Court File No.

CV-14-10695-00CL
ONTARIO

SUPERIOR COURT OF JUSTICE

(COMMERCIAL LIST)

IN THE MATTER OF THE COMPANIES CREDITORS ARRANGEMENT ACT,

R.S.C. 1985, c. C-36 AS AMENDED

AND IN THE MATTER OF A PROPOSED PLAN OF COMPROMISE OR ARRANGEMENT

WITH RESPECT TO U.S. STEEL CANADA INC.

AFFIDAVIT OF GARY DALIAN

(sworn September 21, 2015)

I, GARY DALLIN,

of the City of Burlington, in the Province of Ontario,

MAKE

OATH AND SAY:

Mv Background

1.

I started working with Stelco Inc.

("Stelco")in 1965 as a Project Metallurgist. I held

various positions with Stelco, including as a Mill Metallurgist, Supervising Mill Metallurgist and
Senior Product Metallurgist. I retired from Stele in 2001 in the position of Manager, Metallurgy
and Quality Assurance at Hamilton Works and Finishing Stelco Inc.

2.

In July 2003, I took a leadership role with a few other retirees in establishing the Stel

Salaried Pensioners Organization ("SSPO"),an organization which is focused on protecting the

registered pension benefits and retiree health benefits of retired salaried employees of Stelco,
now known as U.S. Steel Canada Inc. ("USSC").

3.

In 2006, the SSPO was incorporated and I became Chair of the Board of Directors. I

presently continue in this position. I am also currently one of four SSPO members who are
members of USSC's Pension Advisory Committee.

4.

As a result of my employment experience and my involvement as a court-appointed

representative in the two CCAA proceedings of Stelco/USSC, I have knowledge of the

matters herein deposed. Where I make statements in this affidavit which are not within my

personal knowledge, I have indicated the source of that information and I believe such
information to be true.

5.

On September 16, 2014, USSC obtained protection from its creditors under the

Companies' Creditors Arrangement Act,

R.S.0 1985. C. C - 36 ("CCAA").

6.

I, along with Pat Mousseau, George Hanson, Ron McClure, Paul Wendling, and Frank

Dalimonte, were appointed by the Court as the representatives (the "Representatives") of all

non-union active and retired employees of USSC in the CCAA proceedings. The court also
appointed the firm of Koskie Minsky LLP as Representative Counsel.

The transfer of work from USSC to USS (the "USS Plant Loading" Issue)

7.

On August 31, 2015, the Monitor released its 12thMonitor's Report reporting that United

States Steel Corporation ("USS") intends to redirect 180,000 tons of high-revenue automotive
steel production and finishing out of Lake Erie Works and Hamilton Works and send that work
to USS mills in the United States.

8.

On September 17, 2015 Representative Counsel and the United Steel, Paper and Forestry,

Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union

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("USW') filed motions requesting the court to require USS to cease and desist in any redirection of production of automotive and other steel products to USS's other mills under the

USS Plant Loading, and requiring USS to restore and/or continue to mill load and allocate
production of automotive and other steel products to USSC, and to pay USSC compensation for
any losses caused to USSC by the USS Plant Loading (the "Plant Loading Motions")which are
returnable on September 29, 2015.

9.

On September 18, 2015 and again in writing on September 19, 2015 and September 20,

2015, Representative Counsel requested that USS temporarily "standstill" in any re-direction of

production of automotive and other steel products to USS's other mills under the USS Plant
Loading prior to the hearing of the Plant Loading Motions. USS has refused to "stand still".
Reversing the USS Plant LoadinE is Feasible

10.

USSC produces steel coils, manufactured metallurgically according to customers'

specifications.

11.

The orders from automotive customers are for steel coils produced by USSC that vary in

size and composition and can weigh up to 25 tonnes each. These steel coils are then sold to
customers who are primarily automotive parts producers and the automotive manufacturers
themselves. USSC does not produce specific automotive "parts". Once such an order is filled and

delivered, these customers then use the USSC steel coils in stamping and forming machines to

make the specific automotive parts they require (such as, for example, hoods, door skins, and
other automotive body parts).

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12.

