The Hamilton Spectator has this handy article Questions and answers on the shutdown of the former Stelco plants
From the Hamilton Spectator (as a steel town newspaper, hardly a bystander in this arena), dated June 9th, 2009
Canada is launching a full court press in the U.S. Congress today against the Buy American provisions in the federal stimulus spending law.
The action is part of the ongoing campaign by our federal government to get the U.S. government to drop Buy America provisions that force U.S. municipalities and states to use American steel and manufacturing exclusively for projects paid by U.S. taxpayers.
The provisions are believed not to contravene international trade agreements because states and municipalities are sub-national jurisdictions and not subject to trade deals.
Sounds pretty weasily, doesn’t it? Sure we have these NAFTA provisions, and they apply to you, but they don’t apply to our states and municipalities. One wonders how Free Trade can have so many different meanings to different people.
Keeping the issue of U.S. Steel alive, the Hamilton Spectator published this letter to the editor today. An interesting aspect of the problem I hadn’t considered before.
U.S. Steel bought Stelco and made record profits last year. Then the Americans ruined the world economy and U.S. Steel shut down the Hamilton and Lake Erie works, moved all our orders — including Canadian orders — to Pittsburgh, Alabama and Indiana
[…] what follows is some discussion of how US Steel got around NAFTA rules. But the sting is in the tail
What really hurts is our Canadian-born USWA president Leo Gerard not only backs this “Buy American” approach, but used union dues to lobby Congress to get the protectionist plan passed at the expense of Canadian workers.
If it were not for Gerard, we might be actually working, making steel at Stelco, rather than hoping our EI won’t run out before we start up again.
I don’t know about all of it, but at least part of it is true. Leo Gerard was born and raised in a mining family in Sudbury.
I’d let this issue slip to the back of my mind, but re-reading a fellow steel bloggers recent postings brought it back to mind. It seems the national media have forgotten about this story, but in Hamilton it’s still in people’s minds.
From The Hamilton Spectator TheSpec.com
A single guideline in the Investment Canada Act is “probably the crux” of the dispute between U.S. Steel and the Canadian government, says Industry Minister Tony Clement.
The guideline excuses foreign buyers who are unable to fulfil their commitments under the act due to “factors beyond the control of the investor.”
The question is whether the current economic meltdown qualifies as such a factor in U.S. Steel’s shutdown of the former Stelco.
Clement sent a demand letter to U.S. Steel earlier this month after determining that the temporary closure of its plants in Hamilton and Nanticoke violates promises made under the act. He is now reviewing a response from the Pittsburgh steelmaker that is “about 87 pages in total.”
But he was tight-lipped about the contents of that document today.
“You’ll be hearing from us very shortly,” he said.
And then, again, the sounds of silence.
More coverage of suppliers, now from Detroit, where a lot of parts suppliers are, and where the press has clearly been thinking about this.
From the Detroit Free Press
A fragile automotive supply base will be tested even more as suppliers wait to see if they will be part of General Motors Corp.’s future after the company’s historic bankruptcy filing.
Last week, local suppliers Visteon Corp. and Metaldyne Corp. filed for Chapter 11 protection. More are expected to follow […]
[…] analysts say GM seemed as prepared as possible to deal with strains in the supplier industry as it headed into bankruptcy.
That includes paying suppliers last Thursday instead of today, when payments for parts shipped in April could have been caught up in the court process.
The Detroit News has also been writing about the economic impact. Under the headline
Michigan feels brunt of GM’s bankruptcy, they write
Michigan’s share of the total job loss: 42 percent. And that doesn’t count the trickle-down impact on suppliers, stores, real estate and other segments of the state’s economy.
From the Globe and Mail, today. Someone is starting to think about parts suppliers now.
The impact of GM’s Chapter 11 filing has already started rippling through the supply network. Several companies, including Lear Corp., Johnson Controls Inc., TRW Automotive Holdings Corp. and Magna International Inc., are among GM’s largest creditors. Lear, which makes seats, is owed $45-million and Monday said it won’t make a semi-annual interest payment of $38-million that was due June 1.
From further down in the article:
The parts industry has been reeling for months. Canadian parts suppliers have seen their production fall an average of 40 per cent in the past year or so and roughly 10,000 jobs have vanished.
Last week alone two major U.S. parts makers, Visteon Corp. and Metaldyne Corp., filed for bankruptcy protection, joining five others this year.
Yesterday I reproduced a list of suppliers owed money by GM. The conclusion is that these people will lose much, if not all, of that money. There are roughly $400 million (US) owed to parts suppliers. I thought that number was low, but today’s Globe article claims that, in advance of the court proceedings, many parts suppliers were paid up until the end of April (very rare for automotive, it would be more usual to have 75 to 90 days outstanding).
