TORONTO — U.S. Steel violated workforce and production promises it made to Ottawa after it acquired the former Stelco two years ago, but the company says the global recession left it with no choice, according to documents filed with the Federal Court of Canada.
As of May, the workforce at U.S. Steel’s (NYSE:X) Canadian operations had shrunk to only 23 per cent of the more than 3,000 workers it promised to employ when it took over Stelco, according to the legal application made by the federal government.
The Pittsburgh-based company also repeatedly broke production promises it made, with the amount of steel produced by its Canadian operations as of May representing “a small fraction” of the amount it was required to produce on an annualized basis, the documents say.
The Canadian government announced Friday it’s taking the unprecedented step of suing the American industrial giant to force it to live up to its commitments.
According to the Federal Court application, U.S. Steel made two major promises when it acquired Stelco: that its Canadian steel production between Nov. 1, 2007, and Oct. 31, 2010, would be greater than or equal to 3.95 million tonnes a year, and that it would maintain an average employment level of 3,105 full-time workers at its Canadian operations.
However, the application says that U.S. Steel produced slightly less than the benchmark level in 2008, and that as of May 20, 2009, its Canadian business had “produced a very small quantity of steel, which on an annualized basis, would represent only a small fraction of the amount the Canadian business was required to produce pursuant to the production undertaking.”
The court documents say U.S. Steel responded by saying it shouldn’t be held responsible for “factors beyond their control” — namely, the drop in steel demand as a result of the recession.