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The Sault can handle the challenge: mayor.

The Sault can handle the challenge: mayor

Tracking the economic ups and downs of Algoma Steel Corp. is nothing new for Sault Ste. Marie.

However, when the steel mill's very existence is called into doubt, there is much more to worry about than a cyclical industry or a recession.

During February's cash crunch at Algoma, many people had to stare into the face of the unthinkable, and it was not a pleasant sight.

In information provided in court as part of the company's application for protection from creditors, Algoma Steel painted a bleak picture of Sault Ste. Marie without the mill.

A report prepared for Algoma Steel by the accounting firm Ernst and Young predicted that 9,600 jobs and $20 million in tax revenues would disappear if Algoma collapsed.

As if those predictions were not bad enough, the report suggested that about one-quarter of the city's population, 20,000 people, might leave to seek work elsewhere.

It predicted that the financial problems of the unemployed would lead to an increase in crime, family breakdowns, health problems and suicides.

Sault Mayor Joe Fratesi noted that there were 12,500 people working at Algoma Steel in 1982, but that number had fallen to about 7,500 before last year's work stoppage.

That means the community has already dealt with the loss of about 5,000 jobs, he noted.

"If there is another downsizing, it's not going to be of that magnitude. It's not going to be 7,500 reduced to 2,500 because that almost spells the closure of the whole mill," the mayor noted.

However, Fratesi said the potential loss of those jobs has been addressed by the city in its efforts to diversify the local economy.

"The population of the city didn't drop from |82 to now. It dropped by about 1,000 then returned," he noted.

Fratesi said the city must further reduce its economic dependence on Algoma.

"You have to go out there and diversify, and that's why we've been doing what we've been doing," he said. "And we'll do even more of it."

The mayor was not surprised by the dire predictions for his city which resulted from the announcement in February of Algoma Steel's financial crisis.

"Media thrives on bad news," he said.

However, Fratesi said what is most important is that the short-term crisis has been taken care of at Algoma. He believes the city is in good shape to take on the challenges of the long-term.

"Our infrastructure is in great shape here," he said, noting that water treatment plants, sewage treatment plants, firehalls and police stations have all been built in recent years.

"If our community was in tough shape and we had all of these other infrastructure problems, we'd be in a different boat," he said. "But because our infrastructure is in good shape, and we don't have these other problems, we can concentrate our efforts on dealing with diversification, instead of saying we need $60 million or $80 million to build a poo-poo plant."


Jim Rudack, president of the Sault Ste. Marie Economic Development Corporation, believes that there will not be a mass exodus from the city even if there are large employee reductions at the mill, or even if the mill is closed.

"We (the people of Sault Ste. Marie) are not really a migratory animal," he commented.

Instead, Rudack believes that former Algoma employees would look for other employment in the area, or receive public support.

Rudack admitted that there are doomsayers joking that the last one to leave the city can turn the lights off. However, he stresses that the city is not going to die.

"It's a pretty serious gash in our soft underbelly. We're bleeding a lot right now," he said. "We've still got some blood left, though."

Rudack noted that the situation is not hurting the city's ability to attract new industry and investment, although many of his clients are asking him what went wrong.

"I haven't heard anyone say they wouldn't give Sault Ste. Marie consideration," he said.

Sault Ste. Marie was previously more dependent on Algoma Steel than it is today, Rudack noted.

Many of the steelmaker's local suppliers have been trying to develop markets elsewhere. Some are now looking into business opportunities in the U.S., he said.

Rudack admitted that it is a tough time to explore new markets because all of Canada is in a recession, while the U.S. is in a protectionist phase.

Steve Boniferro, an international representative in the city for the United Steelworkers of America, said much of the community makes its living directly from Algoma Steel.

Boniferro noted that the steelmaker's employees and their families total almost 25,000 people.

Without Algoma Steel the tax base of the city would decrease, and there would be an increase in the demand for social programs, he warned.

"No Algoma Steel would be devastating," he said, adding that he does not believe that a shutdown will happen.


Jake Pastori, a business development officer with the Sault Ste. Marie Economic Development Corporation, said the city is not in a panic because the mill will close.

"I think the word is concerned," he said. "I think no one expects the plant to close or go bankrupt."

For every job lost at the mill, Pastori predicts that an extra one or 1.5 jobs will be lost in the city at restaurants, machine shops and in the retail sector.

However, he commented, "It is nothing the people in the Sault can't get over."


The concern for Algoma Steel in Sault Ste. Marie, Ont. is shared by its sister city, Sault Ste. Marie, Mich.

The two communities portray themselves as being one city.

Jim Hendricks, executive director of the economic development corporation in the Sault, Mich., said he doubts there is anything the American city can do to help, such as bringing concerns to Washington about the mill's exports to the U.S.

Hendricks noted that the Canada/U.S. Free Trade Agreement has addressed most of the lingering issues that could have hindered Algoma Steel from exporting products to the U.S.

The Canadian government has a greater number of ways to help than the U.S. government would have if the steel mill were on the south side of St. Mary's River, he added.

Hendricks observed, "The American approach is a sort of economic Darwinism."
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Title Annotation:Focus on Sault Ste. Marie; Joe Fratesi's, Sault Ste. Marie's mayor, opinion on Algoma Steel Corp.'s financial problems
Author:Bickford, Paul
Publication:Northern Ontario Business
Date:Apr 1, 1991
Previous Article:Algoma Steel restructures to ensure its future.
Next Article:Efforts to diversify the Sault's economy are paying off.

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