Canadian USW rep talks to SteelOrbis about Algoma
After the United Steelworkers (USW) applied for a court injunction Wednesday to block US hedge fund manager Paulson & Co's bid to force Algoma Steel into a CA$420 million (US$365 million) cash payout, SteelOrbis talked to Canadian USW representative Jack Ostroski to get the union's perspective on the current situation with Algoma, the proposed cash payout, and the future of the steel industry in
Canada.
Of the union's relationship with Algoma, Mr. Ostroski, the area coordinator for the Local involved in the Algoma situation, said, "It's amicable. We've always had a decent relationship. Obviously we don't always agree with all the decisions the management makes, but we probably have a better-than-normal union /management relationship."
The relationship between the union and Paulson & Co, however, is not so amicable, as the union and Algoma agree that a large cash payout at this time would not be in the best interest of the company.
"Prices right now are at an all time high, and we need the cash on hand for those rainy day things such as pensions and a downturn in the economy, as well as other things, like the re-lining of the blast furnace, which Algoma has been putting off," Mr. Ostroski told SteelOrbis. "The re-lining alone will cost an estimated $200 million."
As previously reported, Paulson & Co. has requested a special meeting among Algoma's shareholders (of which Paulson comprises the majority) to replace the members of Algoma's board with its own directors, who plan on redistributing Algoma's CA$420 million (US$365 million) cash back to the shareholders' pockets. The meeting is scheduled for March 22, 2006.
Despite this setback for Algoma, overall, the union has an optimistic outlook about the company's future as well as the future of the Canadian steel industry going into 2006.
"This is the best I've ever seen the steel industry, and Algoma is still one of the best and most modern mills in
North America," said Mr. Ostroski. "The future outlook looks positive, but anything can happen at a downturn. In early 2000 when the steel market dropped off, Algoma was eating up $10 million in cash a month. That's why it's so important to have cash reserve for next downturn. Still, the outlook for '06 looks good, and prices are holding in first quarter of '06."