:
Thank you, Mr. Chairman.
I am here today to discuss the company and the restructuring process, from which the company will hopefully soon emerge.
Due to the economic conditions that we faced and the lack of sufficient funding within the business to continue without filing for court protection, we filed 16 months ago both in the United States and in Canada. Our main challenge at that time, which remains in the marketplace today, was declining demand for our primary product, newsprint. We are the world's largest producer of newsprint, and that market has seen a significant demand destruction. In our belief, there is no expectation for recovery in demand for that product going forward.
We also saw a significant reduction in the United States housing market. That is a key component for our company, since in eastern Canada, primarily in the province of Quebec, we are a significant producer of lumber. As we all know, the U.S. housing market has still not recovered. For many of our other products, we saw significant swings in demand and pricing due to the global economic situation we faced.
On top of that, we were faced with debt maturities and debt refinancing in the spring of 2008. That was not that long ago, but if we remember back, that was at the height of the credit crisis, the meltdown on Wall Street, the failure of Lehman Brothers, all issues that are still affecting credit markets and capital markets across the globe.
In response, we filed for the companies as I mentioned, but we also immediately started the process of restructuring the company, which included selling assets, and which unfortunately included idling and closing assets across our system in both Canada and the United States as well as in Great Britain. Of course this unfortunately impacted employees and communities across our system. We are here today to discuss those impacts.
Throughout this process we have survived, and we are back on the road to recovery and hope to emerge from bankruptcy soon as a much more flexible company. That could not have been done without the support of the employees of the company who are continuing to operate in a safe and now profitable fashion across Canada and all of our systems.
One of the major steps we undertook was to reduce the cost of operating the company. We have reduced our SG&A, the administrative costs of running our company, by 50%, which is some $160 million a year. That includes significant reductions in staffing at our headquarters as well as across the entire system.
Ultimately this company will succeed as we emerge with a de-leveraged balance sheet. I want to remind the committee that at the time we filed, we had approximately $6.8 billion of debt, and we anticipate emerging with roughly $1 billion of debt as a highly de-leveraged company coming out of this process.
Let me talk for a second about the process we've gone through. The key was, of course, to get the support of our creditors in both the U.S. and Canada. To do that, we had to develop a business plan. That business plan has been submitted and approved by the creditors. It is the base plan for our go-forward strategy, and it contemplated a very de-leveraged, very flexible, very low-cost manufacturing platform based on declining demand in newsprint and the conversion of assets away from newsprint at a pace that matched the decline in consumption of newsprint.
Another key component of the plan was the resolution of our NAFTA claim. That has been resolved and is part of our emergence plan. As we go forward, we will have to continue to battle with the demand components of our market and with the fact that, whether we produce in Canada or in the United States, we have to compete globally, remembering that we are in a free trade industry. When we compete for orders we're competing with Europeans, Asians, and South Americans. At the same time, we're selling our products primarily out of Canada to many of those same markets. Canada is our export platform and will remain our export platform going forward.
Another issue that is always a challenge for our company is the exchange rate. The relationship between the Canadian dollar and the U.S. dollar is important, because we have always been a larger manufacturer in Canada than in the U.S. We will be a larger manufacturer at emergence as well. Our costs are more than 50% in Canadian dollars, but our revenues are predominantly in U.S. dollars, so the ability to implement hedging policies on currency issues is important to us. We have to be out of bankruptcy to do that.
As I mentioned a minute ago, one of our strategies to deal with the decline in newsprint demand is to continue conversion projects away from newsprint, in essence to stop shrinking the company in terms of closing facilities but start converting facilities to other products, dealing with the demand destruction components to newsprint in a positive sense in the sense of reinvesting in assets and making products other than newsprint to deal with the decline.
Looking at the next steps, as we sit here today we're very close to starting the process of raising our new funds; in terms of the capital raise, that will start next week. We are in the process of resolving many issues as related to our pension obligations in Quebec, and then ultimately Ontario. All these matters have to be resolved in a successful manner in terms of our ability to exit. Our creditors want these matters resolved before they'll support the exit plan and essentially write off their debt and accept equity in replacement of their debt obligation.
Over the next several weeks, you'll see the company raising capital, concluding agreements with the provincial governments, primarily in Quebec and Ontario, and starting the process of re-engaging with our creditors, and ultimately our new investors, on the future of the company. That future needs to be one that ensures the profitability and sustainability of the enterprise so that we can meet our obligations to creditors, to investors, as well as our employees.
Let me finish my statement by saying that our goal from this entire process was not to attack the pension plans of our retirees and our active employees, and we believe we have achieved that, though the solution is not final yet. In the next few days I think you'll be very pleased to see the solution we've reached on pension obligations, both past and future, in terms of our employees.
Mr. Chairman, that's my statement.
:
Thank you, Mr. Chairman. I would like to share my time with my colleague, Marcel Proulx, who is directly affected, because of the region involved.
Mr. Paterson, two things are of interest to me. Today, you will be hearing the tapes: the government will tell you that it has done so much for the industry, even though it has announced the same $100 million five times now. In my case, there are two things that interest me: first of all, the fate of the workers, and second, the future of the industry. Without workers, there is no industry.
I know that, in a way, you are between a rock and a hard place. The government has abandoned you. At the same time, I don't understand how you quickly found the money to pay bonuses to your senior management—we are talking about $6 million—while we wait for good news soon regarding the fate of the workers, in terms of their pensions and so on. I would like you to explain why money is available more quickly for bonuses.
At the same time, do you think that more should have been done—I know the answer, but I would like to hear it from you—for example, loan guarantees? Unlike the Conservatives, I believe we should be investing in industry and that this is not violation of the Softwood Lumber Agreement. Even the government's lawyers are saying that it is not a violation of that agreement. So, someone is being taken for a ride here, and I think it's the guys sitting over there and all the women who have lost their jobs. They are the people I am interested in today.
Voices: Hear, hear!
I think there were several questions in there. I'll try to answer each one, and if I miss one, please re-ask the question.
I think we started with the question about the future of the workers and the future of the industry, and you asked me to start with the future of the workers. I think the reality, as I've mentioned, is that in our primary products--and I'll include newsprint in the overall printing and writing sector, which has been a very traditional part of the Canadian industry's product portfolio--we're facing long-term continuing demand destruction as electronic media erodes our customer base.
So if I have to say what we need to do in terms of the workers, we need to ensure that our company as well as all companies in Canada have a viable business model and plan so we can meet our obligations. At the same time, we have to begin to make new products, and we have to face the fact that we may need to help workers be redirected to new or different industries within their regions. I think it's beyond our control to stop the decline in consumption of our primary products. That's just something we all have to deal with. In the case of the worker, I think we need to be up front and open and discuss those matters. Where we don't have sustainable businesses, we need to help workers find new employment.
In our case, as AbitibiBowater, we've offered and continued to offer jobs in other facilities that are still operating in the company. I believe we've had over 200 hourly employees relocate to new positions within the company, and those positions are still available.
With regard to the industry and government policy, I think that is a strategic issue. I think the governments...and I talk about “governments” in Canada because we interact more, quite frankly, with provincial governments because of the issues related to the natural resources of water and timber.
