Industry Committee on Sept. 10th, 2010

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Bouchard.

Mr. Paterson, very briefly.

[David Paterson]

I'll answer your question, but we are currently not in negotiation with Boralex. There's been nothing going on.

Yes, with the right deal we would restart Dolbeau, but something else, some other facility in Canada with the same set of issues, would have to close.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Paterson. Thank you, Monsieur Bouchard.

Thank you, Mr. Paterson and Mr. Robertson, for appearing, especially on such short notice and in the midst of these court proceedings. We thank you for that.

This meeting stands suspended to 11:30.

[The Chair, Conservative, Michael Chong]

I would like to welcome all our witnesses.

Welcome back to the 34th meeting of the Standing Committee on Industry, Science and Technology on the 10th of September 2010.

We are here pursuant to Standing Order 108(2) for a study of the permanent closure of AbitibiBowater of Gatineau

and the Dolbeau-Mistassini plant.

We have in front of us, on the second panel, representatives from three organizations.

I would like to welcome Mr. Carrière, President of Local 142. Mr. Gagné is not with us today, but Mr. Lamontagne is appearing as President of the Paperworkers Division.

Lastly, we have Mr. Coles, president, and

Mr. Ménard, Secretary-Treasurer, National Office, Communications, Energy and Paperworkers Union of Canada.

Welcome to all three groups. We'll begin with an opening statement from the national office.

[David Coles, President, Communications, Energy and Paperworkers Union of Canada]

Thank you very much, Mr. Chairman and members of the standing committee.

My name is Dave Coles, and I am the president of the Communications, Energy and Paperworkers Union. The CEP represents some 130,000 members concentrated primarily in the forest, energy, and telecommunications sector.

Sitting beside me to my left--always to my left--is Mr. Ménard. He's the secretary-treasurer, with whom I will share some time in my slot.

I'd like to offer to the committee a non-partisan, paid political announcement. I have handed out to the committee a report of the sector council on some of the tasks needed to reform the forest industry. I only do that because it's an important piece of work that is non-partisan and we've worked together on it. Not only are brother Ménard and I officers of our national union but we have been workers in this industry for a long time, both out of companies that produced newsprint—brother Ménard here in the Gatineau Valley and I in a paper machine on Vancouver Island. I've also had the mis-pleasure of being the president of the national union while the forest industry spun out of control and shed many, many jobs, and we'll deal with that.

I want to start by saying that the permanent closure of the Gatineau and Dolbeau AbitibiBowater mills is merely the latest casualty in a long, long list of forest crises that have cost more than 100,000 jobs. I'm going to repeat it: we've lost 100,000 jobs, and 40,000 people are still unemployed. If we talk about the workers at these two mills, we also have to talk about the workers at the other mills that have been shut down by AbitibiBowater, such as mills in Beaupré, Grand Falls, Dalhousie, Mackenzie, Shawinigan, and a number of other machines not listed that have been closed by AbitibiBowater.

There is plenty of blame to spread around for these closures, but the victims are always the same. The victims are always the same—the workers and their communities—and you'll hear from some of our members who work in those communities.

First, there is AbitibiBowater, because the company is still restructuring under CCAA. The severance pay owed to workers will likely not be paid, even though both parties agreed in a collective agreement to pay that severance if those mills were shut down. Had AbitibiBowater waited until after the vote to exit the restructuring process before it decided to shut the mills down, the workers would have received their severance. Instead they are stuck at the bottom of the creditors list. This is especially frustrating in the light—many times raised this morning—of the $6 million in executive bonuses that are part of the restructuring agreement that is soon to be voted on by the AbitibiBowater creditors.

In negotiations, and I chaired those negotiations, we have tried to negotiate for these severances to be paid after the company would have come out of CCAA proceedings, and to Bowater's credit, the company was in agreement with that strategy. But the legal opinion we received is that such an agreement could not be reached, as it would be considered an end run around the creditors, and therefore both the company and the union lawyers advised us that it was illegal for us to bargain that severance after they emerged from CCAA. It would have created a super-priority for the creditors, our members.

Hence the second culprit: the bankruptcy legislation. Workers are the butt of jokes with the CCAA and the BIA legislation.

