Fraser Papers may cut 300 jobs
Published Saturday May 2nd, 2009
Amid slumping demand for pulp, paper and lumber products, Fraser Papers Inc. may slash up to 200 jobs at its Edmundston operations and another 100 at its paper mill across the St. John River in Madawaska, Maine.
The company has scheduled a maintenance shutdown at the Edmundston mill for early June and unless its financial losses are fixed nearly half of the 450 workers at the New Brunswick mill may be jobless.
Fraser Papers also plans to cut production on one of the company's paper machines in Madawaska on Monday, putting 100 employees out of work for an indefinite period.
Edmundston Mayor Jacques Martin said the loss of jobs at Fraser Papers will have a devastating impact on the forestry supply chain throughout the region.
"We keep hearing about the automobile industry, but meanwhile, the forestry industry is in peril," he said. "The competition in forestry is ferocious right now and the government needs to take the necessary measures to keep the industry alive."
Despite taking market-related downtime at each of its operations to reduce operating costs, Fraser Papers has reported a $16.7-million first quarter loss, a mounting debt of $25 million and large pension obligations.
Fraser Papers CEO Peter Gordon said the company is asking for concessions from workers, a greater allocation of the province's Crown wood supply, more competitive electricity rates, better compensation for power from its biomass cogeneration facility and the elimination of the black liquor tax subsidy for its competitors in the United States.
"The next few weeks will be critical as the company works with the union, governments and lenders to come up with a viable business plan," he said during an interview from the company's head office in Toronto.
In order to staunch the forestry firm's losses, Gordon has identified a handful of key problems that need to be fixed.
The first is lowering the fixed costs of operations, including a reduction in the number of workers, compensation and benefits.
The company confirmed in February plans to cut 78 jobs from its Edmundston mill over the next two-and-a-half years, with at least 56 positions eliminated from the payroll by the end of 2009. Although no additional job cuts have been confirmed to date, fewer workers may return to work after the Edmundston mill's maintenance shutdown.
Doris Lavoie, president of the Edmundston workers' union, said employees are prepared to make concessions as the union renegotiates the collective agreement, which expires on June 30.
"We're losing 200 jobs and they still want to cut back our wages, pensions and benefits," he said during an interview from Edmundston. "We can make all the concessions in the world but if the government doesn't take action it won't do anything."
Gordon said the company is working around the clock to save the Edmundston jobs, but he added that employee contract issues are only a small piece of the puzzle.
The Canadian forestry heavyweight is also asking the province for an increased allocation of Crown wood supply.
"What we're asking for is an amount that reflects our proportional size in the provincial marketplace," Gordon said.
Fraser Papers consumes 28 per cent of the province's fibre market, which includes sawlogs, pulpwood, chips from sawmills or forest biomass. But the company currently receives only nine per cent of the total Crown wood allocations, Gordon said.
"It's disproportionate," he said. "We are one of the four anchor mills left in the province and we should have access to a secure wood fibre supply that can be harvested at economies of scale."
When asked if the province would increase Fraser Papers' supply of Crown wood, Minister of Natural Resources Wally Stiles said the province is working with all forestry companies to ensure their long-term survival.
"This is not a sunset industry and we'll do everything we can," he said. "We have actually already invested $40 million in Fraser to improve their productivity and energy efficiency."
Fraser Papers is also hoping to capture additional value from its biomass cogeneration facility in Edmundston. Ten years ago, the company invested $120 million to build the power plant, which burns forest residuals known as biomass.
"When we built the project, we signed a 30-year contract with NB power," Gordon said. "Since that time, the biomass cost for us has gone up 300 per cent but the price we get paid from NB Power has gone up only 13 per cent."
Another issue plaguing forestry companies across the province is a high electricity rate. Large industrial users pay 30 per cent less in Quebec and nearly 50 per cent less in British Columbia than in New Brunswick, Gordon said.
Fraser Papers is also struggling to compete with U.S. companies benefitting from a black liquor tax subsidy. This is a tax credit meant to encourage the consumption of biomass-related fuel such as grain ethanol.
"Somehow pulp producers - with the encouragement of their tax consultants - have driven a huge hole into the tax subsidy and it's going to cost the American taxpayer billions and force the closure of Canadian pulp mills."
Fredericton MP Keith Ashfield called the U.S. subsidy a "loophole" that's harming the industry in Canada.
"I've brought this to the attention of (Trade Minister) Stockwell Day and the issue is being discussed with representatives in the U.S.," Ashfield said.
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