I would say that Canada would be well served by having an industrial policy strategy for the forest products industry. We don't have a clear path forward, either as producers or as governments. So if I wanted to encourage this committee and governments to think about something, it would be that: how do we create a new strategy for Canada?
[Translation]
Good morning, Mr. Paterson.
In 2005, the Liberal government implemented a $1.6 billion plan to revitalize the forest industry, but the Conservative government subsequently cancelled it. The Conservative government couldn't care less about the forest industry. The Bloc Québécois can't do anything about it. You are right: Quebec and Canada deserve a federal government whose position is absolutely clear, in order to know what to expect.
In response to a question from my colleague, the Hon. Denis Coderre, you said that employees must be redirected to other industries. I know that, in the case of the Gatineau plant, the restructuring committee is currently carrying out a study. I would say that your financial participation in that regard is minimal. Do you consider it to be a bogus study or are you sincere and in good faith when you say that you want to help the plant find a new vocation? These studies require funding. How much can you put in to help the plant find a new vocation and save these peoples' jobs?
The former town of Gatineau Mills revolved around the plant which you now own. Now you are abandoning, not only the workers, but also much of the new City of Gatineau, something we consider unacceptable.
Can you tell us that you will be investing more money, more energy and more resources with a view to finding solutions for these workers?
:
Thank you, Mr. Chairman.
Good morning, Mr. Paterson and Mr. Robertson.
We are here today to question AbitibiBowater about its financial restructuring plan and the best way of helping a community like Dolbeau-Mistassini to implement its plan to reopen its paper mill based on a unique initiative in Quebec for an integrated forestry complex.
I am troubled by the lack of respect and determination demonstrated by AbitibiBowater with respect to those communities that are, or will be, affected by permanent closures of paper mills and sawmills in Quebec. We understand that AbitibiBowater has to survive in order to keep its plants operating. However, I do question its intentions and its approach, given that AbitibiBowater is now shutting down paper mills and sawmills that it no longer wants, simply abandoning these single industry communities which have always been loyal to the industry.
Mr. Paterson, the former Manager of the Dolbeau-Mistassini paper mill has said that the mill was profitable. The resource is located close by. The workers cooperated, as did the community. So, why did you decide to shut down the Dolbeau-Mistassini mill?
:
Specifically with regard to the Dolbeau decision, we have a major issue there, which is related to the cogeneration facility on the site. As you know--you talked about an integrated facility--we do not own the steam facility at that site. It's part of Boralex. That contract was very disadvantageous to the company, and we worked hard, along with Boralex, to try to find a new solution.
Under the terms of CCAA, we are allowed to repudiate that contract, which we did. Once we repudiated the contract, Boralex was no longer going to supply us with steam, so, unfortunately, until that matter is resolved, Dolbeau is caught in that debate.
The facility itself, under the right energy deal, is a competitive facility and we would re-examine it, but we are not going to be successful there unless we have the proper energy agreement either through acquisition of the energy island, which we discussed with Boralex, or through a new contract, which we have discussed. At this date neither of those has been accomplished.
:
Let me try to answer the question, and please ask another question if you so desire.
First, I'm not really familiar with Nortel, but I will make the difference based on what I know. One of our objectives here, from day one, is to protect the pension interests of our retirees and active employees. You'll see, once we announce our pension resolution, that it is quite significantly different from many other restructurings in Canada, and in fact protects workers rights to a degree that I don't think is common in the CCAA process.
Second, specifically to the management team of the company, we are participating in the cost reduction initiative, first through significant reduction in total management of the company in terms of head count. As I mentioned, we've reduced it by some 50%. The management team has received no wage increase for the last four years. The management team volunteered not to take any incentive payments during the restructuring process. To compare that with what Nortel's management actually did, they paid themselves incentives while in restructuring, and we have not done that. In 2008, under the terms of the agreement the management team had earned a synergy bonus, and the management team refused to accept the synergy bonus and did not take that payment. Finally, the management team at the senior level has agreed to a 15% wage reduction as part of this restructuring plan, as approved by the creditors.
I would point out that the incentive you mentioned has not been paid. It is an incentive that will be paid at the discretion of the new board of directors, subject to successful emergence from CCAA and chapter 11 in the U.S. and Canada.
A final comment is that one of the principles of the incentive plan was that we are spending $12 million a month in fees to lawyers, accountants, advisers, bankers—a whole list of people—so it seemed reasonable, from our creditors' point of view, to incent management to get this process over with merely on the fact that we're spending some $12 million per month, every month we're in this process. It seemed to be a reasonable business proposition to get the process over with and get out, and our creditors have supported that.
:
Thank you very much, Mr. Paterson.
Merci, madame Hughes.
I just want to remind members of the committee that while we've invited these officials to appear in front of us today, notwithstanding that there's a court proceeding ongoing, and while we, in my view as chair, did not need to seek the approval of the court to ask them to appear--they were obliged to appear, which they've kindly done on very short notice--there is the sub judice convention of Parliament, which means that members are to refrain from commenting directly on the court proceedings, on the wisdom of the court, and on its decision.
I don't think anybody has crossed that line yet, but I'd just remind you that I'll rule out of order, based on that convention, anything that gets too particular about the court proceedings and about the decisions of the court, so just keep that in mind as we question the witnesses for the remaining time.
Go ahead, Mr. Scarpaleggia.
:
Thank you, Mr. Chairman.
Welcome, Mr. Paterson and Mr. Robertson.
I would like to come back to the $6 million bonus paid to the company's senior management. I am trying to follow the logic of your earlier answer to Ms. Hughes. First of all, you say that there is no reason to worry, since the money has not yet been paid. In other words, it will be paid later on. The fact remains that, for the managers, this is money in the bank. They can plan their expenses based on the money they expect to receive.
There is another thing that I don't understand. You say that you have to pay the bonus because you spend $12 million a month on lawyers, accountants, and so on. I am having a lot of trouble understanding the connection between the two. So, with respect to those comments, there is a question I would like you to answer. Along the same lines, I imagine that the $6 million does not constitute an annual bonus, but that the money will be paid out in one shot. How many company managers will be receiving a bonus?
:
Mr. Chairman, the first thing we did when the Conservative government took office was to settle the softwood lumber dispute which had been poisoning the forest industry for more than a decade. That is what we did. Contrary to what the member of the Official Opposition has been saying, we invested considerable sums of money: $1 billion to support communities, and $1 billion to develop greener paper mills. There were also specific programs introduced, assistance for workers and industry restructuring.
So, could we do more? Yes, Mr. Chairman. Have we taken concrete action? Yes, Mr. Chairman. And colleagues on this side of the table supported those measures, unlike Bloc members who opposed specific initiatives to support the industry and workers. I find that totally unacceptable.
Having said that, I have a few questions for Mr. Paterson.
Mr. Paterson, we are here today to review the forest industry's current situation. As we know, Amazon sells more electronic books than it does paper books. There is a future for books and paper, but we know that the market is struggling. We agree with that and you yourself made that point.
I have a question for you. You mentioned that, under your emergence plan, you are expecting to continue to operate 19 plants, including 12 in Canada and 5 in Quebec. First of all, when do you expect to arrive at some resolution? Can you confirm when you expect to arrive at a resolution and implement that action plan?