We do appreciate the changes that were finally proclaimed last year, four long years after they received royal assent, but these changes are marginal for workers. Unfunded liabilities in the pension plan remain very low on the creditors list, as does severance pay.

The legislation under the CCAA and the BIA as they now stand really forms a chapter protecting the rights of investors and trampling those of the workers whose livelihoods and whose communities are shattered when a mill shuts down. What these pieces of legislation are saying is that the sweat and blood of the workers are worth nothing compared to the capital provided by people who in many cases live thousands of kilometres away from the company's operation. This is simply wrong, and needs to be addressed by ensuring that the wages and pensions, and even severance pay, that are owed to workers are given super-priority in the CCAA and BIA legislation.

Brother Ménard.

[Gaétan Ménard, Secretary-Treasurer, National Office, Communications, Energy and Paperworkers Union of Canada]

The third culprit, as CEP sees it, in all of these events relating to the forest industry and the crisis is currently experiencing, is the Conservative government. After five years of crisis in our industry, what has been done? It can be summarized as two zeros and a line. Loan guarantees from our federal government: none. Assistance to any company to keep it out of bankruptcy or help it emerge from bankruptcy: none. A forest summit to bring our country together with a plan: no. I admit there was a brief, four-hour meeting, as alluded to earlier by this gentleman. It was a mini summit of sorts. But that is not what we need. During the last election campaign, I met with Lawrence Cannon, a Conservative government minister. We were at the premises of a paper mill in the region, which is also covered under the CCAA. Mr. Cannon promised a summit on the forest industry. He told us that his government would organize such a summit, but we are still waiting.

Why are we talking about a summit? Because in our opinion, it would be an opportunity to bring together all the players: governments, unions, communities and First Nations. Together they could develop a plan for the future. At present, there is no plan for this industry. Across the country, we are losing power plants, our industrial fabric. But the trees are going to continue to grow. This is a renewable resource. What is going to happen? For 100 years the forest industry has provided a living to communities all across Canada. But now, plants everywhere are being shut down. And no one is coming forward with a plan to convert our industry. Yet that is what we need.

In countries where this has happened, government officials sat down with industry players, examined the situation and decided to develop a plan for the future, and find a way to convert their industries. That is what is needed, but it won't happen without help from governments. Since you read the newspapers and you heard it said this morning, you are well aware that forestry companies, all of which you are familiar with, are, without exception, on the verge of declaring bankruptcy, if they haven't already. Government assistance and a plan are clearly needed. The federal government must have a vision of the direction in which to take the forest industry, so that it can continue to provide a living to these communities. We have to convert these plants, rather than letting them just shut down and do nothing about it. This is important. Otherwise, we will end up harvesting logs and, as is the case with the oil sands, ship them off to the United States without processing them first.

I have one final recommendation to make. We have formally requested of AbitibiBowater that it not dismantle the Gatineau and Dolbeau-Mistassini facilities. We believe it's important for AbitibiBowater to ensure that they remain operational. With winter coming, that is very important. If the company is serious about its restructuring plan, it must ensure that these plants continue to operate.

Once again, we will require federal government assistance to convert these plants to other types of new production. But that can be done. All that is needed is for someone, somewhere, to have a vision.

[The Chair, Conservative, Michael Chong]

Thank you.

Mr. Lamontagne, you have five minutes.

[Julien Lamontagne, President, Dolbeau-Mistassini, Paperworkers Division, Communications, Energy and Paperworkers Union of Canada]

Thank you, Mr. Chairman.

I would like to thank the political parties for supporting this process. It's important for the workers.

I would like to come back to a point raised by Mr. Paterson. He referred to newsprint when discussing the Dolbeau-Mistassini plant. If he is not aware of this, I would just like to clarify that the Dolbeau-Mistassini plant has not produced newsprint for the last 10 years.

Our plant was equipped with two paper machines. In 1997, the building and one machine were overhauled, and in 2006, the same was done for the headbox on machine number 2. The headbox is the heart of the machine. The equipment and the plant were performing efficiently. The workers decided to go along with a plan. When machine number 2 was shut down in July of 2007, Mr. Grandmont came to see us to say that cutbacks were absolutely necessary because the plant was losing too much money. We willingly agreed. We felt it would be a way of saving our plant, which was new and cost-effective, and that steps would be taken. The workers did their part.