The production being re-directed by USS out of USSC is high revenue and high gross

margin production for the automotive market, and is among the most valuable and profitable
steel products produced by USSC.

13.

The quality of steel required by the automotive industry is higher than what is required by

most other customers. Many steel plants make automotive quality sheet steel, however, the Zline at Hamilton Works is a continuous galvanizing line that specializes in making high grade
automotive galvanized steel sheet.

14.

When the Monitor reported on August 31, 2015 that USS is re-directing production to

mills in the United States rather than it being allocated to and produced at Lake Erie Works
and finished at Hamilton Works, I believe USS is really only re-directing the customer orders

from the USSC Order Books to the USS Order Books. What this means is that the work is no

longer on the Order Book of the USSC facilities and has been moved to be booked for
production by USS mills in the United States at some point in the future. I do not believe the
orders have yet been fulfilled.
15.

Once an order is placed in a facility's Order Book, the production planning

department at the particular facility decides the production timing to fill the order.
Depending on the rate of delivery that is required by the customer, this can take weeks to
months.
16.

Placing an order on the Order Books is regarded as mid-term planning, and can easily

be changed by either USSC or USS. For example, if there is breakdown of equipment,

insufficient material or cancellation of material, then the timing and location for the order to
be fulfilled can be changed quickly to produce the steel for the customer's needs.

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17.

The raw material exists at any steel facility to fulfill the orders in the facility's Order

Books. USSC's Z Line is one of the facilities that can produce the highest quality coated
steel sheet. Therefore, the re-direction of production from USSC to USS has not changed
USSC's ability to fulfil the orders that are being re-directed to the USS mills and the Order

Books can readily be changed back so that USSC resumes producing the steel at issue
without any impairment to customer's orders.
18.

Despite that these orders may have been booked weeks or months prior to actual

production, they can be changed or modified as late as the same day depending on the
circumstances. It takes 45 minutes to make one heat of steel on any given day the particular

facility usually knows 16-24 heats ahead of time what is planned to be made that day.
19.

In other words, it would not be credible for USS to say as an excuse to resist the

Standstill Order request that they cannot stop the USS Plant Loading or that it is too difficult

to send the automotive orders back to USSC at this stage. USS can easily do so without any
impairment to customers' orders.
20.

Furthermore, USS's transfer of such a large block of coated sheet orders from USSC

to the coating lines at other USS plants does not make business sense from the metallurgical
perspective. There is a significant probability that some of the different automotive stamping
presses that are accustomed to using the steel from the USSC Z-Line will react negatively to

different steel coming from the other USS facilities, resulting in steel-forming problems and

higher automotive part rejections. It is well known that stamping presses need time and
adjustments to become "tuned" to new steel sources in order to make acceptable quality steel
parts. The USSC Z-Line can make the necessary steel now without such steel-forming issues.

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21.

I swear this affidavit in support of a motion by Representative Counsel requiring USS

to cease and desist in any re-direction of production of automotive and other steel products to
USS's other mills under the USS Plant Loading, and requiring USS to restore and continue to
mill load and allocate production of automotive and other steel products to USSC until a decision

is rendered by the Court with respect to the Plant Loading Motions and for no other or improper

purpose.

SWORN BEFORE ME at the City of

Toronto, in the Province of Ontario on
September 21, 2015.

GARY DALLIN

COMPANIES' CREDITORS ARRANGEMENT ACT,

IN THE MATTER OF THE
R.S.0 1985. C. C-36, AS AMENDED

AND IN THE MATTER OF A PROPOSED PLAN OF COMPROMISE OR ARRANGEMENT WITH

RESPECT TO U.S. STEEL CANADA INC.

SUPERIOR
(COM

Proceeding

AFFIDAVI
(sworn

KOSKIE MIN
20 Queen Street
Toronto, ON M

Andrew J. Hat
Tel: 416-595-20
Email: ahatnay

Barbara Wala
Tel. 416-542-62
Email: bwalanc

Adrian Scotcb
Tel: 416-542-6
Email: ascotchm
1836472v 1

Court-appointe
Non-USW Acti
USW Salaried R