:
Thank you very much, Mr. Chairman.
Mr. Paterson, let's not beat around the bush. Let's go back to the bonuses issue. You were saying that you have a deficit of $6.8 billion, which you would like to bring down to $1.1 billion. At the same time, the figure of $6 million was mentioned earlier. Let's not forget that not so long ago, AbitibiBowater gave bonuses of $60 million, including the infamous $27 million bonus given to John Weaver. Then, because of the outcry, you reduced that to $14 million, but you hired him at $80,000 a month until he reached the $27 million. In the meantime, you are telling the workers that they have to do their share, and make a sacrifice. The $6 million paid out to 51 senior managers corresponds to $117,000 each. And yet, at the AbitibiBowater plant in Gatineau, you were able to convince the workers in February to accept a 10% cut in their wages and a 6% cut in their benefits—for a total cut to their income of 16%—in order to help the industry recover. Then what did you do on August 24? You announced that you would be closing the plant permanently, but that you were keeping the restructuring committee.
Your entire approach to this is parasitic, and there I am quoting Mr. Sansfaçon from the newspaper Le Devoir. Even , the Conservative Minister responsible for the Outaouais Region, talked about Atibibi-Bowater's inappropriate attitude towards its workers, with respect to the restructuring it is planning. It is absolutely indecent.
Tell me, Mr. Paterson, are you shutting down the Gatineau plant indefinitely, or do you have a restructuring committee to start up the plant again? What is the real answer?
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 . 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 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.
:
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.
:
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?
:
I would like to welcome all our witnesses.
[English]
Welcome back to the 34th meeting of the Standing Committee on Industry, Science and Technology on the 10th of September 2010.
We are here pursuant to Standing Order 108(2) for a study of the permanent closure of AbitibiBowater of Gatineau
[Translation]
and the Dolbeau-Mistassini plant.
[English]
We have in front of us, on the second panel, representatives from three organizations.
[Translation]
I would like to welcome Mr. Carrière, President of Local 142. Mr. Gagné is not with us today, but Mr. Lamontagne is appearing as President of the Paperworkers Division.
[English]
Lastly, we have Mr. Coles, president, and
[Translation]
Mr. Ménard, Secretary-Treasurer, National Office, Communications, Energy and Paperworkers Union of Canada.
[English]
Welcome to all three groups. We'll begin with an opening statement from the national office.
:
Thank you very much, Mr. Chairman and members of the standing committee.
My name is Dave Coles, and I am the president of the Communications, Energy and Paperworkers Union. The CEP represents some 130,000 members concentrated primarily in the forest, energy, and telecommunications sector.
Sitting beside me to my left--always to my left--is Mr. Ménard. He's the secretary-treasurer, with whom I will share some time in my slot.
I'd like to offer to the committee a non-partisan, paid political announcement. I have handed out to the committee a report of the sector council on some of the tasks needed to reform the forest industry. I only do that because it's an important piece of work that is non-partisan and we've worked together on it. Not only are brother Ménard and I officers of our national union but we have been workers in this industry for a long time, both out of companies that produced newsprint—brother Ménard here in the Gatineau Valley and I in a paper machine on Vancouver Island. I've also had the mis-pleasure of being the president of the national union while the forest industry spun out of control and shed many, many jobs, and we'll deal with that.
I want to start by saying that the permanent closure of the Gatineau and Dolbeau AbitibiBowater mills is merely the latest casualty in a long, long list of forest crises that have cost more than 100,000 jobs. I'm going to repeat it: we've lost 100,000 jobs, and 40,000 people are still unemployed. If we talk about the workers at these two mills, we also have to talk about the workers at the other mills that have been shut down by AbitibiBowater, such as mills in Beaupré, Grand Falls, Dalhousie, Mackenzie, Shawinigan, and a number of other machines not listed that have been closed by AbitibiBowater.
There is plenty of blame to spread around for these closures, but the victims are always the same. The victims are always the same—the workers and their communities—and you'll hear from some of our members who work in those communities.
First, there is AbitibiBowater, because the company is still restructuring under CCAA. The severance pay owed to workers will likely not be paid, even though both parties agreed in a collective agreement to pay that severance if those mills were shut down. Had AbitibiBowater waited until after the vote to exit the restructuring process before it decided to shut the mills down, the workers would have received their severance. Instead they are stuck at the bottom of the creditors list. This is especially frustrating in the light—many times raised this morning—of the $6 million in executive bonuses that are part of the restructuring agreement that is soon to be voted on by the AbitibiBowater creditors.
In negotiations, and I chaired those negotiations, we have tried to negotiate for these severances to be paid after the company would have come out of CCAA proceedings, and to Bowater's credit, the company was in agreement with that strategy. But the legal opinion we received is that such an agreement could not be reached, as it would be considered an end run around the creditors, and therefore both the company and the union lawyers advised us that it was illegal for us to bargain that severance after they emerged from CCAA. It would have created a super-priority for the creditors, our members.
Hence the second culprit: the bankruptcy legislation. Workers are the butt of jokes with the CCAA and the BIA legislation.
We do appreciate the changes that were finally proclaimed last year, four long years after they received royal assent, but these changes are marginal for workers. Unfunded liabilities in the pension plan remain very low on the creditors list, as does severance pay.
The legislation under the CCAA and the BIA as they now stand really forms a chapter protecting the rights of investors and trampling those of the workers whose livelihoods and whose communities are shattered when a mill shuts down. What these pieces of legislation are saying is that the sweat and blood of the workers are worth nothing compared to the capital provided by people who in many cases live thousands of kilometres away from the company's operation. This is simply wrong, and needs to be addressed by ensuring that the wages and pensions, and even severance pay, that are owed to workers are given super-priority in the CCAA and BIA legislation.
Brother Ménard.
:
The third culprit, as CEP sees it, in all of these events relating to the forest industry and the crisis is currently experiencing, is the Conservative government. After five years of crisis in our industry, what has been done? It can be summarized as two zeros and a line. Loan guarantees from our federal government: none. Assistance to any company to keep it out of bankruptcy or help it emerge from bankruptcy: none. A forest summit to bring our country together with a plan: no. I admit there was a brief, four-hour meeting, as alluded to earlier by this gentleman. It was a mini summit of sorts. But that is not what we need. During the last election campaign, I met with , a Conservative government minister. We were at the premises of a paper mill in the region, which is also covered under the CCAA. Mr. Cannon promised a summit on the forest industry. He told us that his government would organize such a summit, but we are still waiting.
Why are we talking about a summit? Because in our opinion, it would be an opportunity to bring together all the players: governments, unions, communities and First Nations. Together they could develop a plan for the future. At present, there is no plan for this industry. Across the country, we are losing power plants, our industrial fabric. But the trees are going to continue to grow. This is a renewable resource. What is going to happen? For 100 years the forest industry has provided a living to communities all across Canada. But now, plants everywhere are being shut down. And no one is coming forward with a plan to convert our industry. Yet that is what we need.