In February of 2008, machine number 2 was returned to service. It was the first time in North America that a machine that we had been told would be shut down was returned to service. Initially, there were five workers per machine. People familiar with the industry probably know that we were the only ones to operate that way in the industry. Everywhere else, there were more than five workers per machine.

In 2008, in recognition of the exceptional performance of the Dolbeau plant following the return to service of paper machine number 2, for commercial printing paper, Mr. Grandmont presented us with a plaque conveying the management group's congratulations to the entire team.

To thank us for our efforts, these same people shut down the plant in 2009, supposedly on a temporary basis. Three weeks later, they told us that because of Boralex, it would be impossible to reopen it. They then placed themselves under the protection of the Bankruptcy and Insolvency Act and shut down our plant permanently. That is unacceptable, and we have no intention of giving up. Over the last 15 years, almost $400 million was invested by Alliance Forest Products. They, on the other hand, did not invest much when they came into the picture.

In March of 2009, our plant manager met with all of us to tell us that an additional effort was needed. We were told that our plant was generating some $5 million a month and that some way had to be found to generate even more. Additional cutbacks of 20% were needed. Our departmental directors were saying that they didn't know what to do anymore, and that every drop of juice had been squeezed from the lemon. In June, we were told of a temporary closure, as I said earlier. And then the plant shut down permanently.

It's funny. Questions were asked this morning. Knowing that AbitibiBowater's plants were generating $5 million a month, it is difficult to understand why they are being shutdown. We just don't get it.

Personally, I am appearing before this Committee to defend the workers and the community. We made considerable efforts to start up the plant again. Every time we try to propose something, we come up against the non-competition provisions. We are told that some people thought it would be possible to manufacture something in a plant that has been shut down. But it's still the same story. We don't want them to demolish that plant. We are concerned that their plan is demolish it and recover the equipment. Given that all the AbitibiBowater plants are shutting down, we are afraid they will transfer that equipment to the Abitibi-Consolidated plants.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Lamontagne.

Mr. Carrière, you have five minutes.

[Gaston Carrière, President, Local 142, Communications, Energy and Paperworkers Union of Canada]

Good morning, ladies and gentlemen, members of the Committee. Thank you for inviting us to appear.

At the Gatineau plant, the infrastructure is the industry flagship. It is one of the most modern plants in North America. I know that in Canada, the Gatineau plant is the most modern. In the last 20 years, $1 billion has been invested there, including a $400 million paper machine, a $180 million boiler, a TMP, or thermo-mechanical pulp, machine, at a cost of $150 million, and a $90 million de-inking machine. And there was an $18 million cogeneration unit three years ago. A power contract with Hydro-Québec provides for 20 megawatts for 20 years at a competitive rate. It's more profitable to sell than to buy.

In 1963, the Premier of Quebec, the Hon. Jean Lesage, negotiated a contract with the CIP paper company. It provided for 38 megawatts of power for 100 years. Today, that electricity represents some $12 million a year, and there are 96 more years left. The employer or the government brought the parties back before the courts in 2006 because there was a misunderstanding with respect to the contract negotiated in 1963. The multinational, called Avenor at the time and later to become AbitibiBowater, won its case. It was agreed that the contract would begin in 2006 and be effective for 100 years, until 2106. As we speak, it's in the river; it's dormant. People at the multinational were told it wasn't transferable and that it was associated with the Gatineau plant. If it's worth $12 million a year today, how much will it be worth 96 years from now? We're talking about billions and billions of dollars. That would wipe out the deficit of all of AbitibiBowater's 24 pension plans, which are $1.3 billion in the hole.

