Ottawa has given the U.S. owner of Stelco five business days to share a plan to maintain jobs at the Hamilton-based steelmaker or face potential legal action.
Ohio-based Cleveland-Cliffs said last week it plans to lay off as many as 500 workers as it idles certain steel production at Stelco, which the federal government says violates “binding commitments” made when it bought the company in 2024.
In a letter to Stelco president Paul Simon on Monday, Industry Minister Mélanie Joly said Ottawa is prepared to seek a court ruling to enforce the agreement under the Investment Canada Act.
“The Government of Canada takes compliance with undertakings seriously,” Joly wrote in the letter, obtained by CBC News on Tuesday.
“Where an investor fails to comply with an undertaking, the Act provides remedies for breaches, including an application to the superior court for orders that may include directing compliance, divestiture, or monetary penalties.
“I trust that such steps will not be necessary.”
Cleveland-Cliffs acquired Stelco in a $3.4-billion cash-and-stock deal that, according to a news release at the time, kept “national interests at the forefront” and recognized the “importance of the workforce.”
According to Joly’s letter, this includes “undertakings to continue to employ at least the same number of unionized employees and the vast majority of non-unionized employees as were employed when the transaction was announced.”
Cleveland-Cliffs CEO Lourenco Goncalves has said the cuts are necessary and justified by the Canada-U.S. trade war, arguing that Stelco’s ability to sell steel to the U.S. was an “underlying condition” of the deal.
Joly said the company’s commitments “do not cease to apply simply because business strategy or market conditions have changed.”
Prime Minister Mark Carney said last week Ottawa will “use all powers that we have” against Cleveland-Cliffs as it pursues the Ohio-based company to the “fullest extent of the law.”
CBC News reached out to Cleveland-Cliffs for comment on Tuesday.
What could happen next?
Foreign takeover commitments under the Investment Canada Act typically extend for five years, covering details like the acquiring company’s level of investment in the business it’s purchasing, the location of the acquired company’s headquarters, and levels of employment, according to Sandy Walker, co-chair of the competition and foreign investment review group at the global law firm Dentons.
“If you don’t live up to those commitments … the minister can send you a demand letter saying to you, ‘please explain why you have not lived up to these commitments,’ and then the company has a chance to respond,” she told CBC News in an interview last week.
If the government is not satisfied with this response, she said, the next step is for the attorney general to take the company to court.
Prime Minister Mark Carney says Canada will ‘use all the powers that we have’ to ensure that Stelco meets its ‘legal obligations for employment.’ The company, which is owned by U.S.-based Cleveland-Cliffs, announced plans on Monday to idle some production at its Hamilton plant, putting hundreds of workers out of a job.
“The company, Cleveland Cliffs, could say that as a result of circumstances beyond its control, it was not able to meet these undertakings. And those circumstances might include U.S. tariffs,” Walker said.
“I can’t say what would actually happen, but those are the types of issues they’re going to look into.”
In 2009, Industry Canada sued Stelco’s previous owner, U.S. Steel, over job protection. The matter was settled out of court in 2011.
Ron Wells, president of United Steelworkers Local 1005, said his members hoped for a different experience under Cleveland-Cliffs’ ownership.
“They said, ‘Trust us, we’re nothing like U.S. Steel. We’ll prove it to you,'” he told CBC News on Tuesday. “The bond of trust has been broken.”
Wells said he doubts Stelco will scrap its plans to lay off workers, despite mounting pressure from Ottawa.
Aerial (drone) images of the Stelco Hamilton Works Production facility. (Patrick Morrell/CBC)
“I think they’re going to go ahead and continue the layoff,” he said.
“We hope the federal government takes them to court, and the outcome is they’re forced to divest. I don’t think it would be a bad thing to have a national steel company.”
An internal memo to staff from Stelco’s vice-president of sales obtained by CBC News last week said the company’s plan for up to 500 layoffs was due in part to stiff competition from imported steel products.
On Tuesday, Finance Minister François-Philippe Champagne said a mix of imports and domestic supply is needed in a country the size of Canada.
Funding from Ontario
Meanwhile, Ontario’s government on Tuesday pledged to invest more than $200,000 with Ottawa through the Canada-Ontario Workforce Tariff Response to help protect steel and manufacturing workers in the Hamilton area.
The funding will help 75 workers and jobseekers upgrade their skills and transition to in-demand careers, according to the province’s labour minister.
“Ontario is fighting back against President Trump’s attacks on our economy by helping our workers retrain, upskill, and stay competitive,” Trevor Jones said in a statement.
The CEO of Cleveland-Cliffs, the American company that bought Stelco, says Cleveland-Cliffs ‘will not disappoint the people of Hamilton’ when it comes to protecting the environment in the city. Lourenco Goncalves says the company doesn’t want to generate profits at the expense of the health of the community.
Goncalves has expressed support for Trump’s Section 232 measures, which put up to 50 per cent tariffs on steel and aluminum imports from Canada.
Goncalves has said he supports Canadian steel workers, and that “America first is not America only.”
Last Monday, amid news of the Stelco layoffs, Trump touted a $15-billion US investment plan by Minnesota-based steelmaker Mesabi Metallics to build a massive plant in Iowa as evidence that his administration’s tariffs on imported steel are working as intended.