Louie Palu/The Globe and Mail
Down the road from the Copper Cliff smelter, where the Inco Superstack reaches 380 metres into a clear winter sky, striking Steelworkers stamp their heavy boots and feed a smoking fire pit with scrap wood. Massive ore trucks, engines growling, wait for permission to drive through the picket line. It is a familiar ritual; after 10 or 15 minutes, the picket captain signals the drivers to proceed and go about their business at the smelter-their business being strikebreaking.
When Local 6500 of the United Steelworkers walked off the job at the Vale Inco nickel mines, it was mid-July. The progression from agreeable summer weather to minus 20 C has been brutal. The best to be said about minus 20 is that it's better than minus 30, just like strike pay of $200 a week is better than no pay at all. It's hardly surprising that there's little of the bravado that usually sustains picket lines.
The downbeat atmosphere may also reflect a sense among the strikers that the world has changed and that their strike has not been noticed by Canadians. There have been many strikes in Inco's history-but every other one was decided in Canada. Now Inco is a subsidiary of a company based far away.
If the long stalemate in Sudbury had a sound, it might be that of the other shoe falling. When the takeover binge of the mid-2000s saw many of Canada's pre-eminent companies disappear into foreign hands, the debate over the "hollowing out" of the domestic economy was muted. After all, Vale, like other acquisitors, made undertakings to preserve jobs and, in fact, to carry on much like before.
Now, it appears, things look very different to Vale.
The Steelworkers are on the receiving end of a global consolidation of the mining industry that has accelerated in the last decade, putting once-dominant companies like Inco in the shadow of giants like Australia's BHP Billiton, Swiss-based Xstrata and Vale of Brazil, a company that can now boast 100,000 employees dispersed on every continent save Antarctica. "A pimple on an elephant's ass. That's how small we are," is the summary of Wayne Fraser, the Steelworkers' district director.
It's not as if Inco didn't see it coming or didn't try to stay in the top tier itself. In its heyday, Inco was one of the largest and most prosperous companies in Canada and, for a time, the world's largest producer of nickel. But in the year-long bidding war over the future of Inco and Falconbridge, Inco was hobbled by having overpaid for the Voisey's Bay nickel deposit in Labrador: Inco paid $4.3 billion in 1996, and later wrote down the value of the acquisition by $1.5 billion.
And so Inco could not consummate its defensive efforts to buy Australia's Western Mining, or Inco's own long-time local rival Falconbridge (and alongside it Noranda). The latter deal petered out in indecision. Yet the union would have made a lot of sense-certainly more sense than the two old rivals holding on to their separate shafts on opposite sides of the street. An Inco-Falconbridge merger could have created, once again, the biggest nickel mining operation in the world. More important, it would have kept ownership in Canada.
Instead, while the federal government watched indifferently, Vale took over Inco in 2006 and Xstrata bought Falconbridge the same year, each of them paying about $19 billion. It seemed like a sad turn of events for a country that had been a global leader in mining. But then, there was never much love lost between the Steelworkers and the Canadian owners of Inco. Consider the list of strikes against Inco after the Steelworkers finally squeezed out their local rival, the International Union of Mine, Mill, and Smelter Workers, as the top union in town: 1966, 1969, 1975, 1978-'79, 1982, 1997, 2003. The longest strike was in 1978-'79: 261 days.
However, conflict between Vale and the Steelworkers did not seem inevitable. In his pitch to shareholders before they approved the purchase of Inco in the summer of 2006, Vale's chief executive officer, Roger Agnelli, declared, "Canada is a mining country. It's a country that has the legislation, experience, tradition, and very good people who work inside this sector. So it was very important for us to be in a country like Canada...we had a dream to be there."
Agnelli also met with senior Steelworker officials that summer. The unionists' recollection of the meeting was that he promised that Vale would change nothing. Agnelli said Vale bought Inco because it had a skilled work force that was among the most productive in the world. And, once again, he stated that he was proud to buy a Canadian operation.
That tone was echoed six months later when Murilo Ferreira, the Brazilian in charge of Vale's nickel division, spoke to the Greater Sudbury Chamber of Commerce: "What can Sudbury expect from the new owners? In reality, I expect you to see very little change. We are well aware and very proud of Inco's place of prominence in the Sudbury community and we are not looking to make major changes in how things are done. This is a very successful company."
