Evidence of meeting #38 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was nortel.
A recording is available from Parliament.
9:45 a.m.
President and Chief Executive Officer, Nortel Networks Corporation
Those were discussions to help the company, to keep it from going into CCAA.
9:45 a.m.
Liberal
John McCallum Liberal Markham—Unionville, ON
So these were proposals to help the company maintain operations in Canada?
9:45 a.m.
President and Chief Executive Officer, Nortel Networks Corporation
Yes. It was done to help the company continue, without going to CCAA.
9:45 a.m.
Liberal
9:45 a.m.
Conservative
9:45 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Thank you, Mr. Chair.
Mr. Zafirovski, it is a pleasure to see you today; but after listening to the answers you gave to my colleagues, I believe that this is a sad day for our democracy and our parliamentary system. You have certainly met with representatives and ministers from the government to talk about your financial standing. Your employees are here today, and are the primary asset of your company. They were not at all considered in discussions about a possible bail-out plan the government would have been involved in. I find this very regrettable.
Currently, the employment insurance program has many shortcomings. In light of recent discussions, everyone knows that those who are not receiving employment insurance benefits will have to wait until an agreement is reached. The government does not care about people, about the public, about its citizens. This is what I find regrettable.
You state that you did nonetheless consider your employees. In my opinion, the employees you must count on are your greatest wealth. How can you look forward to the future if you no longer have the confidence or the appreciation of these employees whom you are not even considering?
You agree to cutting back the pension that they have worked for all their lives. I put myself in their shoes. When working for a business for many decades, there are certainly many things that one does not like, and even uninteresting work must be done. However, one expects that one will be recognized for all of these efforts at the end of a productive period. Yet now employees are being deprived of everything because of current difficulties, and at the same time, the executives are still going to receive millions of dollars in bonuses. This is considered normal, because the executives need the bonuses to continue their work.
I deplore this situation, and I truly hope, as all my colleagues have expressed, that you will stay and listen to what these employees have to say later on. It would have been good to hear them before hearing you. That would have helped us understand their distress and their situation.
Can you summarize your position on all of this?
9:50 a.m.
President and Chief Executive Officer, Nortel Networks Corporation
You are talking about a position on what part?
9:50 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
I would like to hear your comments on what I said about how you treat your employees during a difficult economic situation, especially given the fact that you have the collaboration of the current government and the permission of the courts to take such action. As a democrat, this is what is of most concern to me. I am believer in a democratic system that is devoted to the well-being of everyone, collectively. I greatly deplore this situation which you are instrumental in shaping.
9:50 a.m.
President and Chief Executive Officer, Nortel Networks Corporation
It's a rather broad statement and question, but let me just make a couple of comments.
Nortel had 100,000 employees back in 2000. The market gap was more than $250 million. It was in a tailspin at the end of 2005, down to 32,000 to 33,000 employees. I can just tell you the work ethic, the supports, the excitement from the population over the last three years have been second to none. Many of us were on a mission to have one of the great turnarounds in business. It was all based on people; most of the promotions were inside the company. We really thought we'd be able to take four or five years of going backwards to create a company for the future.
We made some big investments, many of which were in Ottawa, on fourth-generation wireless, unified communications.... You can just go through the Ottawa.... So this was not playing defence, because we knew that if that trend from 2005 had continued, this business would have been bankrupt a number of years ago. We thought we were there in the middle of 2008.
Things changed. I can tell you with the same commitment and passion that this will not be a long-term outcome. I'm certain of that. The reason I'm here is because I think I can make a difference, taking the company through this stage. A big part of the efforts we're driving are to preserve the greatest numbers of jobs, which I think we are doing a good job of at this time, and that will be proven over the next number of months.
9:50 a.m.
Conservative
9:50 a.m.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
Thank you, Mr. Chair, and good morning, gentlemen.
Mr. Zafirovski, Mr. McCallum mentioned earlier the former market capitalization of Nortel. I remember a few years ago I think it represented approximately one-third of the value of all the companies listed on the Toronto Stock Exchange, so I guess all Canadians or most Canadians have shared in Nortel's pain. I represent the city of Mississauga, where a lot of your recently severed and retired former employees live.
I wonder if you could tell us if, through the Companies' Creditors Arrangement Act proceedings, you have any plans to ask the court to set aside any of the funds that might come from proceeds of sale of assets for the benefit of recently severed employees for their severance obligations, or for the pension plan, to help bring its funding back up to the full-funding level. Do you have any plans for that?
9:55 a.m.
President and Chief Executive Officer, Nortel Networks Corporation
We are viewing--and this is based on very strong legal advice--that the creditors, including all current and former employees, will be in the same level of protection. If you're a pensioner, employee, bond holder, supplier, then our job is to optimize.... And just as another clarification, the severance policy is applicable, obviously, to everything that's happened to this point in time, including levels of management. We are pretty confident that the decision is--
9:55 a.m.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
Would you be prepared to ask the court to set aside some of those funds if there's a sale of assets, for example? Would you be prepared to recommend that to the court?
9:55 a.m.
President and Chief Executive Officer, Nortel Networks Corporation
We had been prepared. The strong advice was that they would not be approved.
Derek.
June 18th, 2009 / 9:55 a.m.
Derek Tay Counsel, Nortel Networks Corporation
Since it's a legal question, maybe I can be of assistance here.
I think the point that Mr. Zafirovski made earlier was that this company is now under a court-supervised process in which you have the monitor and you have various creditors' committees, so we don't make decisions on our own. It's a consultative process.
9:55 a.m.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
But you could make recommendations, could you not? You could make a recommendation to the court.
9:55 a.m.
Counsel, Nortel Networks Corporation
I can also say that the court has appointed counsel for all employees, and that in fact the counsel for employees has made that motion, and it's in fact in front of the courts right now.
9:55 a.m.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
I understand. I just wonder if the company would make that submission as well.
Let me ask you another question. Mr. Zafirovski, can you tell us the ballpark value of any unused scientific research and experimental development tax credits currently held by Nortel?
9:55 a.m.
President and Chief Executive Officer, Nortel Networks Corporation
I do not have the exact number, but the number is very significant.
9:55 a.m.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
I've been told it's in the neighbourhood of $1.5 billion.
9:55 a.m.
President and Chief Executive Officer, Nortel Networks Corporation
Yes, it's well over $1 billion. That's correct.
9:55 a.m.
Conservative
Bob Dechert Conservative Mississauga—Erindale, ON
So given that it's a valuable asset of the company, are you aware that the retirees' position is that those tax credits were earned with their quite substantial skills and efforts over the years, and represent a significant value in the assets of the company? Given that, would you consider contributing part of the value of those tax credits, the value the company received from the sale of those tax credits--if you were to sell them to another third party that would then use those tax credits--to either the recently severed employees' fund or the pension fund?
9:55 a.m.
President and Chief Executive Officer, Nortel Networks Corporation
I certainly will take a look at it. But my understanding, simply said, is that all the creditors--
9:55 a.m.
President and Chief Executive Officer, Nortel Networks Corporation
--are on the same place, and not the back of the bus. There's no one in front. The question is whether we can make severance payments and pensions as a priority over all the others. There's certainly lots of empathy for that. I do not believe that's going to be possible.
