ArcelorMittal Dofasco and pension issues

In 2011, ArcelorMittal had revenues of $94 billion and crude steel production of 91.9 million tonnes, representing approximately 6 per cent of world steel output. In the fiscal year ending June 2012, ArcelorMittal paid out 588 million dollars in dividends to its shareholders.
On December 14, 2012, 12,000 ArcelorMittal Dofasco workers and retirees got a letter from their employer asking them to consent to ArcelorMittal Dofasco paying the money it owes to their pension plan over 10 years instead of five. If they don’t take the step of mailing in a ‘no’ vote before the end of January, they are deemed to be voting yes.
All those retirees that head south in mid-December for the winter and don’t get their mail forwarded will be deemed to be voting ‘yes’.
If more than a third of those 12,000 people vote no, ArcelorMittal can’t take advantage of the government program that would allow them to pay over 10 years something they would otherwise have to pay over five. By rights the employer should have planned better and never had a deficiency in the first place.
The letter to the members doesn’t really explain why ArcelorMittal Dofasco feels it needs this reprieve on its debt. It does try to assure those 12,000 people that paying this money that it owes over the longer period of time would only have a detrimental effect on their pension cheque if the pension plan were to be wound up within that 10 years before all the money was paid.
Let’s put that into a clear translation. If ArcelorMittal Dofasco were to go bankrupt in the next 10 years, and all the money had not been paid that it owes, the pensioners are going to get in line with all the other creditors and hope for the best. They wouldn’t lose everything but they could very well lose something.
The Ontario government introduced a program allowing companies to seek this concession from the pension plan members in recognition of the fact that returns on investments that fund the pension plan in 2011 were very poor.
The letter to the pension members does not indicate that the employers hat met some financial need test. The fact is that it will help the employer with its cash flow and theoretically, help strengthen its business.
But to be the devil’s advocate, why should dividend cheques be going out to shareholders when the workers’ pensions are underfunded?
A pension is not some sort of gift from the gods. When somebody goes to work with an employer who offers a pension plan it is part of what they are being paid to show up and work every day. If you do that for 30 years or more, then every day you go into work you are earning entitlements from that pension plan. They are yours. You own them. The employer has a legal obligation to make sure that their part of the funding is in place regardless of market conditions. That’s the deal. That’s why you kept going to work decade after decade.
It would be fair for members to argue that if the employer failed to give itself a cushion so that market conditions wouldn’t put it significantly behind in its payments to the pension plan, that’s their problem. Don’t we all understand that about our money management? If you are relying on investments and interest payments for your income, you have to know it’s not guaranteed. It can go up and it can go down.
Ultimately, the question is whether it is appropriate to ask workers and retirees to accept any amount of vulnerability with respect to their pension entitlements when a company is paying out dividends and has apparently decided to put other debts ahead of the workers’ pension plan?
To be fair, ArcelorMittal Dofasco, from all reports, appears to be holding its own and doing well. The chance of them seeking insolvency protection from the courts or threatening bankruptcy is pretty slim. Or is that what we said about Stelco?
As published in the Hamilton Spectator, January 7, 2012
Ed Canning
Ed Canning
P: 905.572.5809