Sue a business into Profitability

 

When a business starts losing money, it is sending a signal. In Hamilton, Ottawa’s instinct is to shoot the messenger.

In 2024, Ohio-based Cleveland-Cliffs bought Stelco for $3.4 billion. To win approval under the Investment Canada Act, it signed binding undertakings to maintain employment for five years: the same number of unionized workers and the vast majority of non-unionized staff. The commitment was sold as a shield for the national interest and for the workforce.

Less than two years later, the shield is being tested. Squeezed by U.S. tariffs and a shrinking market for certain steel products, Stelco says it will idle finishing operations in Hamilton, putting up to 500 jobs at risk. The company calls this survival. Ottawa calls it a breach. Industry Minister Mélanie Joly has given Cleveland-Cliffs five business days to produce a plan to keep the jobs or face court action. The federal government has also put money on the table to keep the lines running, an offer the company has so far turned aside. Prime Minister Mark Carney has vowed to use “all powers” available and to pursue the company “to the fullest extent of the law.”

Start with what Ottawa gets right. Cleveland-Cliffs made a promise to secure a deal it wanted, and an undertaking given under the Investment Canada Act is not a suggestion. If foreign buyers learn that their commitments evaporate the moment they become inconvenient, the entire review process becomes theatre. Holding the company to account through penalties, clawbacks or damages is precisely what those undertakings exist for.

But that is not all Ottawa is doing. It is trying to compel a private firm to keep running operations the firm has judged unviable, and it is offering public money to make the compulsion go down easier. These are two very different projects. One punishes a broken promise. The other overrides a commercial judgment about cost and demand, then hands the bill to taxpayers. The first defends the rule of law. The second suspends the price signal whenever politics finds it unwelcome.

Bailouts are always marketed as emergency medicine. In practice they behave more like a chronic steroid: the symptoms fade while the patient grows weaker. The damage is well documented. When firms expect rescue or political compulsion, moral hazard grows; owners take bigger risks and delay hard decisions because losses can be socialized. Capital and labour stay trapped in low-productivity uses instead of moving to stronger firms. Competitors that adapt without public help are punished for their discipline. And every new rescue raises public debt and contingent liabilities, shrinking the fiscal room left for genuine emergencies.

Combining legal threat with subsidy makes all of this worse. It turns a private company into a quasi-public employment vehicle. Budget constraints soften, efficiency incentives wither, and the line between commercial enterprise and political instrument blurs until it disappears. The cost is not abstract. Every dollar spent propping up one finishing line is a dollar unavailable for other priorities or for paying down debt. Once intervention becomes the expectation rather than the exception, it becomes a structural drain on public finances.

None of this means governments should never act. Temporary, conditional support during a genuine systemic crisis can stop wider damage. Enforceable undertakings on foreign takeovers can protect legitimate national interests. The danger comes when bridge financing tied to restructuring quietly becomes permanent life support for capacity the market no longer wants.

There is a better path, and it is not complicated. Ottawa should collect every dollar the undertakings allow, in full and in public, so that no future buyer mistakes a Canadian commitment for a press release. Then it should spend public money on the workers rather than the mill: income support, retraining and real help moving into firms that can use their skills.

Stelco’s workers deserve better than to be caught between a hard commercial reality and political theatre. Taxpayers deserve better than to become the permanent backstop for private industrial decisions. Markets eventually force losses into the open. Politics can only postpone the reckoning, and the longer it waits, the larger the bill. 

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