Industry Committee on Sept. 10th, 2010

[David Paterson]

Right.

Well, it is a huge challenge. The best thing for us is to be successful and profitable. As for the communities, we still operate. We're paying taxes. We're buying services. We buy over $1.7 billion of materials and services in Canada. We pay almost $600 million in payroll. That's to the benefit to those communities in which we're continuing to operate.

The challenge, of course--and the members have rightfully pointed this out--is that with a facility like Dolbeau, that facility is the community. Those are the very difficult ones. We've always tried to be open to finding ways to help, but ultimately, the future of a one-mill town is very difficult if that mill is not successful.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Paterson and Madame Hughes.

Mr. Shipley.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair.

Mr. Paterson and Mr. Robertson, thank you so much for being here. I'm finding it actually quite an interesting discussion, and I very much appreciate your forthright answers and how you are not trying to dodge the questions.

First of all, Mr. Chair, Ms. Hughes had a question earlier about the summit. I believe there was actually a summit with the forestry people under Minister Lunn. The natural resources committee actually requested that. It wasn't large. All people were invited. There were some forestry people, plus labour. I don't think it really got much attention. It doesn't mean that there shouldn't be another, but I believe there was one back a couple of years ago when Minister Lunn was in. I think those are important...that they start to fill the commitments that were laid out.

Mr. Paterson, we've talked in general terms, and so I'm going to leave it to you.... I don't know what sort of detail you have. We knew the collapse of the industry within the paper industry as it is. It is, I think, recognized in our day-to-day situations. Even around here, within our offices and within our own businesses, we can see the change in the need for newsprint and paper products.

You've talked about the transition and the conversions that you might be going through, but you've been very general. Maybe that's on purpose and maybe you can't go into any more detail than that, but I am interested in trying to understand whether, if you're here now and it's not working, you can take us to some part of your plan. I know you said you would provide that, but I think for the general record, it might be of interest to understand a little bit about your change in direction.

[David Paterson]

Sure. I am probably going to stay a little more general than you might like, because part of this is not public. Part of it is competitive. We don't really want our competitors to know what we're going to do.

There are elements or components of the pulp and paper industry that are growing and have fundamentally better supply/demand metrics than our major segments. Part of our rationalization of our manufacturing assets is that the mills we have going forward tend to have very large, fast machines. There are small machines, which are difficult. Maybe they were built back in the 1930s, 1940s, and 1950s. There are newer machines that, in our case, were built in the 1960s, 1970s, and 1980s. We asked ourselves a question: At a reasonable capital cost and in terms of investment for conversion, for that machine that is making, say, newsprint at high speed and light weights, what other products can we make that have those components that want to use recycled fibre, virgin fibre, or mechanical fibre, which are our three fibre streams, and get more revenue per unit output than we get selling newsprint? That is the fundamental decision-making process. Not all facilities are convertible at a reasonable capital cost, but enough are that we feel confident we can deal with our future view of demand destruction in newsprint.

Also, the future of newsprint, particularly for Canada, in our opinion is going to be based on exporting not to the United States—because the biggest demand destruction has been in the United States—but exporting to markets such as South America, Southeast Asia, and the Middle East, which are growing. Our company, AbitibiBowater, is the world's largest exporter of newsprint, and that segment is growing. We're growing our share in that segment. It's based off, I'll call it, the St. Lawrence Seaway and Canadian assets that can use the seaway.

So that's fundamentally the idea. We can do that in a way that doesn't create excessive risk in terms of reinvestment in the company for that, because we want to also do energy projects. We want to do green conversions and, particularly in facilities such as Thunder Bay, Ontario, where we have a craft pulping process, we're looking at alternative or new energy businesses that are not tied to paper but are tied to green energy and the byproducts we make from the paper-making process.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I wanted to touch on that, actually, so I'm glad you brought it up. You talked about new green energy at lower cost. Assuming that by using your products as a waste that would now become an energy source, I'm wondering two things. One is you talked about a 50% reduction, $160 million per year reduction through the restructuring. Why is that happening now and not four or five years ago, as you were moving into it? The second is the same thing regarding the green energy. When you talked about your large investments in terms of technology, was that a part of a phase-in project, or is that something that has come up now as part of your restructuring?

[David Paterson]

On the first question, yes, I would say that you could find fault with the management team that went in and addressed our fixed costs, as represented by SG&A, faster, but certainly the dilemma we faced got us really focused on that. I will say that we did address it when at the time of the merger it was even higher, but after the filing we just had to take very dramatic steps to reduce our costs for running the company from an administrative point of view. More speed would have been better, yes.

Concerning green energy, both the U.S. and Canada have evolved. First, the technology is evolving and improving. Second, governments in both the U.S. and Canada have started to focus on green energy both from the environmental point of view and also as a new industry and a new source of job creation and a differentiation for mature industries. In Canada, both at the federal and the provincial levels, we are receiving incentive to do green energy projects.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Paterson.

