A case of buyer’s remorse? What went wrong at U.S. Steel Canada – by Kristine Owram (National Post – September 18, 2014)

The National Post is Canada’s second largest national paper.

The exuberance that greeted United States Steel Corp.’s purchase of Stelco Inc. in 2007 is a distant memory as the company begins restructuring its Canadian operations under bankruptcy protection.

When the deal was announced seven years ago — shortly after Stelco emerged from its first trip through bankruptcy protection — the tone was as positive as could be. “Our acquisition of Stelco is another example of how we are building value for our stakeholders,” then-U.S. Steel CEO John Surma said when the $1.9-billion deal was announced.

“The fit with U.S. Steel is excellent,” agreed then-Stelco CEO Rodney Mott. “This is an outstanding deal for Stelco’s owners, employees, customers, suppliers and communities.”

But it didn’t turn out that way. Late Tuesday, U.S. Steel Canada Inc. said it had received creditor protection under the Companies’ Creditors Arrangement Act (CCAA), citing an aggregate operating loss of US$2.4-billion since December 2009 and US$1-billion in pension liabilities.

“I am disappointed and sad to see the former Stelco go into CCAA again,” former Stelco CEO Courtney Pratt said in an email. U.S. Steel’s shares rose by more than 10% to a three-year high Wednesday following the announcement, which included a decision not to pursue US$800-million in expansion projects.

“Steel market conditions have remained very challenging and have not recovered to pre-recession levels,” said U.S. Steel Canada spokesman Trevor Harris.

“This has been true globally, in North America, and specifically in Canada, where a combination of reduced manufacturing and a high percentage of imports into the market have made for continued difficult conditions for U.S. Steel Canada.”

U.S. Steel’s problems in Canada were long in the making.

The company has already made major cuts to the former Stelco’s operations, despite promises to the federal government that it would employ an average of 3,105 workers and increase production by 10% to 4.35 million tons a year.

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