A few months after Ferreira's reassuring words, he was out the door. In his wake went dozens of other staff and executives from the Vale offices in Toronto-veterans of the Inco regime, including prominent figures such as Fred Stanford, the president of Vale Inco's Ontario operations.
Vale was suddenly whistling a different tune. Agnelli now complained that "In Sudbury, there are deeper mines that have a higher cost." Lest that be misunderstood, he spelled it out: "Sudbury is Vale's highest-cost operation and it's not sustainable."
Any comparison of Vale's operations in Sudbury and Vale's vast and varied mining interests elsewhere in the world is difficult, if not impossible. Most of those other mining operations are open pits, worked by relatively unskilled employees. In Sudbury, the Inco mines go down two kilometres from the surface.
When Wayne Fraser went to work at Inco in 1969, there were 17,000 employees; when the strike began at Vale Inco last summer, the head count was down to about 3,000, but nickel production was the same as 40 years ago. The work force has dwindled over the years, in large part because most of the work is now done by sophisticated machinery, and the hard-rock miners are now technicians.
The surprise about Agnelli's new attitude was that the fundamentals of Sudbury had not changed since Vale began its due diligence on the purchase. True, the Sudbury mines were deep, but they had always been deep, and the ore was rich enough to persuade Vale to invest more than $19 billion in it.
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Fraser was following in his father's footsteps when he joined Inco and the Steelworkers in 1969, at age 20. He has been director of the Steelworkers' District 6 (Ontario and Atlantic Canada) since 2001.
Fraser has been on the Steelworkers' bargaining committee in Sudbury since 1978, when the record-length strike began, and he has been chair of the bargaining committee since 1986. The strike that began last summer is his 11th set of negotiations. In the first talks with Vale, he admits, "we didn't get off on the right foot there."
The wrong foot was when Vale started to spell out the new tune that Agnelli had been whistling. The essence was that Vale wants to have the same style of operation that it has in the rest of the world. In particular, Vale wanted to end the Inco defined benefit pension plan and move to a less onerous defined contribution plan, such as the one Vale miners at Voisey's Bay have. Next on the list of changes was a reduction of the profit-sharing plan known as the nickel bonus, which in the rare years of soaring nickel prices could increase pay dramatically.
With that, Fraser says, "The fight started, and they've been holding our members and this community hostage ever since."
In fact, although the Steelworkers are firmly opposed to changes in the pension plan, they cannot claim to be completely surprised at Vale's stand. The idea of switching to a defined contribution plan had been raised by previous management-and is an inescapable issue across the country.
However, what might have been a reasoned discussion five or 10 years ago was no longer possible-not when the union was confronted with what it took to be Vale's threat, since invoked endlessly in Steelworker offices and on the picket line, blunt and unmistakable: "We're going to change your culture."
Both the takeover and its aftermath are tied up with the price of nickel. In the year after the sale of Inco and Falconbridge, the international price of nickel, spurred by Asian demand, jumped from about $14 a pound to almost $24 a pound. The profits from nickel sales in that period were enough to cover at least part of the purchase price of the two mines. But then, with the commodity boom fading, nickel prices slid down almost as abruptly as they had risen, hitting about $8 in January.
A related legacy is the nickel warehouse of the London Metal Exchange. When the two miners were taken over in the autumn of 2006, there were about 6,500 tons of nickel in the Exchange. At the end of last year, there were about 158,000 tons available. The buildup was such that, last spring, both Sudbury mines announced shutdowns because they had so much nickel on hand.
"The pipeline is full," said Vale spokesman Cory McPhee. "We are not selling all the nickel we produce in Ontario and so this allows us to clear the pipeline.… When we return to work we are going to be in a much better position." What he did not say-but was obvious to anyone who inquired-was that Vale could suffer quite a long strike before the mines had to get back into production.
Nonetheless, mid-strike, Vale started limited production in two of its mines and at the Mill in October. It then started the smelter in mid-January. Vale was careful not to disclose how much production was achieved or how many people-replacement workers or managerial staff-were involved. However, spokesman Steve Ball said "the vast majority of those performing the work are staff and not replacement workers."
