Industry Committee on Sept. 10th, 2010

[Gaétan Ménard]

Yes, absolutely. That has been our main criticism of this government for more than five years. That is the real problem. If we had developed a vision, if we had said yes, we could have avoided these closures and the human tragedies that are playing out in each of these communities. Everyone knew that there would be a decline in demand in the paper industry. We made representations to governments. We told them we had to convert our industry, do something else and develop a vision. That is what is lacking.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Ménard and Mr. Pacetti.

Mr. Bouchard, please.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chairman.

I would like to thank you for being with us this morning and providing testimony on the closure of these two plants in Dolbeau-Mistassini and Gatineau. I would have liked to question worker representatives at the national level and in Quebec and engage in a discussion with them.

Like you, I deplore the lack of a real plan of assistance for the forest industry. The government should have made the same effort it did for the auto industry and injected comparable amounts of money in the forestry sector. It's absolutely appalling. I would like to address most of my questions to our two guests from my own region of Saguenay — Lac-Saint-Jean, and specifically Dolbeau—first, to His Worship, the Mayor, and then to Mr. Lamontagne.

Your Worship, I want to begin by expressing my thanks for your opening statement. You painted a picture of the current situation that can be described as catastrophic and tragic for the residents, such as those of Dolbeau. This is something that affects the population and many different sectors. I believe your municipality has made considerable efforts and that you as well, as mayor, have also done a great deal. I would be interested in hearing more about that. What has the community done to try to save the Dolbeau-Mistassini paper mill?

[Georges Simard]

Right from the outset, when we realized that the company was struggling, we met with a manager from the paper mill. We offered our cooperation, told them that their success would be our success, and we invited them to put everything on the table. Without their asking and even before this was done anywhere else, we decided, in concert with city appraisers, to devalue the plant. With the assistance of the RCM—because, as I said earlier, the 11 other towns cooperated—we decided to return some $500,000 in the form of a lower assessment and tax breaks every year for a two-year period.

The workers were extraordinarily supportive. We really were a team. At the time, we had struck a committee which was working on an integrated complex project, on which sat representatives of sawmills, paper mills and cogeneration plants. The workers agreed that 100 employees would be asked to retire.

Over the years, we realized that, being a bad manager, the company had not implemented the projects it wanted to carry out. Knowing that the paper mill was on one side of the river, and the sawmill right opposite on the other side, we considered the possibility of building a bridge. This bridge would have made it possible for a train to haul chips and wood bark across the river by rail, something that has to be done by truck. So, we decided to make representations to governments to extend the train route, because we know the federal government has a program. Also, we are currently involved in a project to build an industrial park on this side. We are working very hard to realize the bridge project.

Furthermore, management had, for years, been wasting $300,000 worth of steam, in accordance with the contract it had signed with Boralex. We realized, in talking to people from the community, managers and others who work for them, that they had already considered the possibility of installing a low-pressure turbine to recover that steam, and at least try and equal the amounts they were losing. They were the ones who sold Boralex, they were the ones who signed the contract to provide them with biomass and they, too, are the ones who set the cost of steam. So, they had not done that. We told them that we would cooperate, that we would pay, that we would look for and find solutions, and we offered them our collaboration. We decided we would do that with or without them, but we are still prepared to work with them. They shut down the plant, something we learned by accident, through someone else. They didn't even call us, and even the union only found out the day after, when it received a press release. There is not a lot of trust between the two sides.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Your Worship.

Now, Mr. Lamontagne, could you describe for us the efforts that have been made by workers to help AbitibiBowater? I would also like to know whether those efforts have borne fruit.

[Julien Lamontagne]

All the workers accepted a heavier workload and a reduction in the number of plant workers. As the mayor stated earlier, that meant 100 fewer jobs in the plant, as a means of making it cost-effective. And it worked, because in March of 2009, we were generating revenues of $5 million a month. We even received a plaque thanking us for our support, after machine number 2 was taken out of service, because it was a total success. They were very happy with us.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Lamontagne. I believe you were perfectly sincere earlier when you made your opening comments and accurately described the situation in the workplace at the mill. In your opinion, Mr. Lamontagne, why did AbitibiBowater shut down the Dolbeau plant, which was profitable, as you yourself stated? Is there an explanation?