Monsieur Coderre.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you, Mr. Chairman.

I don't intend to waste time responding to Mr. Blaney's comments, but if he ever wants a letter of recommendation to work in a circus, I would be very pleased to write one for him. Workers deserve better than the petty, partisan politicking in which some members are engaging today. While that is going on, some people are losing their homes and others are losing their jobs. There are human tragedies occurring. I prefer to talk about that today.

Mr. Paterson, there has been a lot of indecency this morning. We have talked about bonuses. The poor lawyers worked hard for their $12 million a month, so the management team deserves a bonus. In the meantime, workers are losing their jobs. You have just announced that the Gatineau plant is finished. You do some PR, you meet with the restructuring committee, and it's all very pleasant. We can hold a ribbon-cutting ceremony for the restructuring committee, but the fact is it's all over.

My first question is a follows: What do you have against Bowater? I have the sense that AbitibiBowater is pretty much shutting down everything that was previously owned by Bowater. Do you have anything against Bowater? Is your decision to cut loose these companies first part of a strategy? The Gatineau plant belonged to Bowater. As I see it, you're going a little bit too far. The Dolbeau-Mistassini plant was transferred from Domtar to Bowater, and then to AbitibiBowater. So, what's going on? What's your game? Is there a strategy behind all this? As part of your restructuring, you're getting rid of everything that previously belonged to Bowater, right? Yes or no?

[David Paterson]

No.

[Denis Coderre, Liberal, Bourassa, QC]

No? Okay, but I feel better for having asked the question.

[David Paterson]

You asked me a yes-or-no question, I gave you a yes-or-no answer.

[Denis Coderre, Liberal, Bourassa, QC]

You said no, okay. I trust you. You're a humble person. You're an honourable person. It's okay.

I have another problem. We're just talking now. Supposing the Boralex case is resolved—that the people there are able to resolve it. The fact is the resource is available on site, in Dolbeau. You don't even have to truck wood chips in from somewhere else. Supposing there is an agreement with Boralex. We have spent a lot of time talking about the Gatineau plant, but I also want to talk about the one in Dolbeau. If an agreement is reached with Boralex, would you be prepared to reopen the Dolbeau-Mistassini plant? You have abandoned the Gatineau plant; it is finished. However, if the issue with Boralex is resolved and the resource were available on site, would you be prepared to reopen the Dolbeau-Mistassini plant?

[David Paterson]

If I may, I'd like to say one more thing about Gatineau.

We are supportive of the work at Gatineau to find an alternative buyer. I think we've been--

[Denis Coderre, Liberal, Bourassa, QC]

Mr. Paterson, with all due respect, you answered that question.

[David Paterson]

All right. I won't answer.

[Denis Coderre, Liberal, Bourassa, QC]

Now, could you please answer mine? If the Boralex issue is resolved, are you prepared to reopen the Dolbeau plant?

[David Paterson]

We took the position at the time we were in active negotiation, and I would say today, that under the right terms we would reopen Dolbeau. But the committee needs to understand that if that happens, something else will go down, and we will have this very same conversation about another community, most likely in Quebec.

[Denis Coderre, Liberal, Bourassa, QC]

So, you are open to that idea. Today, friends who work for a newspaper actually printed on paper—and I happen to be one of those who believes we still need newspapers printed on paper—announced the closure of the Gatineau plant, but the door was still open for the Dolbeau plant.

[David Paterson]

With the understanding of this committee that something else in Canada will shut down...because we make SC papers in Canada, and we do not have enough orders to run every mill in Canada.

[Denis Coderre, Liberal, Bourassa, QC]

Why don't the workers, mayors and people in the region believe that? How is it that it's that easy… We're talking here. The Committee meeting is being televised and people are watching us.

[David Paterson]

They don't believe that there are not enough orders?

[Denis Coderre, Liberal, Bourassa, QC]

How is it that people have the sense… An agreement could be reached with the people at Boralex. You don't always have to bring the resource in from outside. Dolbeau is a resource region, a magnificent one.

Why have we reached a crossroads where we are now inviting you to appear? Everyone will lose their jobs. Why wasn't it possible to resolve these issues before? Why do we have to invite you to appear in order to get answers?

[David Paterson]

Well, you asked me here, but the.... I would remind the committee that Dolbeau has been down, I believe, for over a year and a half. This is not a new issue. We had extensive discussions with Boralex, including arbitration with Boralex through the court system. We've been unable to find a solution.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Paterson. Merci, monsieur Coderre.

The last member for today is Monsieur Blaney.

[Steven Blaney, Conservative, Lévis—Bellechasse, QC]

Thank you very much, Mr. Chairman.

I have four quick questions for Mr. Peterson.

Can you guarantee that wages—