U.S. Steel Canada says it will collapse by the end of this year if it doesn't get a court order allowing it to reduce payments to pensioners and to stop paying other costs such as city taxes.

At the same time, its American parent is asking for permission to stop supporting the struggling former Stelco and to be allowed to move production of its highest value steel out of Canada.

Both suggestions, contained in new court documents, drew immediate outrage from leaders of the United Steelworkers and local politicians.

"I'm just sickened by this attack on the most vulnerable people in our society," said Gary Howe, president of Local 1005 in Hamilton.

Tony DePaulo, assistant director of the union's Ontario region, called the threats "just another attempt by U.S. Steel to bully us," adding "This company has reached an all-time despicable low" by targeting pensioners.

In a news release, letter to employees and documents filed with the Ontario Superior Court, USSC said if it doesn't cut health benefits for retirees and payments to its badly under-funded pension plans, it won't survive beyond the end of this year.

USSC president Mike McQuade said the Canadian situation went from challenging to dire when the American parent company decided to move production of 180,000 tons a year of high-grade auto steel out of Canada. The move would cut revenue to the Hamilton plant by as much as 40 per cent.

Hot Topic: U.S. Steel Canada "(W)ithout court approval of U.S. Steel Canada's motion, we don't see any way to avoid ceasing operations at the end of 2015," he wrote. "If this court order is granted we expect to preserve jobs and continue to deliver high quality steel products to our customers from both Lake Erie Works and Hamilton Works through 2016."

In new court filings, USSC asks for approval of a "Business Preservation Plan" allowing it to stop paying municipal property taxes, special pension contributions and supplements, health benefits for retirees, salary continuance for employees who left their jobs under special agreements, payments to the provincial Pension Benefits Guarantee Fund and some payments to its parent company U.S. Steel Corporation.

The cuts would affect supplementary pensions paid directly by USSC.

Since the start of its restructuring process, the company said it has paid about $5.9 million a month into its main pension plans and expects to pay another $23.6 million by the end of the year. Through 2016, pension costs could be as high as $18.6 million per month under normal pension funding rules.

"In light of the difficult financial circumstances now facing USSC, the company no longer has the financial resources and flexibility to continue to make these pension and retirement plan contributions and payments during its restructuring proceedings," the company said.

Health benefits for 20,600 retirees and their dependants are valued at $871 million as of Aug. 31. Without court relief, the company said those costs are expected to be $14.4 million for the balance of 2015.

"If the proposed Business Preservation Plan is not implemented now, the cash burn of USSC will be so significant that it would be unreasonable to continue operations (even if it had the cash, which it does not)," the company said.

The company's motion also seeks permission to suspend its sales process other than for its harbour front land.

"Despite the best efforts of USSC's Financial Advisor and USSC under the (sales process), the unwillingness of stakeholders to make the contributions and compromises required by bidders as conditions to their offers, and the unwillingness of bidders to modify their conditions in a manner acceptable to stakeholders, has resulted in none of the offers for the ongoing business being executable," the company said.

The alternative to its plan, the company said, is a "'hibernation' scenario which would involve the … orderly wind-down of USSC's operations and the idling of its facilities pending a future sale opportunity or liquidation."

Even with the cost cuts requested, the company said its business plan "contemplates that USSC will continue to operate at a significantly reduced level for the next 12 to 15 months when a blast furnace reline may be necessary, at which point USSC will not undertake the blast furnace reline or inventory winter buildup and both Hamilton Works and Lake Erie Works will be idled and placed on care and maintenance."

As the Canadian arm struggles to survive, U.S. Steel, of Pittsburgh, has filed materials asking for court orders allowing it to demand the Canadian company post cash deposits for anything it buys from the parent or for permission to end all support to the Canadian company by Dec. 10.

In its motion, the American parent said it submitted offers to buy parts of the Canadian arm, but with that offer rejected, it has no choice but to move production of auto steel out of Canada.

Where auto contracts are typically for a single year, several auto makers are asking for longer terms and USSC's plants can't be relied on for those longer terms.

"In the absence of certainty regarding USSC's ability to remain in production throughout the contracted time periods under discussion … USS cannot count on, or 'bid' USSC's capacity … (and) must rely upon the footprint of its plants where production capacity is certain."

The company also argued moving production out of Canada would allow auto steel to be made in mills closer to its customers.

Bill Aziz, USSC's chief restructuring officer, said in an affidavit that diverting auto steel production out of Canada is highly unusual because auto makers like Ford and GM typically require their supplies to come from specific plants they have certified as meeting their standards. While the Hamilton and Lake Erie mills have been certified and have long histories of supplying auto customers, several of U.S. Steel's American plants do not.

The only times the Canadian plants were unable to serve auto customers have been the three times workers were locked out by U.S. Steel to enforce contract changes.