In countries where this has happened, government officials sat down with industry players, examined the situation and decided to develop a plan for the future, and find a way to convert their industries. That is what is needed, but it won't happen without help from governments. Since you read the newspapers and you heard it said this morning, you are well aware that forestry companies, all of which you are familiar with, are, without exception, on the verge of declaring bankruptcy, if they haven't already. Government assistance and a plan are clearly needed. The federal government must have a vision of the direction in which to take the forest industry, so that it can continue to provide a living to these communities. We have to convert these plants, rather than letting them just shut down and do nothing about it. This is important. Otherwise, we will end up harvesting logs and, as is the case with the oil sands, ship them off to the United States without processing them first.
I have one final recommendation to make. We have formally requested of AbitibiBowater that it not dismantle the Gatineau and Dolbeau-Mistassini facilities. We believe it's important for AbitibiBowater to ensure that they remain operational. With winter coming, that is very important. If the company is serious about its restructuring plan, it must ensure that these plants continue to operate.
Once again, we will require federal government assistance to convert these plants to other types of new production. But that can be done. All that is needed is for someone, somewhere, to have a vision.
:
Thank you, Mr. Chairman.
I would like to thank the political parties for supporting this process. It's important for the workers.
I would like to come back to a point raised by Mr. Paterson. He referred to newsprint when discussing the Dolbeau-Mistassini plant. If he is not aware of this, I would just like to clarify that the Dolbeau-Mistassini plant has not produced newsprint for the last 10 years.
Our plant was equipped with two paper machines. In 1997, the building and one machine were overhauled, and in 2006, the same was done for the headbox on machine number 2. The headbox is the heart of the machine. The equipment and the plant were performing efficiently. The workers decided to go along with a plan. When machine number 2 was shut down in July of 2007, Mr. Grandmont came to see us to say that cutbacks were absolutely necessary because the plant was losing too much money. We willingly agreed. We felt it would be a way of saving our plant, which was new and cost-effective, and that steps would be taken. The workers did their part.
In February of 2008, machine number 2 was returned to service. It was the first time in North America that a machine that we had been told would be shut down was returned to service. Initially, there were five workers per machine. People familiar with the industry probably know that we were the only ones to operate that way in the industry. Everywhere else, there were more than five workers per machine.
In 2008, in recognition of the exceptional performance of the Dolbeau plant following the return to service of paper machine number 2, for commercial printing paper, Mr. Grandmont presented us with a plaque conveying the management group's congratulations to the entire team.
To thank us for our efforts, these same people shut down the plant in 2009, supposedly on a temporary basis. Three weeks later, they told us that because of Boralex, it would be impossible to reopen it. They then placed themselves under the protection of the Bankruptcy and Insolvency Act and shut down our plant permanently. That is unacceptable, and we have no intention of giving up. Over the last 15 years, almost $400 million was invested by Alliance Forest Products. They, on the other hand, did not invest much when they came into the picture.
In March of 2009, our plant manager met with all of us to tell us that an additional effort was needed. We were told that our plant was generating some $5 million a month and that some way had to be found to generate even more. Additional cutbacks of 20% were needed. Our departmental directors were saying that they didn't know what to do anymore, and that every drop of juice had been squeezed from the lemon. In June, we were told of a temporary closure, as I said earlier. And then the plant shut down permanently.
It's funny. Questions were asked this morning. Knowing that AbitibiBowater's plants were generating $5 million a month, it is difficult to understand why they are being shutdown. We just don't get it.
Personally, I am appearing before this Committee to defend the workers and the community. We made considerable efforts to start up the plant again. Every time we try to propose something, we come up against the non-competition provisions. We are told that some people thought it would be possible to manufacture something in a plant that has been shut down. But it's still the same story. We don't want them to demolish that plant. We are concerned that their plan is demolish it and recover the equipment. Given that all the AbitibiBowater plants are shutting down, we are afraid they will transfer that equipment to the Abitibi-Consolidated plants.
:
Good morning, ladies and gentlemen, members of the Committee. Thank you for inviting us to appear.
At the Gatineau plant, the infrastructure is the industry flagship. It is one of the most modern plants in North America. I know that in Canada, the Gatineau plant is the most modern. In the last 20 years, $1 billion has been invested there, including a $400 million paper machine, a $180 million boiler, a TMP, or thermo-mechanical pulp, machine, at a cost of $150 million, and a $90 million de-inking machine. And there was an $18 million cogeneration unit three years ago. A power contract with Hydro-Québec provides for 20 megawatts for 20 years at a competitive rate. It's more profitable to sell than to buy.
In 1963, the Premier of Quebec, the Hon. Jean Lesage, negotiated a contract with the CIP paper company. It provided for 38 megawatts of power for 100 years. Today, that electricity represents some $12 million a year, and there are 96 more years left. The employer or the government brought the parties back before the courts in 2006 because there was a misunderstanding with respect to the contract negotiated in 1963. The multinational, called Avenor at the time and later to become AbitibiBowater, won its case. It was agreed that the contract would begin in 2006 and be effective for 100 years, until 2106. As we speak, it's in the river; it's dormant. People at the multinational were told it wasn't transferable and that it was associated with the Gatineau plant. If it's worth $12 million a year today, how much will it be worth 96 years from now? We're talking about billions and billions of dollars. That would wipe out the deficit of all of AbitibiBowater's 24 pension plans, which are $1.3 billion in the hole.
And there are other problems at the Gatineau plant. In 2007, they shut down a paper machine. The workers were subject to rationalization. We lost 171 unionized workers and 25 non-unionized workers. These same workers were the ones who funded the pension incentive measures, because the employer had abandoned them. We were taken hostage by the employer to ensure there would be joint participation in the Quebec government program, known as the ARTT, but the condition was that there be rationalization. So, in June of 2007, and again in December of 2007, we rationalized our working conditions; we did that twice in a single year. At the request of CEP locals in Eastern Canada, we asked that negotiations start up again in January and February of 2008, so that the multinational could secure a two- or three-year extension of the contract, with zero increase, and a job security guarantee was signed before the Dolbeau-Mistassini and Gatineau plants were shut down. They asked us for $62 million worth of concessions, when only three weeks earlier, some $60 million worth of bonuses had been paid out. Mr. Weaver, in particular, received $25 million. Here I'm talking about all the company's managers, and especially Mr. Paterson, Mr. Alain Grandmont, Mr. Rougeau, Mr. Girard and Mr. Wright. They all received bonuses and now they are doing it again with the $6 million, but that is just the continuation of what these white-collar criminals have already done.
Earlier, Mr. Paterson said they had shut down the least profitable plants. But let me tell you something: at the Gatineau plant, they did everything they could to make us look bad. All the plants where the value per tonne exceeded $500 were at risk. In November of 2009, we were producing paper at the Gatineau plant for $465 a tonne. In December of 2009, we produced it for $469 a tonne. The $4 difference was due to a change in chemical suppliers. No one sent the cavalry to save us. There was a shortage of staff, both on the union side and the employer side. No training was provided. One third of the plant had been emptied out, because of people retiring. But they never helped us. It's really too bad. I won't name any names.
The managers at the Gatineau plant asked for an assessment. They were told not to worry, that staff would soon be provided to them since plants were being shut down. The plants did indeed shut down, and at the Gatineau plant, they sent us people who were offered positions such as assistant director. They had a great time making us less efficient. We were told that we were losing orders, but it wasn't true. They took great pleasure in transferring orders to other AbitibiBowater institutions. They would group the orders that weren't profitable and pass them on to the Gatineau plant. So, we obviously were no longer profitable. It was unacceptable that we received no training or help. On top of that, they mixed up our orders.
