Industry Committee on Dec. 2nd, 2010

[John Farrell]

Nortel—

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

You don't have Nortel any longer.

[John Farrell]

Nortel is a provincially regulated company.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

No one will ever forget what happened to Nortel in 2008.

Canaccord Capital estimated that BIMCOR also had a full 58% of the BCE pension fund riding on the stock market, and that pension lost about $2.8 billion in that year alone. The comment I have for you, Mr. Farrell, is to ask you to please go back to your membership and ask them to start investing conservatively—in bonds instead of stocks—and simply live up to their fiduciary and, I would say, legal obligations to the pensioners. That's just a comment that I want to make, because I think we need to be clear.

The next question is for Mr. Lopez. We need to be clear that there has been a lot of mismanagement here too. You talk about markets, and certainly that has been a problem in the wood industry, but what you don't talk about is that for decades and decades, the forest industry, instead of making investments where they should have--in their properties and elsewhere--paid shareholders when times were good. The industry has always been like this, but when times have been good, management has failed to make those investments. Abitibi is, I think, a good example. When you talk about management and you talk about the kinds of decisions management makes, I will put it to you that in terms of Bowater, Abitibi was maybe not the best investment to make for the forest industry.

There are problems with the market, absolutely, but let us not forget that these companies were not always well managed. I just want to put that to you.

You said earlier that you didn't know how many pensions would have been saved if Bill C-501 had been there, and later you corrected yourself when you said they would all be saved. Of course they would. That was actually my question for you, and you answered it. Thank you for that.

I have questions for Mr. Robertson.

Thank you for joining us, Mr. Robertson. I'm sure you're aware that in my riding of Thunder Bay—Rainy River you have two plants that are still operating, and they represent thousands of current and former workers who depend on AbitibiBowater for their income and for their retirement, so I'm glad to see you here.

Bill C-501 was tabled partly because of the problems that AbitibiBowater is having and will hopefully soon be out of. You entered supervised restructuring partly because your executives, the board of directors, and the pension plan administrators failed to live up to their simple obligations to adequately fund the pension plan. That's one of the reasons you're there. I see that your job tasks you with saving a company that perhaps has not been as well run as it could have been over the last number of decades. You talk about more than $1 billion, and so in essence you have reneged on some of your duties there with regard to pensions.

My questions today are posed in that context. I'm hoping you'll be brief, because I have some other questions too.

[Some hon. members]

Oh, oh!

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

I'm being brief.

Mr. Robertson, were you the official at AbitibiBowater who recommended, despite the company's being in the process of restructuring and facing a $1 billion shortfall, that company executives be paid $6 million in bonuses this year?

[Bruce Robertson]

I am retained as an adviser to AbitibiBowater. I'm not an executive of the company. That issue involved a lot of discussion, and I'd probably refer you and any of the other committee members who have an interest in that to check the record from when we were before the industry committee back at some point in September.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

In general terms, though, do you think that it's fair, when companies are working to come out of restructuring or having difficulties--and of course this refers to Nortel also--for executives to get bonuses while other workers, in particular pensioners, can't secure their pensions? Is it ethical that this happens?

I don't know how much input you had in this particular case, but let me ask in general terms what you think.

[Bruce Robertson]

AbitibiBowater has had a very complex restructuring, and it has been an exercise in balancing a lot of interests of various stakeholders, including a number of the people we are referring to here today. It's our view, and it was the company's view, that part of successful restructuring and part of the strategy to maximize value for all stakeholders, including present and future pensioners, would involve paying bonuses to the senior executives to ensure retention.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

You're here as the restructuring officer, and your task is reorganizing and getting the company back on its feet. It is not an easy job. It is a very difficult job, I'm sure.

You've chosen to attend these hearings to fight Bill C-501. Let me ask you, though, in terms of your job, whether you have also spent time scheduling meetings with the federal government to ask for loan guarantees to help in those efforts. Have you ever asked the federal government to match or negotiate an end to the massive billions of dollars in U.S. subsidies--such as the black liquor subsidy or the BCAP program--that provided your U.S.-based competitors with more than $10 billion in capital while you were in the middle of restructuring?

Did AbitibiBowater press the federal government and tell them to listen? I'm saying this because I have done that. I have done it in the House. I have pressed the government either to match those subsidies or to ask the Americans to get rid of them. They put our forest companies at a disadvantage. Was part of what happened with restructuring pushing the federal government and saying that these subsidies have to be matched?