And there are other problems at the Gatineau plant. In 2007, they shut down a paper machine. The workers were subject to rationalization. We lost 171 unionized workers and 25 non-unionized workers. These same workers were the ones who funded the pension incentive measures, because the employer had abandoned them. We were taken hostage by the employer to ensure there would be joint participation in the Quebec government program, known as the ARTT, but the condition was that there be rationalization. So, in June of 2007, and again in December of 2007, we rationalized our working conditions; we did that twice in a single year. At the request of CEP locals in Eastern Canada, we asked that negotiations start up again in January and February of 2008, so that the multinational could secure a two- or three-year extension of the contract, with zero increase, and a job security guarantee was signed before the Dolbeau-Mistassini and Gatineau plants were shut down. They asked us for $62 million worth of concessions, when only three weeks earlier, some $60 million worth of bonuses had been paid out. Mr. Weaver, in particular, received $25 million. Here I'm talking about all the company's managers, and especially Mr. Paterson, Mr. Alain Grandmont, Mr. Rougeau, Mr. Girard and Mr. Wright. They all received bonuses and now they are doing it again with the $6 million, but that is just the continuation of what these white-collar criminals have already done.

Earlier, Mr. Paterson said they had shut down the least profitable plants. But let me tell you something: at the Gatineau plant, they did everything they could to make us look bad. All the plants where the value per tonne exceeded $500 were at risk. In November of 2009, we were producing paper at the Gatineau plant for $465 a tonne. In December of 2009, we produced it for $469 a tonne. The $4 difference was due to a change in chemical suppliers. No one sent the cavalry to save us. There was a shortage of staff, both on the union side and the employer side. No training was provided. One third of the plant had been emptied out, because of people retiring. But they never helped us. It's really too bad. I won't name any names.

The managers at the Gatineau plant asked for an assessment. They were told not to worry, that staff would soon be provided to them since plants were being shut down. The plants did indeed shut down, and at the Gatineau plant, they sent us people who were offered positions such as assistant director. They had a great time making us less efficient. We were told that we were losing orders, but it wasn't true. They took great pleasure in transferring orders to other AbitibiBowater institutions. They would group the orders that weren't profitable and pass them on to the Gatineau plant. So, we obviously were no longer profitable. It was unacceptable that we received no training or help. On top of that, they mixed up our orders.

In closing, I just want to make the point that the contract was renewed in 2009. The first meeting was with union reps and the AbitibiBowater negotiating team. There were 12 plants, two of which had shut down.

Immediately after saying hello to all of us, the employer stated that had he been able to shut down the Gatineau plant because of its liabilities, he would have done so. However, he didn't have the right to do that under Quebec legislation. But the employer simply circumvented the legislation and shut down the plant. In terms of liabilities, there are 1,828 workers, 1,447 retired workers, 381 workers who opted for late retirement and 21 people on long-term disability. The plant was shut down and we are convinced that it was because of the liabilities. Don't forget that the Gatineau plant absorbed everybody remaining from the former CIP plants in Temiscaming, Hawkesbury, Matane, Lachute, Trois-Rivières, Dalhousie, Maniwaki and Harrington.

Thank you very much.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Carrière.

And our final presenter is the Mayor of Dolbeau-Mistassini, Mr. Simard.

[Georges Simard, Mayor, City of Dolbeau-Mistassini]

Thank you, Mr. Chairman. Good morning everyone. I want to convey special greetings to the workers and the unions.

Appearing today to talk about a community and try and explain to people that there is no logic to what is happening now is quite a responsibility. I will try to discharge it as best I can.

First of all, I would like to give you some background. The Town of Dolbeau-Mistassini is part of the Regional County Municipality of Maria-Chapdelaine. It comprises 12 towns. The population of that RCM is 27,000 and Dolbeau-Mistassini has a population of approximately 15,000. As will already be clear to you, that leaves about 12,000 for the 11 other towns. We constitute the commercial centre and have the hospital and school that serve the entire community. Industry in Dolbeau-Mistassini provides a living to workers from the 11 other municipalities. It is truly a very important community.

Dolbeau-Mistassini covers an area of some 40,000 square kilometers. It's as large as Switzerland. Ninety-five per cent of its surface area is covered with forest. Indeed, more than 70% of the economy in our RCM is based on the forest. We have the largest commercial forest area in Quebec. Some 3 million cubic meters of wood are harvested in our area. Our slogan is: “Maria-Chapdelaine, a generous nature to share the future”. Large quantities of wood, bark and chips are sent all across Quebec. We have always accepted that, except that now, our community which sprang from the forest, which has lived and still lives off the forest, wants to continue to do so. But there is something illogical happening: our plant has been shut down.

