Stelco responds to recent union initiatives

HAMILTON, ON, July 27 /CNW/ - Stelco Inc. (TSX:STE) today issued the
following letter to employees concerning recent statements made by USW
leadership, and the issuance this morning of a 90-day strike notice by Local
8782.

To all employees:

I'm writing to discuss the content of a document circulated in recent
days by a number of union Locals, and that appeared as an advertisement in
this morning's Hamilton Spectator. I also wish to discuss the 90-day strike
notice we received this morning from the President of Local 8782. I'll respond
first to the claims made in the letter/advertisement, and then to the strike
notice.

USW Letter and Advertisement
----------------------------
"We have fought very hard to make good on our promise...that Stelco would
not use CCAA to take away our hard-won gains": In the first place, the Locals'
leadership have not had to fight for the simple reason that once steel markets
and Stelco's business conditions improved as dramatically as they did, the
Company did not ask for concessions. The Company's restructuring plan outline
filed on July 15 does not call for any "take away" of wages or benefits from
employees or retirees.
"The union will never agree to a 10-year freeze on our right to negotiate
pension improvements": Our restructuring plan outline doesn't ask for a 10
year freeze. It does propose that pensions not increase until the pension plan
deficiency reaches an agreed funding ratio. This protects the active work
force and retirees by ensuring that the pension deficiencies are dealt with
once and for all. Pension benefit increases for active employees would
increase the solvency deficiency. This would only add to the Company's funding
burden and increase the risk for retirees.
The priority of the USW, employees, retirees and the Company has been the
elimination of the funding deficit. Our plan outline does just that, resolving
the pension funding issue within 10 years through a combination of upfront
contributions and annual cash payments. While our pension funding plan takes a
different route than the one favoured by the Locals' leadership, the
destination and the outcome are the same.
"...others say that it is none of the union's business to be involved in
the restructuring": While some may be of that view, that has never been the
Company's position. I have consistently said that the USW is one of the
critical stakeholder groups in the restructuring process. In fact, and as the
record clearly demonstrates, the Company has invited and urged the Locals'
leadership to participate in the process in a meaningful way from the outset,
often with little success.
Let's also recall that it was the Locals' leadership that pursued a
number of time-consuming and unsuccessful Court challenges that questioned the
very legality of the restructuring process itself. They also refused many
invitations to participate in meaningful restructuring negotiations. The USW
International and Local 8782 have chosen to use the leverage of an expired
collective bargaining agreement and strike threats to influence the CCAA
restructuring process, even though no concessions have been asked of them. For
its part, our largest Local, Local 1005, has elected not to participate in the
process at all.
"It was Stelco that underfunded the pension plan by choosing not to pay
down its insolvency": Let's be clear. Stelco has funded its pension
obligations at all times and in accordance with its legal obligations. Stelco
is not in default of any of its pension funding or other employee related
obligations. Stelco has had the legal right to utilize an exemption from the
pension solvency funding obligations applicable to some other employers.
Stelco is not the only company that has been given the benefit of this
exemption. That exemption only relieves Stelco of providing additional funding
that is required if it is assumed that Stelco does not continue in business -
the solvency deficiency.
Stelco has tabled a reasonable and achievable plan to resolve that
deficiency within 10 years through a combination of initial contributions and
annual cash payments. As I noted earlier, our pension funding plan may take a
different route than the one favoured by the Locals' leadership, but the
destination and the outcome are the same.
"Stelco refuses to choose a plan that will deal with the pension solvency
and retire its debt": This is simply untrue. We believe that we have tabled a
plan that will do just that. It just doesn't happen to be the plan favoured by
the Locals' leadership. I have said before that the Company does not consider
that plan to be fair to all stakeholders or achievable. It's also important to
point out that the plan favoured by Local 8782 is not supported by Local 1005,
which represents by far the largest number of our employees and retirees.
"Clearly our fight is not over": The Locals' leadership seems to be the
only stakeholder painting our restructuring in such confrontational terms. You
will not find one word of confrontation or hostility towards Stelco employees
and retirees in any of the more than 170 letters and news releases issued by
the Company since the restructuring process began. As the Court has observed
on many occasions, we're all in the same boat and will succeed or fail
together. The plan filed by the Company does not threaten jobs, pensions or
union contracts. To the contrary, no concessions are asked for and the funding
of the pension plans will be dramatically increased.
"The members of Local 8782 have voted overwhelmingly to authorize any
action, up to and including a strike": The rhetoric used by the Local's
leadership in this matter injected uncertainty and instability into the
Company's operations, into the restructuring process, and into the minds and
plans of our customers, suppliers and other stakeholders.
Based on comments attributed to Local officials in the media, the stated
reasons for seeking the action authorization seem to have nothing at all to do
with the process of negotiating a renewal collective agreement between Local
8782 and the Company. The Company has been engaged in 'on again, off again'
bargaining with Local 8782 for months. We remain committed to working towards
a renewal collective agreement whenever the Local leadership is prepared to
sit down and negotiate seriously. The reasons for seeking the authorization to
act seem to deal more with the restructuring plan outline filed on July 15
than with the collective bargaining process at Lake Erie.

