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This article was the cover story of the March 26, 2010 edition of the Globe and Mail’s monthly Report on Business magazine.
Down the road from the Copper Cliff smelter, where the Inco Superstack reaches 380 metres into a clear winter sky, striking Steelworkers stamp their heavy boots and feed a smoking fire pit with scrap wood. Massive ore trucks, engines growling, wait for permission to drive through the picket line. It is a familiar ritual; after 10 or 15 minutes, the picket captain signals the drivers to proceed and go about their business at the smelter—their business being strikebreaking.
When Local 6500 of the United Steelworkers walked off the job at the Vale Inco nickel mines, it was mid-July. The progression from agreeable summer weather to minus 20 C has been brutal. The best to be said about minus 20 is that it’s better than minus 30, just like strike pay of $200 a week is better than no pay at all. It’s hardly surprising that there’s little of the bravado that usually sustains picket lines.
The downbeat atmosphere may also reflect a sense among the strikers that the world has changed and that their strike has not been noticed by Canadians. There have been many strikes in Inco’s history—but every other one was decided in Canada. Now Inco is a subsidiary of a company based far away.
If the long stalemate in Sudbury had a sound, it might be that of the other shoe falling. When the takeover binge of the mid-2000s saw many of Canada’s pre-eminent companies disappear into foreign hands, the debate over the “hollowing out” of the domestic economy was muted. After all, Vale, like other acquisitors, made undertakings to preserve jobs and, in fact, to carry on much like before.
Now, it appears, things look very different to Vale.
The Steelworkers are on the receiving end of a global consolidation of the mining industry that has accelerated in the last decade, putting once-dominant companies like Inco in the shadow of giants like Australia’s BHP Billiton, Swiss-based Xstrata and Vale of Brazil, a company that can now boast 100,000 employees dispersed on every continent save Antarctica. “A pimple on an elephant’s ass. That’s how small we are,” is the summary of Wayne Fraser, the Steelworkers’ district director.
It’s not as if Inco didn’t see it coming or didn’t try to stay in the top tier itself. In its heyday, Inco was one of the largest and most prosperous companies in Canada and, for a time, the world’s largest producer of nickel. But in the year-long bidding war over the future of Inco and Falconbridge, Inco was hobbled by having overpaid for the Voisey’s Bay nickel deposit in Labrador: Inco paid $4.3 billion in 1996, and later wrote down the value of the acquisition by $1.5 billion.
And so Inco could not consummate its defensive efforts to buy Australia’s Western Mining, or Inco’s own long-time local rival Falconbridge (and alongside it Noranda). The latter deal petered out in indecision. Yet the union would have made a lot of sense—certainly more sense than the two old rivals holding on to their separate shafts on opposite sides of the street. An Inco-Falconbridge merger could have created, once again, the biggest nickel mining operation in the world. More important, it would have kept ownership in Canada.
Instead, while the federal government watched indifferently, Vale took over Inco in 2006 and Xstrata bought Falconbridge the same year, each of them paying about $19 billion. It seemed like a sad turn of events for a country that had been a global leader in mining. But then, there was never much love lost between the Steelworkers and the Canadian owners of Inco. Consider the list of strikes against Inco after the Steelworkers finally squeezed out their local rival, the International Union of Mine, Mill, and Smelter Workers, as the top union in town: 1966, 1969, 1975, 1978-’79, 1982, 1997, 2003. The longest strike was in 1978-’79: 261 days.
However, conflict between Vale and the Steelworkers did not seem inevitable. In his pitch to shareholders before they approved the purchase of Inco in the summer of 2006, Vale’s chief executive officer, Roger Agnelli, declared, “Canada is a mining country. It’s a country that has the legislation, experience, tradition, and very good people who work inside this sector. So it was very important for us to be in a country like Canada…we had a dream to be there.”
Agnelli also met with senior Steelworker officials that summer. The unionists’ recollection of the meeting was that he promised that Vale would change nothing. Agnelli said Vale bought Inco because it had a skilled work force that was among the most productive in the world. And, once again, he stated that he was proud to buy a Canadian operation.
That tone was echoed six months later when Murilo Ferreira, the Brazilian in charge of Vale’s nickel division, spoke to the Greater Sudbury Chamber of Commerce: “What can Sudbury expect from the new owners? In reality, I expect you to see very little change. We are well aware and very proud of Inco’s place of prominence in the Sudbury community and we are not looking to make major changes in how things are done. This is a very successful company.”
A few months after Ferreira’s reassuring words, he was out the door. In his wake went dozens of other staff and executives from the Vale offices in Toronto—veterans of the Inco regime, including prominent figures such as Fred Stanford, the president of Vale Inco’s Ontario operations.
Vale was suddenly whistling a different tune. Agnelli now complained that “In Sudbury, there are deeper mines that have a higher cost.” Lest that be misunderstood, he spelled it out: “Sudbury is Vale’s highest-cost operation and it’s not sustainable.”
Any comparison of Vale’s operations in Sudbury and Vale’s vast and varied mining interests elsewhere in the world is difficult, if not impossible. Most of those other mining operations are open pits, worked by relatively unskilled employees. In Sudbury, the Inco mines go down two kilometres from the surface.
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