[The Chair, Conservative, David Sweet]

Mr. Rafferty, I'm going to have to cut you off there. You are substantially over time.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Is it seven minutes already?

[The Chair, Conservative, David Sweet]

Yes. It was more than seven minutes, but I gave everybody a little space.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you, Chair.

[The Chair, Conservative, David Sweet]

Go ahead, Madam Sgro, for five minutes.

[Judy Sgro, Liberal, York West, ON]

It just astounds me. If I were presenting that bill, I would have been talking about how good it was and why it was going to help the people we were talking about helping, rather than trashing some companies that managed to save an awful lot of jobs. I applaud the work you both have done on that issue, because at the end of the day people need to be working. People need to be paying taxes.

We in the Liberal Party supported this bill, even though we recognized from the beginning that many other bills that the NDP puts forward are totally irresponsible. They know they're not going to be in government, so they can just say and do whatever they want. I think it's extremely irresponsible of Mr. Rafferty to put these amendments on the table after we all acted in good faith. We had lots of witnesses on all sides come forward to talk about a small, narrow band of special payments. We were all trying to do that to try to help Nortel. We heard from Nortel people themselves that this bill isn't going to help them either. They know that.

On this side of the table we were trying to see if we could find some way to make some improvements and to help. The amendments clearly take it way over the top, so whether or not Mr. Rafferty and the NDP are playing irresponsible games again, they have certainly made it very difficult for a lot of us who were trying to do the right thing. Frankly, this destroys an awful lot of good intentions that some of us had to try to fix a problem.

The most this bill is going to do, if it gets through the committee.... It will be the end of February before this bill comes to a vote in the House, and that is beyond any hope of help for any of the Nortel people. They also know that. At some point I would have liked to have heard Mr. Rafferty give us concrete reasons as to why we should even be looking at this bill, given the fact they have put amendments that push it over the top and make it irresponsible in many ways. It was irresponsible to begin with, but some of us were trying to make it work. It is not going to work.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Chair, I'm happy to answer that question if she wants to use part of her--

[Judy Sgro, Liberal, York West, ON]

You had your seven minutes and you clearly didn't choose to use the time to talk about the bill.

The point is that we put out a white paper. Mr. Robertson, I produced a white paper with 28 recommendations, some of which I expect the government will be picking up and using. I applaud them for doing so, because these are issues about how to prevent this from happening again. We recognize that Nortel was a perfect storm and we can be sympathetic, but we're running out of ways to be able to help.

I will ask Mr. Robertson. What is the status of the pension plan in your company today, following the restructuring? Where are those employees and their pensions, those who are currently on pension and those who are looking forward to a pension?

[Bruce Robertson]

The pension benefits are going to continue post-emergence, so 100% of people's benefits will continue to be paid. We avoided the termination of any of the 15 pension plans we had in Canada, and the Canadian company, AbitibiBowater, is certainly far stronger than it was when it entered creditor protection. I think that should give pensioners further comfort with respect to their future ability to derive benefits from the plans.

[Judy Sgro, Liberal, York West, ON]

Would you comment, Mr. Lopez?

[James Lopez]

I don't have the exact statistics for you today, but the number in terms of the solvency is in the 80% range and rising, because as we proceed according to the regulations, we are actually funding over what you would call your normal funding rate. Within four years we'll be funded 100%. As far as our pensioners are concerned.... There are always solvency issues or surpluses in pension plans. They ebb and flow over the decades. This is just the way interest rates in capital markets work, but the pensioners always get their full pension, and the commitments to the existing employees never change.

One of the things I'd caution about here is that even these discussions in committee have created a situation in which we're now getting phone calls from analysts who follow our industry. They're starting to do calculations on various companies on the solvency of their pensions and how that's going to affect their ability to access the capital markets, so don't underestimate what even these deliberations are doing already to the investment community.

[Judy Sgro, Liberal, York West, ON]

I would certainly hope that we don't have to decide between saving jobs and saving pensions in the future, and that over the next while changes will get made so that those decisions don't have to be one or the other. It should be about making sure that pensioners get what they expected to get, saving jobs, and building companies at the same time. That's where our struggle is. It's to try to deal with all of those issues in a balanced way.

Thank you.

[The Chair, Conservative, David Sweet]

Yes, Mr. Rafferty.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Just so Ms. Sgro knows, just so it's very clear, if she checks the record, she'll see that we were very clear, absolutely from day one, when I first spoke about this bill not helping Nortel. Just so she's absolutely—

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Is that a point of order or debate?