The resumption seemed designed to rattle Steelworker nerves, and the sight of smoke coming out of the Superstack did exactly that.
It's a strange and painful world out on the picket line. When you're not talking about a Brazilian company wanting to change the culture of Canadian mining, you talk to strangers about things you wouldn't normally discuss, like relying on the Steelworkers' food bank, or trying to find clothes and shoes for the young lad who is outgrowing everything he owns. It's not just the shortage of money; you're used to working. Unless you're on the picket line, you're just sitting around home doing nothing. Your life is totally different.
One miner, who has been at Inco since 1976, following two generations of his family before him, peers at the smoking fire pit and ponders the future: "How do we tell our kids to work here after this?"
Conversations can turn almost anywhere, so the guy you met for the first time 15 minutes ago says he has not seen much of his kids recently because the strain of the strike finished off his 11-year marriage. This draws a sympathetic nod from another striker whose marriage also broke up a couple of months ago. A third miner has a brother on staff at Inco who has continued working through the strike; unsmiling, he concedes that family relations are not happy at the moment.
The luckiest suffer no more than having to put their dreams on hold. There are others who have to use all of their strike pay and savings for food, so some of them are losing their cars and their homes.
The surprise is that there is not more visible anger in the 12-hour shifts on the cold and boring picket line. The mood is more of a slow, apprehensive simmer. The talk is about the security guards hired by Vale, and about surveillance cameras, and about scabs, particularly the guy who was a picket captain last week and this week crossed the line.
Most of the time, everyone is restrained. A driver heading for the Clarabelle Mill is told to proceed through the picket line, and he acknowledges the green light with a brief and courteous wave of the hand. He doesn't hear the muttered anger of the picket: "Don't wave to me while you're going in there to do my job, asshole!"
If there is an apprehension of disaster, it may be because it doesn't feel like a fair fight. How come, the strikers wonder, Vale Inco made $4.2 billion in profits (by the union's reckoning) in the first two years after the Inco acquisition? True, the Steelworkers internationally have 700,000 members, and the Steelworker strike fund stands at $200 million (U.S). Fraser cites someone from Vale as having said that the strike is costing the company $7 million a week-for most companies an astronomical amount of money, but for Vale Inco, which has $21 billion (U.S.) in current assets, not that much.
For a brief time it looked as though the federal government was going to step in to level the playing field when the company announced its eight-week shutdown last summer. Federal Industry Minister Tony Clement announced briskly that this was "not welcome news" and there might be "legal options" facing Vale under the Investment Canada Act.
This was a bit of a surprise in view of the Conservative government's reluctance to meddle in the marketplace. The basis of Clement's reaction was Vale's promise when it bought Inco that there would be no job cuts for three years, ensuring that the takeover was a "net benefit" to Canada.
However, a few weeks after his initial announcement, Clement dramatically changed his mind. Bad Vale suddenly became good Vale. If the Brazilian company had not come along, he said, Sudbury would have been a "valley of death." Without Vale, "There was going to be no buyer, there were going to be no jobs, there weren't going to be any capital investments, there was going to be no employer."
Explaining his change of heart, the Industry Minister said that "one of the things I look for is: Is there an equality of pain around the world in these international enterprises?...And judging from the shutdowns, in Brazil for instance, and other parts of the world, it seems that they haven't targeted Canada or targeted Sudbury for their shutdowns. So that's obviously something in their favour, so at this point we're not going to be proceeding with any actions with respect to Vale Inco."
Former Inco president Scott Hand, who had tried to build Inco into a Canadian world-beater, fired back: "Anybody who thought we were going out of business was naive indeed. It wasn't just Vale that wanted to buy Inco, it was Teck Cominco and it was Phelps Dodge." (Since then, Hand has kept his thoughts to himself and refused interviews.)