Local 8782 Strike Notice
------------------------
As I pointed out at the beginning of this letter, Local 8782 has now
served the Company with 90-days strike notice. In his letter to me, Mr.
Ferguson says that we have left Local 8782 with no other choice. Of course it
had another choice - it could have elected not to issue the notice at all. The
decision to issue the notice only creates further uncertainty among employees,
retirees, customers, suppliers and the communities in which we operate. The
last time the Local took this step, the Company lost the business of General
Motors, its largest customer. That business has not been regained. The cost of
this loss to the Company, and particularly to Lake Erie's business, has been
significant.
In his letter, Mr. Ferguson urges the Company to engage in serious
negotiations on the restructuring plan and on the renewal collective
agreement. The fact that Local 8782's collective bargaining has been an 'on
again, off again' process rests entirely in the hands of the USW Local's
executive. As I have said before, and will say again, the Company is open to
all discussions on its restructuring plan outline except with respect to
suggestions that would change the balancing of stakeholder interests which we
are required to do by law and which we have endeavoured to do in the most
responsible manner.
Finally, Mr. Ferguson states in his letter that "the only stakeholders to
benefit from Stelco's proposed restructuring plan are the financial
speculators". This is absolutely untrue. The Stelco plan asks for no
concessions from employees or pensioners. In addition, it provides for the
full funding of the deficiencies in the pension plans. As well, the plan
envisions the conversion of a very significant portion of existing debt into
equity, and extends the maturity of the remaining debt well into the future.
We believe that these and other provisions of our plan outline are fair to
employees, retirees, and the people of the communities in which we operate.
There are other places and ways in which the Local leadership could
discuss its concerns about the plan outline itself or the restructuring
process in general. The public record clearly demonstrates the number of
occasions on which the Company has invited and urged the leadership to
participate in and contribute to the search for a positive outcome for the
members of Local 8782 and for all our stakeholders. We have always stated that
the Local was a critical participant in this process.

There is another way
--------------------
There is, and for the past 18 months there has been, another way to
address the concerns of our employees and retirees. That way consists of the
meaningful discussions that the Company has tried to generate throughout the
restructuring process. No one has a monopoly on concern for our employees,
retirees and other stakeholders. As I've said repeatedly, we all want the same
goal. It's time to work together if we are to achieve it.
We will only achieve that goal if everyone wants it and works for it.
It's just not possible for every group to get everything it wants because the
pie isn't big enough. As well, Stelco is the only participant in the process
with a legal obligation to take into account the interests and competing
demands of other stakeholders.
I once again urge the Locals' leadership to reconsider the path of
confrontation it alone has chosen, to tone down the rhetoric, to resume
discussions, and to ease the uncertainty and instability surrounding this last
push for a positive outcome for employees, retirees and other stakeholders.

Sincerely,

Courtney Pratt
President and Chief Executive Officer

About Stelco

Stelco Inc. is a large, diversified steel producer. Stelco is involved in
major segments of the steel industry through its integrated steel business,
mini-mills, and manufactured products businesses. This news release may
contain forward-looking information with respect to the Corporation's business
operations, financial performance and conditions. Actual results may differ
from expected results for a variety of reasons including factors discussed in
the Corporation's Management's Discussion and Analysis section of the
Corporation's 2004 Annual Report. To learn more about Stelco and its
businesses, please refer to our Web site at www.stelco.ca.

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