In closing, I just want to make the point that the contract was renewed in 2009. The first meeting was with union reps and the AbitibiBowater negotiating team. There were 12 plants, two of which had shut down.
Immediately after saying hello to all of us, the employer stated that had he been able to shut down the Gatineau plant because of its liabilities, he would have done so. However, he didn't have the right to do that under Quebec legislation. But the employer simply circumvented the legislation and shut down the plant. In terms of liabilities, there are 1,828 workers, 1,447 retired workers, 381 workers who opted for late retirement and 21 people on long-term disability. The plant was shut down and we are convinced that it was because of the liabilities. Don't forget that the Gatineau plant absorbed everybody remaining from the former CIP plants in Temiscaming, Hawkesbury, Matane, Lachute, Trois-Rivières, Dalhousie, Maniwaki and Harrington.
Thank you very much.
:
Thank you, Mr. Chairman. Good morning everyone. I want to convey special greetings to the workers and the unions.
Appearing today to talk about a community and try and explain to people that there is no logic to what is happening now is quite a responsibility. I will try to discharge it as best I can.
First of all, I would like to give you some background. The Town of Dolbeau-Mistassini is part of the Regional County Municipality of Maria-Chapdelaine. It comprises 12 towns. The population of that RCM is 27,000 and Dolbeau-Mistassini has a population of approximately 15,000. As will already be clear to you, that leaves about 12,000 for the 11 other towns. We constitute the commercial centre and have the hospital and school that serve the entire community. Industry in Dolbeau-Mistassini provides a living to workers from the 11 other municipalities. It is truly a very important community.
Dolbeau-Mistassini covers an area of some 40,000 square kilometers. It's as large as Switzerland. Ninety-five per cent of its surface area is covered with forest. Indeed, more than 70% of the economy in our RCM is based on the forest. We have the largest commercial forest area in Quebec. Some 3 million cubic meters of wood are harvested in our area. Our slogan is: “Maria-Chapdelaine, a generous nature to share the future”. Large quantities of wood, bark and chips are sent all across Quebec. We have always accepted that, except that now, our community which sprang from the forest, which has lived and still lives off the forest, wants to continue to do so. But there is something illogical happening: our plant has been shut down.
From its beginnings in 1927 until its indefinite closure on August 24, the paper mill has always been profitable. Even last year, a profit of $45 million was expected.
As you mentioned a little earlier, the company owners sold their cogeneration plant to Boralex in 1998, which weakened the mill. The company sold it, and yet today, the company is saying that it's unhappy about that. Its managers, who brought the company to the point where it is now, are talking about restructuring. I must admit that scares me.
AbitibiBowater says it is still interested in forest operations in our area and in the Dolbeau-Mistassini sawmill. And yet we are aware of no operational or investment plan. AbitibiBowater is prepared to talk, but only based on a highly restrictive non-competition clause. That kills any possibility of recovery or even of selling the paper mill, because AbitibiBowater owns 80% of the wood in the Saguenay—Lac-Saint-Jean area. Anybody interested in buying the plant would be facing a non-competition situation. Furthermore, whatever happens, it would be forced to ask AbitibiBowater for chips and bark. To which the company will reply that it is willing to sell, but at the price that it has set. That means that two plants are now endangered—both Boralex and SFK Pâte in Saint-Félicien, which makes pulp. The fact is that AbitibiBowater, or the previous companies, had sold those plants with promises and supply guarantees that they effectively ended with Bill .
We are living amidst the resource and we cannot allow ourselves to be dispossessed without reacting; we cannot accept the idea of a closure as part of a financial restructuring carried out based on highly debatable rules. As I stated a little earlier, the plan closure will have wide ranging effects at the municipal, educational, business and social levels. It is an especially serious catastrophe for a single-industry town and RCM. As I mentioned earlier, 12 towns are affected.
I would like to briefly address the real estate market. Right now, a lot of houses are for sale. Some 300 people to be exact, and that is a very significant number. We are now in a buyer's market, as opposed to a seller's market. There will be very significant repercussions for the municipal budget. Dolbeau-Mistassini is a regional centre for services, business, and so on. Day in, day out, we are concerned about what people will do. They've never had a problem, but they have no other way of making a living. As a result, our health and social services centres have been responding for a number of months now. We don't understand how this kind of legislation could allow a company to jeopardize other companies. It seems that, based on this logic, in order for a bankruptcy to occur, the people who own the sawmills or sawmill equipment, or the workers, have to fail as well. That is totally unacceptable. We cannot accept the idea that a company could file a financial restructuring plan without unveiling its operational and investment plan.
The President of AbitibiBowater told you earlier that other plants will be shutting down four or five years from now. That means that people who think they are secure today will go through what we are going through now, because of people who have made sure that this company would end up this way.
Yet people are rewarded for succeeding in causing so much harm. How can anyone, at the cost of a financial restructuring, allow a company to jeopardize an entire community? The community is worried. We are convinced that September 14 and the subsequent steps are only part of a process for the company which, with the blessing and complicity of an entire system, will trot out its emergence plan, which I call a “resurrection plan”. We are being held hostage by a company that has the benefit of a monopoly. We are also concerned that our sawmill will cease operations because the company has shut down its planing units. So, they will have to dry the wood, load it onto trucks and haul it.
In closing, Mr. Chairman, at the present time, fiber is being left on the forest floor which, barely two years ago, was being processed. The company decided to leave it in the forest, because it doesn't want to process it; it would result in too many chips. One has to wonder about the FSC environmental standard. At the present time, local chips, bark and logs are travelling hundreds of kilometers, whereas in our area, everything is shut down.
Today I am sounding the alarm bell for a single-industry region and appealing to you, Mr. Chairman, and everyone present. The plant back home, which is at the centre of the resource, has no right to shut down. So, we are here today to make you aware of that.
:
Thank you, Mr. Chairman.
Good afternoon and thank you for being here today.
Mr. Coles talked about victims. After hearing your comments, I'd say that is no exaggeration. Earlier there was talk of negotiations with AbitibiBowater to obtain compensation, but later we were told that it's illegal because there was already an agreement; then a minister promises there will be a summit on the forest industry which never happens; a plant closes when the managers don't even seem to know what is manufactured there; and there is another plant with a contract which guarantees savings that other plants cannot provide. So, it is clear to me that there truly are victims.
When Mr. Lebel, the announced funding in April of $100 million over three years, the Communications, Energy and Paperworkers Union of Canada said it was too little, too late. Mr. Gagné is unfortunately not here today, but I would like to ask you this question. What could have been done previously? What would that change now? Is it still too late? What can be done to prevent the closure of these two plants? And five other plants may be at stake.
Could you explain what Mr. Gagné had proposed?
:
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?
:
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.
:
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.
:
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?
:
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.
:
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 , 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?
:
Thank you, Mr. Chairman.
I would like to thank you for your testimony. It is important testimony, in my opinion, because you have shown us just how much more complex the issue is than Mr. Paterson's comments suggested. His description of the situation was quite simplistic.