From its beginnings in 1927 until its indefinite closure on August 24, the paper mill has always been profitable. Even last year, a profit of $45 million was expected.

As you mentioned a little earlier, the company owners sold their cogeneration plant to Boralex in 1998, which weakened the mill. The company sold it, and yet today, the company is saying that it's unhappy about that. Its managers, who brought the company to the point where it is now, are talking about restructuring. I must admit that scares me.

AbitibiBowater says it is still interested in forest operations in our area and in the Dolbeau-Mistassini sawmill. And yet we are aware of no operational or investment plan. AbitibiBowater is prepared to talk, but only based on a highly restrictive non-competition clause. That kills any possibility of recovery or even of selling the paper mill, because AbitibiBowater owns 80% of the wood in the Saguenay—Lac-Saint-Jean area. Anybody interested in buying the plant would be facing a non-competition situation. Furthermore, whatever happens, it would be forced to ask AbitibiBowater for chips and bark. To which the company will reply that it is willing to sell, but at the price that it has set. That means that two plants are now endangered—both Boralex and SFK Pâte in Saint-Félicien, which makes pulp. The fact is that AbitibiBowater, or the previous companies, had sold those plants with promises and supply guarantees that they effectively ended with Bill C-36.

We are living amidst the resource and we cannot allow ourselves to be dispossessed without reacting; we cannot accept the idea of a closure as part of a financial restructuring carried out based on highly debatable rules. As I stated a little earlier, the plan closure will have wide ranging effects at the municipal, educational, business and social levels. It is an especially serious catastrophe for a single-industry town and RCM. As I mentioned earlier, 12 towns are affected.

I would like to briefly address the real estate market. Right now, a lot of houses are for sale. Some 300 people to be exact, and that is a very significant number. We are now in a buyer's market, as opposed to a seller's market. There will be very significant repercussions for the municipal budget. Dolbeau-Mistassini is a regional centre for services, business, and so on. Day in, day out, we are concerned about what people will do. They've never had a problem, but they have no other way of making a living. As a result, our health and social services centres have been responding for a number of months now. We don't understand how this kind of legislation could allow a company to jeopardize other companies. It seems that, based on this logic, in order for a bankruptcy to occur, the people who own the sawmills or sawmill equipment, or the workers, have to fail as well. That is totally unacceptable. We cannot accept the idea that a company could file a financial restructuring plan without unveiling its operational and investment plan.

The President of AbitibiBowater told you earlier that other plants will be shutting down four or five years from now. That means that people who think they are secure today will go through what we are going through now, because of people who have made sure that this company would end up this way.

Yet people are rewarded for succeeding in causing so much harm. How can anyone, at the cost of a financial restructuring, allow a company to jeopardize an entire community? The community is worried. We are convinced that September 14 and the subsequent steps are only part of a process for the company which, with the blessing and complicity of an entire system, will trot out its emergence plan, which I call a “resurrection plan”. We are being held hostage by a company that has the benefit of a monopoly. We are also concerned that our sawmill will cease operations because the company has shut down its planing units. So, they will have to dry the wood, load it onto trucks and haul it.

In closing, Mr. Chairman, at the present time, fiber is being left on the forest floor which, barely two years ago, was being processed. The company decided to leave it in the forest, because it doesn't want to process it; it would result in too many chips. One has to wonder about the FSC environmental standard. At the present time, local chips, bark and logs are travelling hundreds of kilometers, whereas in our area, everything is shut down.

Today I am sounding the alarm bell for a single-industry region and appealing to you, Mr. Chairman, and everyone present. The plant back home, which is at the centre of the resource, has no right to shut down. So, we are here today to make you aware of that.

[The Chair, Conservative, Michael Chong]

Thank you, Your Worship.

We have one hour for questions and comments from Committee members. We will begin with Ms. Zarac.

[Lise Zarac, Liberal, LaSalle—Émard, QC]

Thank you, Mr. Chairman.

Good afternoon and thank you for being here today.

