Stelco Economic Impact Study Explores Potential Restructuring Outcomes
05/04/2004 -
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Stelco Economic Impact Study Explores Potential Restructuring Outcomes
May 4, 2004 — If Stelco Inc. fails to achieve a successful restructuring, results could include the loss of thousands of jobs in Ontario and beyond, reduced employment income in many regions, and lost tax revenue at all levels of government in Canada. A successful outcome, on the other hand, could pave the way for capital projects that would create additional jobs, employment income, and tax revenue for government programs and services.
Economic Study Results According to the study, closure of Stelco's operations in Hamilton (including Stelwire Ltd.) and Haldimand County could:
In contrast, a successful restructuring, and the resulting planned expenditure of $603 million on capital projects at the Hamilton and Lake Erie facilities, would:
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These are the findings of Estimating the Economic Impacts of Potential Major Changes at Stelco Inc., a study commissioned by Stelco in the fall of 2003 and completed in March 2004. The study was prepared by Dr. Stephen Tanny, the principal of Datametrics Consulting Inc. and a professor of mathematics at the University of Toronto. Dr. Tanny was assisted in the preparation of his report by the firm of Ernst & Young.
The economic impact study utilized Stelco data for 2002 and models from Statistics Canada and the University of Toronto. It examined the economic impact of three hypothetical outcomes: closure of the Hamilton facility and that portion of the Lake Erie operations that depend on its activity; closure of the entire integrated steel operations; and a successful restructuring.
According to the study, closure of the company's operations in Hamilton (including Stelwire Ltd.) and Haldimand County could cost 24,537 jobs (7,069 direct and 17,468 indirect) in those communities, elsewhere in Ontario, and across Canada. It would threaten $1.8885 billion ($520.8 million direct and $1.3 billion indirect) in salaries, wages, and other employment income. And it would reduce tax revenue by $1.083 billion at the municipal ($57.5 million), provincial ($510 million), and federal ($515.5 million) levels of government.
Courtney Pratt, Stelco's President and CEO, said, "This study shows how Stelco's importance extends far beyond the communities in which it operates. It also demonstrates the widespread and devastating consequences that will result if the company does not achieve a successful restructuring."
On the other hand, the study concludes that a successful restructuring, and the resulting planned expenditure of $603 million on capital projects at the Hamilton and Lake Erie facilities, would create 8,574 person-years of employment, generate $667.6 million in total employment income, and provide $477.4 million in tax revenue for government programs and services over a three-year period.
Pratt added, "These findings show the importance and the benefits of a successful restructuring. We know the investments we need to make in order to improve our facilities, reduce the cost of production, and become a competitive steel producer. The study shows that the positive impact of these capital projects will be felt in many ways by many people in many parts of the country."
Discussing the process going forward, Pratt noted, "That's why we hope that all interested groups will participate in the meaningful discussions that must begin soon. The process must proceed if we are to achieve the best available outcome for everyone who depends on Stelco in one way or another. Every group will have a role to play in the process and a say in the outcome.
"No solution will be forced or imposed on anyone. The solution will emerge from everyone working together, or it will not emerge at all. The study released today indicates what can be gained — or lost — depending on the approach that various groups decide to take. We hope they will realize that their participation is the best way to preserve well-paying jobs for our employees, security for our retirees, plus economic and other benefits for the community."
Stelco Inc., a large and diversified Canadian steel producer, is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. Stelco has a presence in six Canadian provinces and in two states of the United States. Consolidated net sales in 2002 were $2.8 billion.