The mood of Vale Inco going into the strike was unmistakably combative. A company strategy workshop held a month before the walkout complained that mining costs in Sudbury are 50% to 100% higher than corresponding "world-class mines." The report from the workshop said it now costs Vale between $4 and $5 to produce a pound of nickel. That cost, it said, should be lowered to the $2.50 level. Assessing Sudbury and costs in the world-class mines, the document said, "The differences are largely in numbers of direct employees." If costs are not reduced, it warned, in five years the Sudbury mine will be "out of business."
Although the workshop was held in June, the report on its proceedings saw the light of day only in January, just after the six-month mark in the strike, with both sides hunkered down for the long haul. The report was leaked to newspapers in Sudbury, presumably as a prod to the union.
A further prod-another leak-was a letter from Vale Inco president Tito Martins warning that workers in Sudbury can expect the same kind of contract that Vale workers get elsewhere in the world: "There is no logic in making our Canadian operations an exception as we move forward with the business. Our position is clear; we want to give everyone fair and equal treatment."
For all that, Vale does not seem eager to see comparisons of wages in Sudbury and Brazil or other Vale holdings. Asked how much Vale miners are paid in Brazil, spokesman Steve Ball replied, "Sorry-I have no idea, though you cannot compare apples to apples with Canadian wages and those in Brazil, given our higher living standards and everything else Canadian." In response to further e-mailed questions about wages in Brazil, Ball replied, "I don't mean to be unhelpful-I just don't know and don't have any contacts in Brazil who could help with this answer."
An unexpected and perhaps annoying jolt for the company came in January from the trade magazine Metal Bulletin. Regarded by some as the bible of the metals industry, the magazine bluntly described Vale's hard line as an attempt to break the union.
The magazine pointed particularly to Vale's prosperity, citing a nickel trader who said that the company "is making money hand-over-fist and can afford to dig their heels in." In the same vein, the writer concluded that "Vale depends far less on the Sudbury nickel operations for its revenue than Inco did." And high stock levels at the London Metal Exchange give the company breathing room. As one analyst told the magazine, "If the management wants to take a strong view, there is some slack in the system."
As the strike dragged on through the winter, Vale's cards were held close to the company vest. The most senior executive to comment publicly was John Pollesel, vice-president production services and support for Canada and the United Kingdom, and general manager of Vale's Ontario operations. At that, his comments were made by open letter. As public relations chief Cory McPhee explained: "We haven't really made John available, honestly, to the press at this point in time."
In his letter, Pollesel argued that infrastructure at Inco had not been sufficiently upgraded for the past 15 years. Therefore, billions must be spent in the next five years. Sudbury's productivity is more than 50% lower than that of competing mines around the world. Sudbury runs the risk of being a "swing" producer, running only when nickel prices are high. "The union keeps shouting that Sudbury is the richest ore body in the world-it quite clearly isn't and hasn't been for some time," he wrote.
McPhee described the "bit of a perfect storm" that had hit the Vale operation in Sudbury-a combination of having sunk money into the mine, the worldwide recession and record prices for nickel that meant miners were taking home more money than their supervisors (to the extent that some of the latter wanted to go back to the union ranks). "A huge labour relations problem for us," McPhee said.
Between the nickel bonus and the pension dispute, the company's demand for "cost certainty" remained the obvious stumbling block when the two sides finally resumed meetings in the last weekend of February.
Curiously, two days after the return to the table was announced, Vale Inco filed a more than $1-million lawsuit against the union, complaining of "unlawful thuggery" by Steelworkers. The union was accused of assault, intimidation, threats and sabotage of company property.
In its statement of claim, the company alleged that trucks carrying explosives and fuel were prevented by large fires from crossing the picket line; it said hydro wires were cut, rail equipment was damaged and roads were littered with spikes to puncture truck tires.
The allegations have not been proven in court. Fraser described the lawsuit as an antagonistic measure, a nuisance and untrue.
The surprise of the Sudbury strike is that the city will emerge stronger than most had expected from a long walkout. Although the weekly incomes of 3,000 Steelworkers were slashed down to $200 in strike pay, the city itself was perhaps staggered but certainly not grievously wounded.
Dick DeStefano, executive director of the Sudbury Area Mining Supply and Service Association, estimates that the purchase of goods and services by Vale Inco in 2008, the last full year before the strike, amounted to $450 million. Since the strike, he estimates that has dropped to $150 million. But to his knowledge, only one supplier has been bankrupted by the strike.