Mr. Coles talked about victims. After hearing your comments, I'd say that is no exaggeration. Earlier there was talk of negotiations with AbitibiBowater to obtain compensation, but later we were told that it's illegal because there was already an agreement; then a minister promises there will be a summit on the forest industry which never happens; a plant closes when the managers don't even seem to know what is manufactured there; and there is another plant with a contract which guarantees savings that other plants cannot provide. So, it is clear to me that there truly are victims.

When Mr. Lebel, the Minister of State for the Economic Development Agency of Canada for the Regions of Quebec announced funding in April of $100 million over three years, the Communications, Energy and Paperworkers Union of Canada said it was too little, too late. Mr. Gagné is unfortunately not here today, but I would like to ask you this question. What could have been done previously? What would that change now? Is it still too late? What can be done to prevent the closure of these two plants? And five other plants may be at stake.

Could you explain what Mr. Gagné had proposed?

[David Coles]

Sadly, the situation in Dolbeau is not unique. It's repeated in community after community after community right across Canada and Quebec.

Our complaint is that there is no strategic plan for the industry. We have, almost on bended knees, asked the federal government to facilitate a strategic meeting at which all of the players can get together to find a way out, because, Madam, this is not over. There is much more going to happen to forest workers in Canada, and we have to stop the bleeding. It is not just about cheap rhetoric. This industry is in chaos and continues to spin in chaos.

The first thing that must happen is the government must hold strategic meetings with all of the players to make a plan for the short term and the long term. The situation in Dolbeau is no different from that anywhere else. Single-industry towns and the communities around them are dying. There is no question that money is needed, but it takes a strategic economic plan for the industry to survive. That's the first thing that has to be done.

[Lise Zarac, Liberal, LaSalle—Émard, QC]

Yes, there must be a plan; I agree with you on that, particularly since it is expected that further cutbacks are coming.

In addition to a plan, to get things moving more quickly, would loan guarantees have helped to stabilize the situation, before this meeting took place?

[David Coles]

Absolutely. Loan guarantees have been on the agenda.

If you pay close attention--the committee should listen to this--to what Mr. Paterson said, he has to get money not at commercial rates but at exaggerated rates, and it puts at risk that corporation, White Birch, and many others that are trying to exit CCAA because they can't get loan guarantees at commercial rates. It is absolutely imperative that the federal government at very little risk--very little risk, considering the uptake it would get--guarantee the loans of these corporations that do have realistic business plans. Loan guarantees are essential.

We also have to find a way to compete with the subsidy of the United States. The American government subsidized the industry with $2 billion cash. The Canadian government came with a program that was half the value and put our paper companies at a great disadvantage.

[Lise Zarac, Liberal, LaSalle—Émard, QC]

The auto sector was saved. We recently were made aware of results in that regard. Do you feel you are at a disadvantage compared to that industry?

[David Coles]

Without question I think the forest industry has been written off by many politicians in this country. They've said it's a sunset industry. I don't believe that. I think it's a sunrise industry. Properly managed, this is a sustainable, green industry. It has to have the cooperation of not just the industry but the government and the workers.

It's a funny thing about those trees, Madam: they just keep growing. We're squandering economic diversification in this country.

[Lise Zarac, Liberal, LaSalle—Émard, QC]

I would like to give my final minute to my colleague.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Even the Liberal Party proposed refunds for amounts invested in research and development. Those amounts can be directly allocated to the companies and improve their cash flow. Could that not be an immediate solution for a company like AbitibiBowater?

[David Coles]

Yes, it's absolutely necessary that this kind of rebate or economic incentive be there. The other real issue that's connected to that is research and development. Forest countries--

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

That's what we've been proposing: that money should be going for research and development. We're just waiting for the announcement, but there's nothing.... We've been calling for a portion of the amount put into research and development to be reimbursable, refundable, because companies that don't have the cashflow can't wait for tax breaks if they're not paying taxes.

[David Coles]

The issue is this: why do you make products that people don't want to buy? To be able to make new products, you need research and development, plain and simple, just as the government has funded the aerospace industry.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

It requires that one have a vision.

Mr. Ménard, I believe you are the one who said we need a vision, a plan for the future, but that there has not been one for this industry under the current government.