We now know, however, that there are two companies rather than one, that you had access to the best equipment, and that you worked hard and creatively to bring down costs. In other words, you did what you were asked to do as good unionists and workers. Yet you seem to be taking the rap for the bad decisions made by the company over the years and for its lack of judgment. It didn't invest enough and, if I understood correctly, gave you no mandate with respect to the products which had a better future. So, what you told us today is very important.
Just to complete the discussion on pension plans, if I understood you correctly, no current retiree will be receiving less money than expected as a result of the restructuring. Current pensioners are therefore well protected. Is that correct?
:
Your question is very timely.
I can say this because he gave me authority to say it. I met several days ago with Mr. J.D. Irving, the owner of Irving Paper. He urged me to continue the work our union has been doing.
I've met with every CEO in Canada with regard to holding such a high-level summit, and we will. We are hoping that the sitting government will participate, but we will go ahead and do it, one way or the other.
The one point that I think has to be made here is about the severity of this crisis. I personally am not in favour of any kind of a covenant that says you can't sell a mill, but I can't give some of these mills away when the employers say take them. In some of these situations I have travelled the world trying to find someone to operate a mill. In fact in some cases government has offered to pay people to take a mill. This crisis in Canada is very, very serious.
We have a number of companies still in CCAA; we have some on the verge of going in CCAA. If there are not radical changes to the way we treat our forests, we will have hardly any paper mills or solid wood mills running in Canada and Quebec. That's not idle talk, it's reality. We need somebody to step up.
:
Thank you very much, Mr. Chairman.
I would like to thank the witnesses for meeting with us today, and particularly Mr. Simard, whose community has a single industry, in a way, as well as Mr. Carrière and Mr. Lamontagne, who are making a heartfelt appeal. Mr. Ménard pointed out that there is no lack of culprits in terms of all that has occurred. Many people are to blame for these closures, but the victims never change: they are the workers and their communities. That came through in your presentations, gentlemen, and particularly the comments made by Mr. Carrière.
I am from Lévis. We have a shipyard there which has had its share of problems. As you say, these are situations that families and workers have trouble coping with. Jacques also referred to that.
I would like to come back to one point. As politicians, we have a role to play. My father is a scaler, from the Sainte-Croix school near Quebec City, in the riding of Lotbinière. He knew how to handle 2 X 4s. He still has his little piece of land in Saint-Elzéar. His land is a real garden. For Quebec and for the entire country, the forest is also an asset. As a politician, I believe in the importance of the forest industry. As Mr. Simard said, it is not only there to produce 2 X 4s, although 2 X 4s are already very good products. Some people say it's a carbon sink. That's the sort of thing we could focus on to emphasize the environmental side of it. The fact is that it stores carbon dioxide. We can tell our friends at Greenpeace that a 2 X 4 is truly environmental.
That said, I would like to return to the industrial side of this. We talked about the automobile industry, where there is competition. Companies did receive help from the government and began to pay back that money. This week, I was with Ministers et . Minister Lebel fought to secure $1 billion for the communities. We want to be sure that this money is well invested. I want to underscore that, because it's easy to talk about what can be done, but personally, I believe we were able to accomplish something with that $1 billion in terms of greening business. Can we do more? I think so, and I agree with Mr. Ménard on that score.
However, I can tell you that in recent weeks and months, I have supported measures aimed at helping industry, to the extent we are able, under international agreements. I also supported measures for workers. I hope they will yield the expected results.
My first question is for Mr. Simard, but before I ask it, I would like to invite Mr. Carrière and Mr. Lamontagne to comment on what my colleague, Mr. Gourde, said. He referred to the fact that you have profitable plants in which investments were made, and yet they are shutting down. There is some background to that. A number of players are involved. Perhaps you could comment.
:
I'd like to talk about the Gatineau plant. This is a problem that affects Quebec and Gatineau. I will continue to be conservative. Here I'm not referring to the Conservative Party.
Construction of the Gatineau plant began in 1926, and the plant became operational in 1929. The first collective agreement was signed in 1933. At certain points, the plant had 3,000 or 4,000 workers. And there wasn't only the CIP plant. There was one Masonite plant, then International Plywood and Commercial Alcool began operations there; after that, there was a Ten Test plant. In the 1990s, there were still 1,500 workers. A first machine was shut down, then a second, and then another in 2007. There were investments, automation and new technologies introduced.
We have the best plant as well as a recovery plan. As Mr. Paterson said, there is a need to look to convergence and move into other market niches. This has become a national issue. My people from Ottawa are here. My Vice-President for Quebec, Mr. Gagné, is not here. He is the one who has given us the greatest support on these issues. I am not saying these people didn't do their jobs They did and they are still doing a lot. That's their job. This has become a national issue.
Why did we not appear before the Senate Committee on Industry, Science and Technology before now? Why are two plants with enormous potential being shut down? I can't speak for the Dolbeau plant, because I never went there. But I do know it has recent infrastructure. That plant was worth a great deal of money, but its value was depreciated: it's now worth $3 million. Tell me that the Thurso plant in the Outaouais is worth $3 million. Millions and millions of dollars were invested there.
As for Gatineau, we assume it was a setup. That's what it is. These people did everything they could to make us look bad. In April of 2007, Mr. Cayouette said that if they shut down one machine, it would be the beginning of the end. In order to bring us on side, they threatened us. They started talking about rationalization. In 2008 and 2009, they premeditated a situation intending to make us look bad. Funds were invested in equipment, but nothing was invested in labour. There was a lack of both workers and training in the paper mills. The Assistant Director of the plant, Mr. Levasseur, even asked an assessment. Finally, they had the effrontery to give $3,3 million to the Gatineau plant in January and February of 2010 as an investment. That is part of their liabilities. These people are trying to get around the situation. We haven't received much cooperation on the recovery plan.
We have a very good recovery plan that we don't intend to table here. But we believe in it. We will get things going again and stay the course, with or without federal assistance. We will receive assistance from the provincial government, from the FTQ, from the workers and from CEP. We will start up the plant again because it is profitable. It's a question of survival. What I deplore about Mr. Harper is that he won't help us twice. You haven't helped us enough and you should do more. Making a mistake once is not a problem, but continuing to make a mistake is. You have an opportunity to mend your ways. One thing is certain, however, and that is that we will start up the plant again.
:
We have to be careful. Theoretically, one of AbitibiBowater's plants should be more modern than the Gatineau plant, namely the one in Amos. It was newly built in 1982. It was previously a Donohue plant. But whether I'm talking about the old plant in Kénogami or plants in Alma, Laurentide, Clermont, Baie-Comeau, Mersey, Thorold, Iroquois Falls, Thunder Bay or Fort Frances, all of these plants are ones in which the employer should be investing, although they do not have the same infrastructure as the Gatineau plant.
The Gatineau plant is the industry flagship. When we presented our recovery plan to senior managers, we made it clear to them that they could not survive following emergence without the Gatineau infrastructure as part of their restructuring plan. In a way, their biggest blunder was the pension plan. There was a shortfall of $1.3 billion in the 24 pension plans, which were supposed to have a capital of $5.7 billion.
