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U.S. Steel Canada Inc. is threatening to cease operating in Canada by the end of the year if an Ontario Superior Court judge rejects its request to stop paying municipal taxes, halt payments into pension funds, and cut off health care and other benefits to 20,000 retirees and their dependents.
A decision by the company’s parent, United States Steel Corp., to shift production of high-value-added steel to U.S. mills means the Canadian unit requires a “business preservation order” that will allow it to keep operating, U.S. Steel Canada said in a court filing.
Unless the court approves U.S. Steel Canada’s motion to conserve cash by slashing spending, “we don’t see any way to avoid ceasing operations at the end of 2015,” the company’s president, Mike McQuade, said in a separate memo to employees.
The prospect of a shutdown of operations in Hamilton and Nanticoke, Ont., comes as U.S. Steel and its Canadian unit prepare to enter mediation efforts after a year of protection from creditors under the Companies’ Creditors Arrangement Act.
The companies’ actions are in part a response to a move by the United Steelworkers union to seek an injunction to prevent U.S. Steel from shifting production of 180,000 tons of high-value-added steel to U.S. mills and out of the Canadian operations.
The mediation hearing has been scheduled for next week to examine the proposed shift in production as well as the overall restructuring process, which includes the potential sale of the Canadian assets, possibly back to U.S. Steel.
The proposed actions to be taken if mediation fails will “provide the company with the necessary breathing space to continue its operations while continuing its restructuring efforts,” William Aziz, chief restructuring officer of U.S. Steel Canada, said in a court filing.
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