So we are left to ponder cascade effects. Another quote from the article
JPMorgan Chase & Co. analyst Peter Acciavatti said in a recent note that based on debt-trading levels, Lear, American Axle & Manufacturing Holdings Inc., Cooper-Standard Automotive Inc., and at least one other company “appear to be on the verge of bankruptcy.
Well, given the events of the last few weeks, this is hardly a surprise. None-the-less, now it is really happening.
From Yahoo Finance, originally from AP
General Motors Corp. filed for Chapter 11 bankruptcy protection Monday as part of the Obama administration’s plan to shrink the automaker to a sustainable size and give a majority ownership stake to the U.S. government.
GM’s bankruptcy filing is the fourth-largest in U.S. history and the largest for an industrial company. The company said it has US$172.81 billion in debt and $82.29 billion in assets.
They owed more than twice what their assets were. The big question now is, how much of that debt was tooling owed to metal stampers and other outsources? How many upstream businesses will fail now because of the defaults? How many jobs will be lost? Is there protection for the supplier chain as part of this deal? I know it was a slow, negotiated slide into bankruptcy, but was saving the supply chain a part of the negotiations? I’ve heard lip service paid to this idea in the press in the last month, but see nothing in todays headlines that is on point.
From the same article:
the automaker will permanently close nine more plants and idle three others
and the article contains unconfirmed speculation on where those dozen plants likely are.
The downsized GM’s brands will be limited to Chevrolet, Cadillac, GMC and Buick. Its Pontiac, Saturn, Hummer and Saab operations will be either sold or closed.
I never got the point of Hummer. Not as a car, not as a part of GM.
It’s a shame about Pontiac. We had one when I was a kid. Everyone did.
Saturns are good cars. Everyone I know with one loves it. I don’t understand why they’d sell it.
It’s a shame what they did to Saab. It was a good brand. My boss in Germany had one 20 years ago, and it was a wonderful car. But it became the Commodore Amiga of the auto world. They bought it and had no idea what to do with it.
The Globe had an interesting list of who the creditors are (or should we already speak of them in the past tense?)
Name of GM creditor and amount of claim.
- Starcom Mediavest Group $121.54-million (U.S.). Not a parts supplier, as far as I can see.
- Delphi Corp. $110.88-million. parts supplier
- Robert Bosch $66.25-million. parts supplier
- Lear Corp. $44.81-million. parts supplier
- Renco Group $37.33-million. not sure
- Enterprise Rent A Car $33.10-million. not a parts supplier
- Johnson Controls Inc. $32.83-million. parts supplier
- Denso Corp. $29.23-million. I believe these are the rust proofers
- TRW Automotive Holdings Corp. $27.52-million. parts supplier
- Magna International Inc. $26.75-million. parts supplier
- American Axle & Manufacturing Holdings Inc. $26.74-million. parts supplier
- Maritz Inc. $25.65-million. ? there are several companies named Maritz
- Publicis Groupe SA $25.28-million. Advertiser, I think
- Hewlett Packard Co. $17.01-million. computer maker
- Interpublic Group of Cos Inc. $16-million. marketer
Not to diminish the damage to non-parts manufacturers, but this is a metal stamping blog. There’s a lot of part suppliers out there with their unmentionables flapping in the breeze this morning.
Joe Brown, in his blog, wrote an excellent, fictionalized (I presume) account of what it’s like to be laid off, followed by an excellent analysis of why we’re losing tooling money offshore and how the car companies are encouraging this.
What if we added that not only were taxpayer funds being funneled to China, the very recipients of these taxpayer funds, (GM, Chrysler and hundred’s of Tier 1 parts manufacturers) gave the Chinese competitors to North American manufacturers a 5-9% cost advantage by paying these Chinese suppliers on far better terms than they would pay say a company in Grand rapids, Detroit or Windsor.
I’m glad to hear someone is worrying about the supplier base (stampers amongst them)!
From the Wall Street Journal:
Bill Ford, Jr., the Dearborn, Mich. auto maker’s executive chairman, said that the precarious state of auto parts suppliers remains the company’s greatest concern after Chrysler filed for bankruptcy protection
When US Steel announced that the former Stelco plant in Hamilton would be shut down “temporarily”, a lot of people were upset and called for action. This seems to be the first step in the action.
From the Canadian Press, via Yahoo Finance News
The Canadian government is warning U.S. Steel it must live up to production commitments at the former Stelco Inc. plants in Ontario.
Industry Minister Tony Clement said he has sent a ‘demand letter’ to the U.S. giant that it’s temporary shutdown at plants in Hamilton and Nanticoke, Ont., may be in violation of commitments it made when it bought the Canadian steel producer in 2007.
In Clement’s announcement, the minister said the demand letter is the first step in the enforcement process under the Investment Canada Act.