For a time, it was hard to tell whether the city was hurting more from the recession or the strike. DeStefano estimates that in October, the peak of the recession, 85% of local companies were working at three-quarter capacity. But restaurants and stores were apparently busy, and when a new Walmart opened at the end of January, it was jammed with crowds.
The good news was that Xstrata settled a new contract in the final hours before a strike deadline at the end of January. A strike would have been a further $150-million loss to the Sudbury economy just in Falconbridge's direct spending on goods and services.
So the picture is not pretty, but it could have been far worse-like the marathon strike of 1978-'79, say. Mayor John Rodriguez recalls that "the whole town came to a halt. I mean, it was devastating."
After that crisis, the city's leadership got together to figure out what they could do about the future-what should the city look like in the year 2000? They decided that their immediate goal should be to cement Sudbury's position as the hub of Northeastern Ontario for health-care delivery, education, government services, tourism and retail.
Significantly, mining did not get a major role in this imagining of the future. Teachers, health-care workers and bureaucrats may not make as much as miners on their good days, but their paycheques are regular, and they are not usually dependent on the vagaries of commodity markets.
In that way and others, the Sudbury of today is not the Sudbury of 1978. The 3,000 Vale strikers account for about 5% of the city's work force. In 1978, the Inco strikers constituted about 25% of the work force. The city is now much more diversified; two-income families are far more common.
As he talks about how Sudbury has developed in the last 30 years, Mayor Rodriguez bubbles with the same quick enthusiasm that he exhibited in a 17-year career as a New Democrat MP. If he ever gives up on politics, he would be an impressive tour guide: Science North ("the second-best science centre in North America"); the cancer treatment centre (no more flying patients to Toronto); a new hospital; a new school of medicine; the overflowing campus of Laurentian University; the Ministry of Northern Development and Mines.
Then there is the re-greening of Sudbury. Decades of sulphur dioxide pollution had made the rocks black and wiped out virtually all vegetation. The first step was to build the $25-million Inco Superstack, which spreads the pollution further and thinner. After that, 4,000 hectares were limed to reduce the impact of the sulphuric acid rain; grasses and some 14 million trees were planted, so that endless tracts of slag heaps became grassy hills. It is not yet a lush green paradise, but Sudbury no longer looks like the moon.
But like most of the other 153,000 residents of Sudbury, Rodriguez, whose party once regularly called for the nationalization of Inco, is still a helpless spectator of the struggle that has wounded his city. It was at a press conference to urge both sides to the bargaining table that he confessed that in his 48 years in the city, he has never seen such aggravation-"a whole new level of aggravation." It was a moving appeal, but it was not clear that anyone was listening.
If the Steelworkers had their way, the strike would rekindle the sort of economic nationalism that Rodriguez used to be identified with. The Steelworker response to the strike has been a skillful and persistent evocation of Canadians' lurking xenophobia. Thus Leo Gerard, a onetime stalwart of Local 6500 who is the international president of the Steelworkers, talks of Vale's "Third World ways" and vows that "the union and Canadian workers in general will never submit to a labour relations culture imported from another country by a foreign corporation." John Fera, the president of Steelworkers Local 6500, was particularly effective in February when he called in Mayor Rodriguez and Richard Paquin, the head of Mine Mill (now absorbed into the Canadian Auto Workers), for a joint appeal on behalf of the Sudbury community. Even though the days of bitter Steelworker-Mine Mill rivalry are long gone, the appearance of the two union leaders on the same platform was a powerful signal that this was Sudbury against the world.
"Who are the Vale leaders that speak for our community?" Fera asked. "Does it not bother anyone that nobody in this company speaks for Sudbury?" And he turned the sharp edge of wounded national pride against the federal and provincial governments: "When are they going to speak for the working families that pay the freight in this province and this country?"
In the end, it is Fera who has delivered what may be the saddest judgment on one of the most painful of Canada's labour disputes: "I don't think they speak the same language as us. I don't think we're on the same page when we talk about negotiations. They don't seem to understand how we talk and, in fairness, I don't think we understand how they talk. It's not the same language. It's not the same meaning."