POLITICS

Taxpayer money to help struggling N.L. paper mill a waste: economists

06/20/2012 03:50 EDT | Updated 08/20/2012 05:12 EDT
ST. JOHN'S, N.L. - As most workers at Newfoundland's last paper mill prepare to vote on a take-it-or-leave-it contract offer, economists say more taxpayer cash for Corner Brook Pulp and Paper would be good money after bad.

"I think this is money that goes down the drain," Gabriela Sabau, an economist and chair of environmental studies at Memorial University of Newfoundland's Grenfell Campus, said from Corner Brook.

"This is a dying mill. It's not going to be revived in any way," without a massive retooling investment that doesn't appear to be in the works, she added.

Sabau said any government help should focus on targeted retraining for workers and helping Corner Brook — Newfoundland's third-largest city with a population of about 20,000 — prepare for life after the mill.

Michael Wernerheim, an economist at Memorial University in St. John's, agreed.

"I realize the extent of the economic devastation that this is going to wreak on first of all the workers that are directly and indirectly affected at the mill, but also the economic hardship this is going to impose on sawmillers and others," he said in an interview.

"This said, the continued subsidization and shoring up of this mill diverts productive resources to ends that are not the best. They're not the best use that this money could be put to."

Wernerheim described any future for the money-losing plant as "extremely bleak."

A global downturn in demand for its newsprint is on top of its distance from markets and a desperate need for major upgrades that might make it a competitive and profitable operation, he said.

"If this were to take place, it would involve labour-saving technology," which would also cut jobs.

About 400 people work at the iconic mill with its towering smokestack and whistle that have helped define Corner Brook since paper first rolled there in 1925.

Two other paper plants in Grand Falls-Windsor and Stephenville closed in 2009 and 2005 respectively, and Resolute Forest Products announced last week it's closing its mill in Brooklyn, N.S., putting 320 people out of work. The Bowater mill in Nova Scotia closed after the provincial government put together a $50-million financial package last year aimed at keeping it running.

Montreal-based Kruger Inc. bought the Corner Brook mill in 1984.

Owner Joseph Kruger implored more than 300 unionized workers in a letter this week to accept wage, benefit and pension concessions or watch their plant close. The company walked away from contract talks last week after making what it says is a final offer in the face of bankruptcy.

"A vote against our proposal would be a vote against maintaining the mill," Kruger wrote in the two-page letter. "Conversely, a favourable decision on your part will potentially benefit a lot of people in Corner Brook, starting with yourself and your family... ."

A group of skilled trades workers rejected the company's offer Wednesday, saying concessions and changes to the pension were ultimately unacceptable.

The employees, members of the International Association of Machinists and Aerospace Workers, represent a minority of the mill's unionized workforce.

"This decision is neither a vote against maintaining the mill nor does it show a lack of support to pensioners or local businesses," Ross Edison, president of union Local 1567, said in a statement.

"Our position is to negotiate a fair contract with the company to ensure the long-term viability and competitiveness of the mill."

The bulk of the mill's workers, represented by the Communications, Energy and Paperworkers union, vote on the offer Thursday with the results expected to be announced Friday.

Local 242 of the union hasn't given any recommendation to its members on how they should vote, but president Bruce Randell said workers know what's at stake.

He said the vote by the trades workers was worrisome, but not entirely unexpected.

"I think most of the people that's in the mill understand that the trade union people are being offered huge amounts of money all across Canada and in other parts of Newfoundland, so they've got that opportunity to pack up and leave, I guess, tomorrow," Randell said Wednesday.

He said he didn't want the vote by the trades workers to scare people in the province.

"Just because the trades union rejected the contract, that don't mean we can't find a solution to what we need to do in order to keep the mill running."

Kruger said the company has invested more than $800 million in the operation since 1984 but hasn't made a profit in five years and has defaulted on loan agreements since the last quarter of 2009.

Premier Kathy Dunderdale said this week that she has seen the company's books and it's not bluffing. She has said the province is willing to discuss help for the mill but has ruled out direct operating subsidies to keep it open.

Wernerheim, who co-authored a report last year on the state of the forestry sector, says the provincial government has already spent more than $42 million since 2006 on training and other programs to support the mill. He has been calling for a complete review of how the province subsidizes forestry, starting with the Corner Brook plant's viability.

"I'd like to stress that the hardship of the workers in the region and everyone affected should not be underestimated by any stretch," he said. "I'd suggest that the government negotiate an end game with Kruger on this, with a view to protecting the workers and those who depend on the mill as best as can be done."