Algoma Steel CEO: Feds knew about plans for layoffs before giving $400M loan

Algoma Steel CEO Michael Garcia discusses the timing of the job cuts, dealing with Trump's tariffs, and whether the federal government knew about layoffs.

The head of Algoma Steel says the federal government and Government of Ontario knew the company’s business plan included a re-tooling of its Sault Ste. Marie plant that would result in layoffs before they agreed to half a billion dollars in loan assistance to help the company weather the storm of U.S. tariffs.

Canada’s last remaining independent steel producer, which employs about 2,700 people in the northern Ontario town, issued layoff notices to about 1,000 workers on Monday, effective in March.

The company was hit hard by 50 per cent steel tariffs imposed by U.S. President Donald Trump in June.

The layoffs come less than a month after the company said it had completed $500 million in financing agreements with the federal government and Government of Ontario, which had provided loans of $400 million and $100 million respectively.

In an interview on CTV’s Power Play, CEO Michael Garcia said it has been a “very challenging and sobering week” for Algoma Steel, and that the entire company has known for “a few months” what its strategy would be if the tariffs were not removed.

Since 2021, the steel producer has been transitioning to Electric Arc Furnace (EAF) steelmaking, which Garcia describes as more cost-effective, more flexible, and less labour intensive. It also means a shutdown of its blast furnace and coke oven operations.

Garcia explained to host Vassy Kapelos that cutting jobs at Algoma Steel was “always the future of this company.” Only 1,600 employees are required to operate electric furnaces that can produce 3.2 million tonnes of steel, compared to 3,000 employees operating blast furnaces that produce two million tonnes, he noted.

However, transformation timelines have sped up as a result of unprecedented tariffs imposed by the United States, which have effectively closed off the American market to Canadian steel.

“We expected that transition to happen in early 2027 or late 2027, but with the dynamics and the significant change to our available markets, with the U.S. tariffs, the future has arrived early at Algoma Steel,” Garcia said, adding that his company could not survive without this accelerated timeline or financing that the federal and provincial governments have provided.

When asked by Kapelos if Ottawa and Ontario knew layoffs were in the cards before it agreed to the half a billion dollars in loan assistance, Garcia said the “government certainly knows our business strategy.”

“It knows the pivot that we had to make. It knew very well the extreme pressure the company was under. I don’t think anybody would loan the company half a billion dollars without asking very detailed questions about what our business plan was,” he said, adding that he’s been “very open” with both the government and his employees about the configuration the company is moving towards.

“I think the core concern is, how do we protect the ongoing Algoma Steel? How do we make sure this company is competitive [and] viable?”

Speaking to reporters on Tuesday, Industry Minister Mélanie Joly said her thoughts are with the workers who have been laid off and their families.

“We’ll continue to fight for these jobs. We’ll be working with the union, we’ll be working with the company, and we’ll make sure that the future can be brighter right now for the steel workers and the steel sector,” she said.

Joly said the federal government has been working with Algoma Steel on a new structural beam steel mill and clay plate steel plant, and says she believes more jobs will return as a result of these investments.

Garcia agreed that if Algoma Steel invests in that production, it will drive the creation of more jobs — potentially as many as 400-500 jobs in the years to come — but clarifies it won’t replace the jobs that were lost as a result of these layoffs.

“Once we shut down the blast furnace and the coke ovens, those jobs are not coming back. Those operations are not coming back,” he said.

Asked whether he believes Algoma Steel is still viable, Garcia said “yes” but “it’s going to take some work.”

“We have the people to get this right, and I also have faith that the government is taking the right steps to create a fair and competitive market for domestic steelmakers.”

Looking to the future, Garcia said domestic steelmakers need to dominate the domestic market, but looks forward to Canada re-establishing trade with the U.S.

“It’s an important part of the future prosperity of the Canadian steel industry,” he said. “When the U.S. trade relationship improves and there’s more access to the U.S. market, we’ll certainly take advantage of that. But we’ll never lose sight of the fact that we have to build the foundation of our company on a strong domestic presence.”

You can watch CTV Power Play’s full interview with Algoma Steel CEO Michael Garcia at the top of this article.