and replacement workers. The strike is viewed by labour historians as a working class revolt reminiscent of the 1919 Winnipeg General Strike.

The company wanted to go back to a pre-war authoritarian style of management, Lewchuk says. Whereas the workers, many of whom were returning from the Second World War overseas, did not find that acceptable.

Local 1005 was officially chartered in 1942, but the company did not recognize the union, and workers took to the picket line, eventually winning recognition and a first collective agreement.

The 81-day strike bitterly divided the community and set a nasty tone for negotiations that followed. Historic tensions were made worse through the 1970s and ’80s when the company’s business fortunes sputtered. There were long labour disruptions that, Lewchuk said, “probably damaged everybody’s interests. And then the buyout by U.S. Steel (in 2007) was a bit of a disaster both from the perspective of management and from the workers.”

One person who is deeply critical of the U.S. Steel ownership days is Kestenbaum.

“One of the first things I noticed when I got into Stelco was that labour relations ... (were) not great. The first thing I did when I got there was to insist to senior management that the people who work as union members are our employees ... we treat them like equals. We treat them like adults. We value their opinion,” he said.

“It has always been my philosophy to be very friendly and co-operative with unions, to listen to their concerns. If we can address them and achieve what they want to achieve and, at the same time, achieving the objectives of the company and the company’s shareholders, then that’s just a win-win situation,” he said.

“Too many people go into labour relations with an antagonistic attitude, trying to win a battle but lose the war. We focus on the war and the war is to go and create a very productive company and to do that you need good relations with all workers, whether they are unionized or not. That is our philosophy and it has worked for us and I can point you to many situations over the years in particular with my relationship at the (United Steelworkers). We have a great reputation, a great track record with them and great working relationship with them.”

Before acquiring Stelco, Kestenbaum ran a silicon-alloy company called Globe Specialty Metals Inc. — and later Ferroglobe PLC — and had numerous dealings with the United Steelworkers officials in the U.S.

One person who has good things to say about Kestenbaum is Leo Gerard, the president of the United steelworkers International Union.

“My experience with Alan Kestenbaum has been positive,” Gerard told the Spectator last summer.

In fact, it was Gerard who suggested to Kestenbaum that he look at investing in Stelco. Gerard knows Stelco well because he began his labour career negotiating contracts there as a union representative.

McMaster University business professor Marvin Ryder says the new Stelco “in some ways sounds like the old Sherman family running Dofasco.”

Dofasco — known as ArcelorMittal Dofasco since 2006 — still uses its wellknown slogan: “Our product is steel, but our strength is people” to describe its management style and continues its profit sharing tradition. The company that was created in 1912, with Clifton and Frank Sherman at the helm, never unionized.

University of Toronto steel expert Peter Warrian says “this is all good given the acrimonious history ... but the real question is where do they see this business in five or 10 years. And that is where they both have to roll up their sleeves and figure it out,” he said.

The restructured Stelco that Bedrock acquired for about $500 million has no debts because they were removed through the court supervised creditor protection process. As well, the company does not have to worry about environmental legacy issues because Stelco is now leasing the land it operates on from a land trust (so the land trust assumes the risks).

For the time being, Ryder says, Kestenbaum is in a good position. But that could change with NAFTA renegotiations and mood swings by U.S. President Donald Trump when it comes to steel tariffs.

“I always say the true test of management is not how you manage during good times, it is how you manage during bad times.”