The federal government can certainly do a number of things to help us and guarantee that we will be first in line among creditors when such events occur. The federal government may want to look at what happens elsewhere in the world when multinationals get rid of workers with about as much ceremony as when they throw an empty lighter in the garbage. Some workers are being refused their pension even though they had only two days, two weeks, two months or four years left to work. Forty-four maintenance workers in their fifties will not be able to retire. In addition, 39 operational workers are discouraged, because some of them only have a grade 7 education. We even realized that there is one member of that group who didn't even complete grade 2, although he had never told me that before. He did his work and he was a good worker. We also have women workers and office employees. Some 150 workers will not be able to retire. And the situation is the same in Dolbeau, although the workers in Dolbeau, despite their bad luck, were luckier than we are, because their plant was shut down for a year and a half, whereas ours has only been closed for four months. It's appalling what they're doing. They're getting rid of their workers.
Whatever your political party, you should impose your will. There is one government that imposed its will and wasn't afraid to make decisions, and it was the Government of Newfoundland and Labrador. They seized the dam. If I had been able to seize the golf course, I would have. I asked the union's legal department to seize it. And the reason they put Dolbeau and Gatineau in the third wave of closures is because they liquidated our lay-off pay and notice. They ripped us off. Help us! In the name of the workers, I appeal to you for help! What they're doing is not right. It just isn't right. It's not just a commission. There should be a bailiff, and they should be put behind bars. They are thieves. That's what is happening. They are thieves.
Voices: Hear, hear!
Mr. Gaston Carrière: It's a good thing we are members of CEP, the Communications, Energy and Paperworkers Union of Canada, because without the union movement, we would be wearing a ball and chain and be fed nothing but bread and water. Men and women workers owe their working conditions to the union movement.
Now, as regards Gatineau and Dolbeau, please consider this tonight. The infrastructure is recent. Mr. Paterson said the industry has to be converted and move away from newsprint and specialized paper. I can speak for the Gatineau plant. Its infrastructure is recent, it is good, and we have an effective recovery plan. We forced management to support the recovery plan. The provincial government, CEP and the Gatineau LDC paid $200,000 for a feasibility study. We have another study on protecting equipment, and the City of Gatineau will be paying for that one. They moved everything to Dolbeau. I can tell you one thing, it isn't hard to convert a plant to carton or other types of production.
I provided a document to my colleague, Mr. Nadeau, but I cannot give it to you—and I apologize—because it is not available in both languages. That document explains that these plants have to be converted to other niche production areas.
I will say more about this later if you give me an opportunity.
:
Thank you, Mr. Pacetti.
Are there any other questions about the budget proposed? Seeing no further questions, I'll call the vote.
(Motion agreed to [See Minutes of Proceedings])
The Chair: The budget has been adopted. Thank you very much.
We have in front of us, on our third panel today, Monsieur Boivin,
[Translation]
who is the Reeve of the Regional County Municipality of Maria-Chapdelaine.
[English]
We have Mr. Stephenson, the assistant deputy minister of the trade policy and negotiations section of the Department of Foreign Affairs and International Trade. From Export Development Canada we have Madam Hendricks, the vice-president of the resources group, and Mr. Hodges, the account manager of the resources group.
Finally, from the Conseil de l'industrie forestière du Québec, we have Monsieur Lachapelle,
[Translation]
who is the Director of Supply and Markets.
[English]
Welcome to all.
We'll begin with an opening statement from Monsieur Boivin.
:
Thank you, Mr. Chairman.
I, too, would like to thank the Committee on Industry, Science and Technology for inviting me to appear this afternoon to present the concerns of the Town of Dolbeau-Mistassini and the entire RCM of Maria-Chapdelaine regarding the closure of the AbitibiBowater paper mill.
As has already been stated, the RCM of Maria-Chapdelaine has the largest commercial forest in Quebec. Between 1927 and 2007, the year the plant became the new AbitibiBowater entity, we had an efficient paper mill located close to the resource, equipped with excellent technology and skilled workers.
In 1998, the Alliance company owned the mill. Equipment was modernized. I am referring to machine number 5, which produces a circular SCB paper, as we call it in our jargon, and machine number 2, which produces what is called book paper. There was also the addition of a cogeneration plant which produced steam and electricity. The idea was to bring down the energy costs Mr. Paterson referred to this morning. Without wanting to, those involved may actually have laid the foundations then for a future integrated forestry complex.
In Dolbeau, we had a pulp and paper unit, an energy unit and an entity that processed the sawmill's leftover wood. In Mistassini—between Dolbeau and Mistassini runs a small river—we had a sawmill for lumber, a planing unit where we produced chips and biomass residue that could then be used at the cogeneration plant. Throughout the non-organized areas—in other words, the large forest lands—we had logging operations.
In 2007, Abitibi-Consolidated and Bowater became the new entity known as AbitibiBowater. Two struggling companies were merged to create a new one which soon got into trouble as well. Everyone knew that and had predicted it. We know what happened next. This morning we were discussing the trade dispute with the Boralex group, the confirmed financial problems, the Companies' Creditors Arrangement Act and, finally, the permanent closure announced on August 24.
Prior to these events, we had a profitable paper mill and enviable facilities from any standpoint. The mill was turning a profit despite a difficult economic climate. The Companies' Creditors Arrangement Act had the effect of weakening the Boralex's cogeneration plant. That was when they began breaking up what we had and what we were so proud of—namely, an integrated forestry complex.
For us, the future means again setting up a real integrated forestry complex, what we call in our jargon a “fibre maximization centre”—in other words, a complex that meets the expectations of the Government of Quebec as well as those of the forestry community and the industry. In order to meet economic, social and environmental requirements, the following conditions must be met: the right type of wood and the right use, total processing of logs in these facilities, maximum job creation through different fibre processing units, and reduced environmental impacts by limiting transportation and transshipping. We are even talking about reduced deterioration of roads caused by hauling wood chips.
The ability to reposition ourselves as part of an integrated forestry complex rests essentially on the following: the proximity of forest lands; sawmills and pulp facilities which require little upgrading; an already established cogeneration plant interested in maintaining its operations—here I refer to Boralex—; skilled, well-trained workers such as the ones we were talking about before lunch; and a community prepared to invest in order to resume operations.
We want to create a complex that meets the expectations of industry, the Government of Quebec and even Mr. Paterson. Abitibi wants to move away from producing newsprint. That's not a problem in our area; we don't produce any. The facilities can be converted to produce new products; all the experts have told us that. And, as a community, we have invested close to $400,000 to identify potential solutions. Those studies will be released soon.
We are there, with a cogeneration plant and use of the biomass. So, everything is in place. We are saving on transportation, and we are even eligible for carbon credits. We even have a rail network that connects the Municipality of Dolbeau-Mistassini to the facilities at the Port of Saguenay. So, exports are facilitated. What we want to create in Dolbeau-Mistassini is what everyone would like to see: a viable, integrated forestry complex.
:
Thank you very much, Mr. Chairman.
First of all, I would like to thank you for inviting the Quebec Forest Industry Council, or CIFQ, to appear before the committee. I would also like to extend the apologies of our CEO, Mr. Guy Chevrette, who had a prior commitment and asked me to replace him.
