Canadian Court approves U.S. Steel’s Canadian Unit Separation
10 October 2015
A Canadian court has approved United States Steel Corp.’s moves to separate its money-losing Canadian unit and suspend health-care benefits to retired workers.
The unit had an operating loss of $2.4 billion on aggregate, or more than $16 a share, when it filed for bankruptcy protection last year, the Pittsburgh-based steelmaker said, adding the unit represented about $1 billion of its consolidated employee-benefits liability as of June 30, 2014.
Under the court-approved restructuring plan, U.S. Steel will continue to provide services to the Canadian unit for two years but, in the event of a sale or restructuring process, it won’t bid for the unit.
The steelworkers’ union said in an online posting that it was working on alternatives for the estimated 20,000 affected retirees. Pension and life insurance payments will continue without disruption, it said.
The company has been aggressively cutting costs in response to a sharply weakened market and growing competition from cheap imports.
U.S. Steel created the Canadian unit following its 2007 acquisition of Stelco Inc. At the time, the roughly $1.1 billion deal was seen as an opportunity for the American steelmaker to grab a bigger slice of the market for higher-valued steel products, such as automobile fenders and parts for appliances, which typically have higher profit margins.
U.S. Steel said Friday that going forward, it will load its production of critical automotive products on its U.S. mills.
Shares, down 54% this year, closed at $12.38 on Friday.