[Julien Lamontagne]

AbitibiBowater is comprised of two entities: Abitibi Consolidated Inc. and Bowater Canada Inc. The Abitibi Consolidated Inc. plants were less profitable than the Bowater Canada Inc. plants and had a lower resale value. That's the reason.

In the documents we were provided subsequent to the filing of the plan for unsecured creditors, it is mentioned that the settlement for the Bowater division will be 36.5%. For the Abitibi Consolidated Inc. division, it will be 17.1%. That is exactly what they say. I believe that is the reason.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Lamontagne.

Mr. Simard, you heard the President, Mr. Paterson, talking about Boralex earlier. He explained why the Dolbeau-Mistassini paper mill had been shut down, which was that they had been unable to reach an agreement with Boralex. Like myself, you heard him say that if they could agree, they would reopen discussions with Boralex. I would be interested in hearing your views on this.

How do you see things working? You have just heard the President's testimony, Mr. Paterson. For almost a year, you witnessed the negotiations between Boralex and AbitibiBowater. I invite you to comment.

[Georges Simard]

I was pleasantly surprised to hear the answer given by the president of the company. He said that if he is able to reach an agreement with Boralex, he might reopen the plant. I must say that Boralex was sold by that company for some $76 million. As I said earlier, all the contracts have been signed.

For the time being, according to Boralex's books, the plant is worth almost nothing, because the other company's monopoly is such that there won't be any bark. Boralex and ourselves are therefore in the same boat: we are dependent on AbitibiBowater. This is the first time I've heard that offer from Mr. Paterson. They have life or death control over the employees of both the paper mill and the cogeneration plant. I don't know exactly what kind of agreement there could be, but I think it is something well worth exploring.

The company president says that it is Boralex's fault. However, having seeing Boralex's private books, I can tell you that Boralex was making a profit of $10 million a year. When Bowater ended the contract, they said that from then on, bark or biomass would cost so much a tonne and steam would cost so much. According to its calculations, Boralex stood to lose $4 million a year. The company says it is willing to make an effort, but there is no logic to any of that.

Is this a tactic so that they will be forced to give it back, even though it was sold for $76 million? That may be the case.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Simard and Mr. Bouchard.

Mr. Gourde, please.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you very, Mr. Chairman.

I would like to thank the witnesses who are with us today. I believe they are giving extremely valuable testimony. I understand the situation in which the mayor and the union representatives now find themselves. They are on the front line. When a closure of this magnitude takes place, it makes sense that people go to see them. It's a human tragedy, and people can't cope.

I was listening to Mr. Lamontagne's comments earlier. Can you tell me more about AbitibiBowater's infamous monopoly? That company seems to have a large market share and pretty well does whatever it wants with these plants. Is that due to all of its acquisitions, and to the fact that it owes too much money and is making business decisions to pay down its debt? The two plants we have been talking about, including the one in Gatineau, are profitable. The latter has new equipment, is making a profit, and yet the plant is still shutting down.

You have been part of the worker community in these plants and you yourself saw what happened. You are better aware than we are of what is happening in that market. Please try and explain. Did the company lack vision? Did it have a long-term vision? Is it bending under the weight of its debt load?

[Georges Simard]

I'm glad you asked me that question. When these companies merged, there was something abnormal about it. It was agreed that these four companies would merge into one, and yet they're still independent. Indeed, it seems as though Bowater Canada could fail, but were that to occur, Bowater in the United States could not. Abitibi-Consolidated Inc. Canada could fail, or vice versa. There is something appalling about that.

Often, when two people come together to form a group, one succeeds but the other does not. Sometimes the experience of the other will be used as a way of moving forward. But what we say back home is that Abitibi-Consolidated Inc. and Bowater were both poor companies. You can't make a rich company out of two poor ones. The expertise, planning and way of working of these people brought them to where they are now.

It was not just yesterday that newsprint stopped selling. These companies, which have 500 managers and a beautiful building in Montreal, far from the forest—which they couldn't care less about—should have hired people to plan and decide which machine would produce which type of paper, and whether they should change another machine and slowly move into biodiesel and ethanol. There is talk nowadays of all kinds of pulp that could be used in China. But they refuse. How can you possibly trust two people who were in charge and whose actions led to this?

