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OTTAWA (Reuters) - The Canadian government took U.S. Steel Corp to court on Friday over production cutbacks at its Stelco subsidiary, Industry Minister Tony Clement announced.
Clement had sent U.S. Steel a "demand letter" on May 5 asking the company to comply with commitments it made when it took over Hamilton, Ontario-based Stelco. He said on Friday he was persuaded that U.S. Steel was still not complying with those undertakings.
An application has been filed with the Federal Court of Canada asking the company to "order appropriate measures to remedy this situation," Clement said in a statement.
He told Reuters afterwards: "I am requesting that the court mandate that U.S. Steel meet its obligations and that it be fined for every day that it does not." He said the fine could be up to C$10,000 ($8,900) a day.
In March, U.S. Steel temporarily shut down most of its operations at two big former Stelco plants in Hamilton and Nanticoke, Ontario, affecting some 1,500 jobs. It blamed adverse market conditions. A spokeswoman said on Friday that as a matter of policy the company would not comment on whether any of the facilities had been restarted.
Clement said in the statement he expected U.S. Steel to stick to the undertakings it had given at the time of its Stelco takeover on capital expenditures, research and development and production.
"I have carefully reviewed U.S. Steel's response to my letter. I remain of the view that U.S. Steel is not complying with its undertakings, and I am not satisfied by its explanations for noncompliance," he said.
U.S. Steel complained on Friday, however, that Clement had declined to meet the company to discuss the issue.
"We are disappointed that the minister has apparently decided to pursue the matter in the courts while ignoring our numerous requests to meet with him on these issues and while disregarding the ministry's own guidelines with respect to foreign investment," U.S. Steel General Counsel James Garraux said in a statement, without elaborating.
"Nevertheless, we will vigorously defend our record at U.S. Steel Canada in the appropriate forum, he said."
Responding to Garraux's remarks, Clement said he had met with the company when it informed him of its shutdown plans, and then they exchanged correspondence; when the company started making legal representations to change the deal he referred it to his officials.
"Basically, the bottom line is this is a distraction. They don't want to be held to account for violating their undertaking with Investment Canada, and I'm going to hold them to account, or I'm seeking that the court do that on my behalf," he said.
Additional reporting by Euan Rocha in Toronto; editing by Rob Wilson