Stelco Faces Potential Government Lawsuit Over Planned Layoffs Following Cleveland-Cliffs Acquisition
The Canadian government has given Stelco Holdings five business days to present a plan to preserve jobs after the steelmaker announced up to 500 layoffs, potentially violating commitments made during its 2024 acquisition by Cleveland-Cliffs.
Stelco Holdings has been given five business days to submit a plan to save jobs or face legal action from the Canadian government. The ultimatum follows the company's recent announcement that it intends to idle certain production in Hamilton, Ontario, resulting in up to 500 layoffs company-wide.
The planned job cuts appear to conflict with conditions attached to Cleveland-Cliffs' $3.4-billion cash-and-stock acquisition of Stelco, which Ottawa approved in 2024. That approval included promises to maintain unionized employee numbers for five years. Cleveland-Cliffs CEO Lourenco Goncalves stated the cuts are justified by the Canada-U.S. trade war, arguing that selling steel to the United States was an underlying condition of the deal.
Industry Minister Mélanie Joly rejected the argument that tariffs constitute force majeure, stating that commitments do not cease due to changed market conditions. Lawyer Nassira El Hadri suggests the matter is likely to end up in court, noting the government's letter does not ask for an explanation but asserts the validity of the commitments. However, lawyer Sandy Walker notes that Industry Canada guidelines on factors beyond a company's control may allow Stelco to avoid some accountability.
The current dispute echoes a previous confrontation involving the same steelmaker. In 2007, U.S. Steel acquired Stelco for approximately $1 billion US, renaming it U.S. Steel Canada. As part of that transaction, U.S. Steel agreed to undertakings including maintaining Canadian employment levels for three years and increasing steel production by at least 10 per cent. Following the 2008 financial crisis, U.S. Steel closed most Canadian operations and laid off over 1,500 employees.
In July 2009, the Attorney General of Canada filed a lawsuit against U.S. Steel, described as the only time Ottawa has gone to court over such commitments. That 2009 dispute prompted updates to the Investment Canada Act in 2009 and 2012, raising daily non-compliance fines to $25,000. The lawsuit ended in late 2011 with an out-of-court settlement requiring U.S. Steel to keep production alive in Hamilton and Lake Erie and make $50 million in new capital investments by the end of 2015. The settlement did not include minimum headcount requirements.
U.S. Steel Canada subsequently filed for creditor protection in 2014, and the American parent company severed ties with its Canadian operations. A New York-based private equity firm acquired the steelmaker in 2016, and the Stelco name was revived when it returned to the Toronto Stock Exchange in 2017.
The standoff tests how foreign investors are held accountable under the Investment Canada Act amid Prime Minister Mark Carney's efforts to attract $1 trillion in investments over the next five years while managing trade tensions with the United States.