You referred to a monopoly. Just to repeat, in Saguenay—Lac-Saint-Jean, that company owns 80% of all the timber that can be harvested annually. It has even signed contracts with other independent companies. They were located in the Saguenay—Lac-Saint-Jean, but through a contractual arrangement, they had to sell all their chips to that company, because otherwise they would not have sold them, given that this company owns all the paper mills and that all the wood chips go there. That's why these people agreed.

In Saint-Félicien, there was a large pulp mill that was sold by the company. The sky was the limit back then. The Donohue company, which was with these people, said they would provide the pulp. They later decided they would no longer do so because of Bill C-36. So, these people were really in a tight spot. They turned to a plant in our area, which is independent and had a mountain of chips. They asked the company to sell them some. It said it couldn't because it had signed an agreement with AbitibiBowater and was not authorized to sell them. As a result, they will rot where they sit.

So, there is a monopoly in Saguenay—Lac-Saint-Jean and no one did anything about it. I don't want to be too harsh, but there is sometimes talk of collusion. It is as though these four companies had decided they would take control and settle this.

It's the same as if I owned every restaurant in Ottawa and decided to close some of them even though many were doing good business at lunch time. I would decide to keep only a few of them. Some restaurants would be breaking even, others would be making a little profit, but I want to make a lot. And even if they were making a lot, how could you trust them?

In years when the Canadian dollar was worth less than 70¢, people were making money; it was coming out of their ears. But what did they do to invest in our plants or try to convert them? Nothing.

We are ready to cooperate with them. We are discussing an integrated complex—my friend will say more about this later—of sawmills, paper mills and cogeneration plants. You have to own the cutting rights and complete the processing, because otherwise, you're dependent on someone else who will sell if he wants to and at the price that he sets. That's impossible. Even if they gave us the paper mill, we would still be dead in the water because they own everything that is needed to operate it. We have been told we could never compete with them, because of the legislation. I am asking the president why he told me that. He shut down the plant saying it wasn't profitable. Well then, give it to us, and we'll find someone to step in. They reject that, because they know full well that it was profitable.

The cogeneration plant made millions of dollars—tens of millions of dollars, just like the paper mill. I can tell you it would be easier to find buyers for the sawmill, because it's a time-tested asset.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

I have one last question. As I understand it, you are stuck. If a competitor were to come into the market tomorrow and the market picked up, you would not be in a position to do anything. If Abitibi decides not to sell, it just won't sell, and the plant will remain closed.

[Georges Simard]

Yes, it's as crazy as that. It has sold three plants, it seems, at a cost of $5 million for the old iron. Imagine: it invested $180 million in machine number 5, which is apparently AbitibiBowater's most modern machine, barely ten years ago. People set production records on these machines. There is just no logic to any of this.

It was stated that the decision had been made to close Bowater Canada. Whether we're talking about Belgo, Beaupré, Donnacona, Dolbeau-Mistassini or Gatineau, all of those are Bowater plants. The president, who was sitting here earlier, is from Bowater, but the rest of his group is from Abitibi-Consolidated Inc. So, I wonder.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Is there a competitor out there who could pick up these companies?

[Georges Simard]

I would just like to remind you, as we pointed out earlier, that the forests are still growing. So, I say to these people that if they don't want to do the processing in our region, they should at least have the decency to leave it there and we will try to find something else. When we talked to the Minister of Natural Resources for Quebec, she told us that there is no possibility of expropriation. Timber supply contracts were given to Bowater and Abitibi-Consolidated Inc. Those companies are together; they are the owners and they can't be expropriated. So the result is that you will just have to sit and watch us die. There is something wrong with that picture.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you very much.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Simard.

Ms. Hughes, please.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Thank you, Mr. Chairman.

I would like to express my thanks for your comments.

Mr. Simard, what is happening in your community is occurring all across Canada. In my riding, whether it's in White River, Smooth Rock Falls, Opasatika or Wawa, we have all seen this before and we continue to see it happen. I sympathize with you. I wanted to mention that you do not seem to have much hope with respect to the company and what it is trying to do. You seem to have great doubts that the company is actually trying to find a buyer or seeking a different option.