Aziz also said losing that production would seriously harm the Canadian operation.

"It is clear that any diversion of production from USSC for the remainder of 2015 would result in a sudden, marked decrease … in revenue and earnings. These plants have fixed costs and require sufficient volumes to remain viable," he wrote.

Aziz added the diversion would cut volume through the Hamilton mill's Z line coating facility by about 25 per cent. It could also trigger a default under some of USSC's credit lines, make the plants "significantly less attractive to a potential purchaser," and would take management attention away from the restructuring effort.

"The effect of the Diversion Decision is to reallocate a key revenue stream from USSC to USS at a time when stability and preservation of the status quo at USSC is most critical," he added.

In separate filings USSC, the United Steelworkers and a group of active and retired salaried employees all ask that the diversion of production be declared a breach of the court order that gave USSC creditor protection last year.

At a Friday afternoon news conference, union leaders called the company threat an attempt to bully workers into giving up benefits and pensions earned over a lifetime.

"A lot of people out there are going to be worried, but that's how U.S. Steel operates," said Bill Ferguson, president of the USW Lake Erie local. "U.S. Steel has made it known they are going to go after the most vulnerable in our community. They want something and they are not holding back. They're going after everyone."

DePaulo said Friday's news conference was only the first response by the union.

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"We're going to have a lot of these and demonstrations. We're going to take it to the streets just like we did before," he said. "As far as I'm concerned, it's just despicable. I couldn't believe anyone would use that as a threat."

In response to a request for additional comment, U.S. Steel Canada referred to its filing and its news release.

Political reaction to the threats was also swift and negative.

"The motions before the court threaten the sustainability of current production at local facilities and will have great impact on those retirees in our community," said Mayor Fred Eisenberger. "I am requesting a response from all parties in the federal election to the question: what actions are they prepared to take to protect all involved? I intend to leverage their ability to support the motions in front of the court."

Coun. Sam Merulla, vice-chair of the city's steel committee, also emphasized the election. "I don't think it's a surprise (the company) is going to try to get out of its obligations," he said. "At this point, a federal election is on, so we need to focus on demanding answers and solutions from the government."

Coun. Scott Duvall, chair of the steel committee and now an NDP candidate on Hamilton Mountain, said the company is pushing boundaries further than ever.

"We haven't seen them try to go this far before," he said. "It is so disappointing. This is supposed to be a restructuring process, but it looks a lot more like dismantling."

Both councillors said they're awaiting updates from the city's finance and legal departments on tax implications for the city. A recent study suggested losing U.S. Steel would result in annual losses of $2 million in water and sewer revenues and nearly the same in taxes.

A common theme among federal and provincial politicians was anger at the Harper government for not releasing a 2011 agreement under which it dropped a lawsuit against the company for breaching the production and employment promises it gave in 2007 when it was allowed to buy Stelco.

"It is unconscionable that the federal government won't enforce the contractual agreement with U.S. Steel and is allowing this company to bully it, and it is a disgrace that the federal government is not standing up for the people of Hamilton, Nanticoke and surrounding areas," NDP MPP Paul Miller said.

Miller and Duvall are both Stelco veterans.

Hamilton Liberal MPP Ted McMeekin weighed in on Twitter, declaring "Pensioners worried about actions of US Steel deserve answers" and calling on the federal government to reveal details of the "secret deal."

Hamilton Centre NDP MP David Christopherson said it is "Just not acceptable to threaten retirees with their pensions and benefits. It's not only un-Canadian, it's bloody well inhumane and it needs to be stood up to now."

He said if the NDP takes power in the Oct. 19 federal election, "One of the first things we would do is throw every lawyer we can find in the Canadian government at whether or not there is some way to get this document released because that's the key to everything. We need that document to know exactly what promises were made and which ones were kept."

Christopherson also challenged MPs Dean Allison and David Sweet, the only Tory incumbents in the Hamilton area, "to stand in front of this community and defend or distance themselves from the actions of their own government. It's no more acceptable for those Conservative MPs to remain silent than it is for the federal government to keep that document hidden."

The federal industry minister has repeatedly said only U.S. Steel can release the agreement and it has refused.

In a news release, Flamborough-Glanbrook Liberal candidate Jennifer Stebbing, challenging Sweet, also condemned the Conservative government "for once again failing to protect Canadian workers.

"These are hard-working Canadians, many of whom put decades of dedicated service working at US Steel and now are being abandoned by the government. Where is the prime minister's so-called economic leadership?" she asked.

The USSC motion is to be heard in court in Toronto Sept. 28. The company and workers have also been ordered into mediation to try to solve their difference. That session is expected next week.

The issue will also be aired at a town hall meeting to be held Monday at 4:30 and 7:30 p.m. at the Port Dover community centre.

- U.S. Steel applies to end property tax payment