Lifestyle

The Ode: Stelco (1910 - 2010)

The company's fortunes were forged during wartime, but a half-century of warfare between unions and management finally took their toll.

The Steel Company of Canada was formed in 1910 through the merger of the Hamilton Steel and Iron Co. with Canada Screw Co., Montreal Rolling Mills, Dominion Wire Manufacturing and Canada Bolt and Nut Co.

After profiting from military demand during the First World War, the company became the largest single Canadian producer of steel ingots. The good times continued to roll thanks to the Second World War. In 1946, however, a violent three-month strike put management itself in a state of war with Hamilton workers. Demanding higher wages, a 40-hour workweek and recognition of their union, about 2,000 employees lay siege to the Hilton Works mill. A union fighter pilot famously took to the skies, bombing Stelco with leaflets enticing workers to join the battle. In the harbour, a bootlegger boat called the Whisper was deployed to disrupt the company’s supply lines.

Since the 1946 strike, Stelco workers have walked off the job about once every decade. Nevertheless, the company, which employed 25,000 in the 1970s, became one of the pillars of the national economy. And for a long time, what was good for Stelco was considered good for Hamilton. In the early 1990s, Steeltown residents launched a share-buying spree to help then-CEO Fred Telmer deal with a market downturn and competition from east Asia. But in 1996, Telmer enraged Hamilton workers by using pension holiday legislation to stop fully funding retiree obligations. At the time, Stelco was considered too big to fail. And yet, unlike the company’s newer Lake Erie Works in Nanticoke, Ont., Hamilton’s Hilton Works was showing its age.

After Stelco lost $178 million in 2001, Telmer’s replacement Jim Alfano pleaded with Hamilton employees to help him deal with the mix of weak market conditions, legacy costs and cheap imports that had driven more than 25 competitors bankrupt. Dofasco, Stelco’s non-unionized hometown cousin, was the only integrated steelmaker on the continent making money at the time. But Stelco had just granted contract gains to Lake Erie employees, so USWA Local 1005, which represents the Hamilton mill, demanded similar wage increases.

After resigning in 2003, Alfano insisted comparing Stelco to Dofasco wasn’t fair because the latter was an “excellent company.” Telmer, now chairman, returned to the helm, buying time by selling profitable assets while seeking a new CEO. Courtney Pratt, a former Toronto Hydro executive, took over in January 2004, and Stelco quickly filed for creditor protection with $545 million in long-term debt and a $1.3-billion pension hole.

But Chinese demand for steel was heating up, and Pratt lost control of the $200-million restructuring when Stelco started posting record profits while claiming to be insolvent. After playing a two-year game of chicken with management, bondholders forced the company to wipe out shareholders and legally separate the Lake Erie operation — the most modern integrated steel plant in North America — from the Hamilton mill and its related obligations. Lake Erie workers accepted the restructuring after winning wage increases. Calling the process a fraud, Local 1005 refused to participate.

Stelco emerged from CCAA in 2006 as a holding company. Rodney Mott, a former U.S. Steel executive, took charge of operations, which now employed fewer than 3,600. After continuing to struggle, Canada’s last steelmaker was bought for $1.9 billion in 2007 by Mott’s former employer, which allegedly broke promises to Ottawa when it laid off workers and cut production during the Great Recession. While fighting related fines, U.S. Steel recently announced Hamilton’s Hilton Works will be idled indefinitely.