There are a lot of issues I would like to address with you today and I will try to put them in perspective. As I said, this is a national issue. We have seen job losses all across the country, from Newfoundland to British Columbia by way of Quebec and Ontario. Many of the workers are still without jobs. In most cases, it is also because they are older. But this is really a question of survival for them, for their families and for the communities. I would also like to address some other points with you.

The NDP has been saying for a long time that one of the first things to be done when a company in Canada—which might be a company in our community—is going to shut down, or even before it shuts down, is to ensure the survival of the workers, their families and the communities.

You also talked about natural resources and the fact that they should remain in the community. There was discussion of protecting pensions and severance pay. I would just like to say that the Conservatives have almost completely abandoned their responsibilities. There has been a lot of inaction. And I mustn't forget to mention that the Conservatives are not the only ones at fault, because the job losses and plant closures began under the Liberals. People saw the problem coming but the Liberal and Conservative governments did not respond.

I would like to know whether you agree with me. This is addressed to the unions and to anyone else who wishes to answer. We tabled Bill C-501, which talks about pension protection. What is important, in your view, when companies fail? Is there a significant need for a government that will respond immediately and try to resolve these problems, so that these people's lives are not ruined?

[Gaétan Ménard]

Yes, that is critically important. As we have seen a number of times in recent years, when there isn't enough money in the pension plan when a company declares bankruptcy, the pensioners and workers are the ones that pay the price. I think it's very important for pension plans to be at the front of the line. They are one of the things we worked hardest for and we have asked the Conservative government to look at this. We told them they have to find a way to protect retirees. It is not right that retirees pay the price when a company goes bankrupt. That represents millions and millions of dollars.

In the case of AbitibiBowater, we were able to save the pension plans. Mr. Paterson said this morning that an announcement will soon be made, because an agreement has been reached with the Government of Quebec. This time at least, pensioners will not be paying the price for this restructuring.

Yes, it is absolutely essential that the federal government look at the Bankruptcy Act to ensure better protection for pension plans.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

I would just like to add something. We saw what happened or what often occurs under NAFTA. I have in front of me a press release dated August 27 in which the Conservative government, in the middle of summer, announced that it had decided to resolve an issue involving AbitibiBowater and would be giving it $130 million. Just how important is it to renegotiate or resolve the problems we have under NAFTA?

[David Coles]

The situation of the NAFTA settlement actually was an issue caused or created by the Province of Newfoundland taking back the resources it believed it had the right to do under an agreement with the former company. The NAFTA issue is not the cause of the forest industry problem. It's a separate issue. We have some strong opinions about NAFTA, but it's not what's causing the problem for the forest industry.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

We know that they decided to take back the resource. A number of communities are asking us to do that, because their survival is at stake. If the companies retain their timber lease or make sure that they retain their rights with respect to water or land… The problem is that we cannot ask an investor to come back in if he won't have access to the resource. That is why I asked the question about NAFTA. I realize that may not be directly connected to the survival of the forest industry, but it does affect the communities' ability to survive.

I mentioned the summit on the forest industry. Mr. Shipley said there had been one. I understand why there wasn't one: they are calling a four-hour meeting a summit. I wonder what can really be accomplished in four hours, particularly since this is a crisis of national proportions.

I understand the problems. Can you tell us what your thoughts are on a potential forestry summit, on how long it should last and on who should take part?

[Gaétan Ménard]

We believe that a national summit should bring together all the players. You alluded to control over the resource. We noted the problem in Newfoundland and we are seeing it again now in Dolbeau-Mistassini. That control rests with the provinces. That's why it is important for the provinces to attend such a summit, along with the federal government, provincial governments, municipalities, First Nations—who also live off the forest—workers, unions, and organizations representing workers and communities. All the players must come together and determine whether this resource can continue to be a source of livelihood for the communities and, if so, how.

What is needed is a plan. It is in that sense that we have been talking about a vision. I agree with you that the Conservatives are not the only ones to lack vision. That applies to AbitibiBowater as well, as I freely admit. However, as Mr. Simard was saying, for years money was paid out in dividends to shareholders, whose pockets were overflowing. But no investments were being made that would have allowed the company to remain on the leading edge in terms of its technology. We need to bring together a large number of players in order to develop a strategy.