I'm sure you can understand that the CIFQ is not appearing this afternoon to discuss a particular case. We are here to talk about the situation of the forest industry as a whole.
Our industry has, for some years, been going through a cyclical crisis which, in the softwood lumber industry, is the result of a decline in housing development—primarily in the United States—and, in the pulp and paper industry, is associated with a considerable drop in the consumption of a number of paper products, especially in the wake of the exponential development of electronic media. The Quebec forest industry is also experiencing a major structural crisis, as the cost of fibre in Quebec is the highest in North America because of its quality, and wood chips are generally the most expensive in the world.
The pulp and paper industry is in the midst of a monumental crisis because of a radical drop in the consumption of newsprint, as well as printing and writing papers. It is especially in Canada and Quebec that the consequences are being felt. Six or seven plants that produced these kinds of paper have already shut down, and I'm sure you know that newsprint production is still far too high in relation to North American and European demand. If that trend continues, the plants will continue to shut down in Quebec. That conclusion seems inevitable because of the cost structure, the distance to markets, a high exchange rate and less and less competitive labour and power costs. We have no doubt that you are all aware of the situation in the pulp and paper industry as regards newsprint. Consequently, we are sure you are not surprised to see plants shutting down.
It is no surprise that industry consolidation is occurring, because leaders of each of the political parties, at both the federal and provincial levels, asked that the industry restructure, and restructuring involves consolidation in particular. It is not only that, but it does mean consolidation. So, the Canadian and Quebec industry begun to restructure and company consolidation is not over yet.
As you know, the industry is having trouble coping with this consolidation, because this cyclical and structural crisis is now occurring in the midst of a significant financial crisis. The reconversion of existing plants to other market niches presents major technological and financial challenges. At the same time, banks and financial institutions are refusing to refinance struggling forestry companies. As for governments, they refuse to offer loan guarantees to companies at a commercial rate, which would nevertheless be perfectly legal, based on the legal opinions we have received. I'm sure you know that in Quebec, Mr. Guy Chevrette has made this request on many occasions in recent years.
We know for a fact, because we have been working on this for several months now, that a return to sustainable profitability for our industry requires innovation, but that money is lacking. In that regard, several weeks ago the federal government announced the introduction of a $100-million program over four years to fund innovative projects. We said that this was a step in the right direction, but that it was not enough, because $100 million for all of Canada means $25 million per year. We know full well that a single innovative project may require investments of some $200 million for a single plant and the program requires that the company invest 50% of that amount. However, the necessary cash is not available.
I'm sure you can easily understand the problems we are facing. Yes, there is a need to diversify; yes, there is a need to innovate. But, as I'm sure you understand, without a large scale program, the process will be very slow, even though a number of projects are already on the table. We are aware that the industry will never be the same again. We are also aware of the different avenues to be explored. There is no doubt in our mind that you are also aware that we need substantial assistance to bring all of this to fruition.
Without government aid, some development and innovation projects that companies are bringing forward will likely see the light of day, but not at the same speed as the speeches; rather, at the speed associated with financial availability.
The industry will never again be what it was. If the future seems promising in the mid and long term, restructuring our industry will, unfortunately, involve consolidation in the short term.
Thank you.
[Translation]
I would like to thank you, Mr. Chairman, and member of the committee, for giving us this opportunity to address the committee today.
Given the current challenges posed by the economic conditions, your study could not come at a better time. It is of critical importance.
[English]
Access to credit is vital for companies of all sizes. As a crown corporation, Export Development Canada plays an important role in helping Canadian companies access credit and protect themselves against a variety of risks. This is our mandate; it is what the Government of Canada created us to do 65 years ago.
What does EDC do? Briefly, we provide commercial financing and insurance solutions to Canadian companies, helping them to export and invest internationally. This includes loans to foreign companies looking to buy goods and services from Canada; working capital loans to Canadian companies to help them fulfill their export contracts; loans to help Canadian companies invest abroad; working with trusted partners by providing guarantees to banks, making it easier for them to lend; using our new domestic powers to enter into transactions that fill a financing gap; insurance to protect Canadian companies against a variety of risks, including non-payment and political risks; bonding services to help Canadian companies guarantee their performance and equity participation.
We do all of this, both directly and in partnership with Canadian and international financial institutions. We do it on commercial terms, without annual appropriations from Parliament.
While I cannot speak to or comment on company-specific information for reasons of commercial confidentiality, I would like to speak briefly about our work in forestry overall.
The forestry sector is vital to Canada's economy. The industry's annual contribution to our gross domestic product was approximately 1.7% in 2009. It is the economic cornerstone of more than 300 communities from coast to coast.
The industry is highly dependent on trade, and the recent economic downturn, as you know, has created serious challenges for forestry companies of all types and sizes. As a result of the economic downturn, we're seeing a great deal of financial restructuring in companies of all sizes. This is primarily due to increased competition from foreign producers, extraordinarily weak North American demand for lumber and newsprint, and generally weak global demand for all products.
The Canadian softwood lumber industry in particular is still experiencing difficult economic conditions as a result of the collapse of the U.S. housing market, the sector's largest customer.
At EDC, the forestry sector is one of our largest and most important. In 2009, EDC provided financial solutions to 538 different forestry companies. The total volume of forestry exports supported for these companies was just over $16 billion. As of August 31 of this year, EDC served 456 forestry companies, for a business volume of approximately $8.6 billion.
While EDC's services are needed in good times, they are needed even when times are difficult. In response we are stretching our capacity more than ever to support our bank and our customers. It is important to note that EDC operates in the commercial sphere just like a bank. Like any bank, customers must be creditworthy to be eligible for our support and they must demonstrate their ability to pay back a loan on market terms.
EDC is also bound by regulations of Canada's international trade agreements, such as the Canada-U.S. softwood lumber agreement. We cannot and do not provide subsidies to any industry. However, what we can do for Canada's forestry sector, we are doing.
EDC is helping forestry companies primarily by helping their banks continue to provide support. In doing so the banks are exposed to less risk themselves, and they are therefore better positioned to continue serving their customers.
EDC also provides accounts receivable insurance, ARI, to Canadian exporters, primarily to cover any losses if their customer is unable to pay for their shipment. With ARI, EDC will refund 90% of the cost. This insurance enables financing. With EDC's ARI, a company can then work with its bank to margin the insured receivables and get access to more working capital.
As the economic downturn taught us, Canadian companies need to diversify beyond their traditional markets. For the sectors to remain competitive now and in the future, they need to break into global supply chains of more emerging markets. We are seeing many of our customers doing just that already, and they are prospering as a consequence.
Despite the challenges we're seeing right now, new technology and emerging global markets will present future opportunities for Canada's forestry sector. EDC is actively working with Canadian forestry companies to help them grow and diversify their customer base beyond the U.S. market.
Together with DFAIT, EDC has organized forestry trade missions to Chile and Russia. Recently, EDC and DFAIT organized a reverse trade mission whereby Chilean buyers met with more than 20 Canadian forestry companies. The goal of these missions is to introduce foreign buyers of forestry products to Canadian providers, to target and penetrate global markets where the need for services matches Canadian expertise. We are also in the early stages of organizing an information session to Canadian forestry companies on exporting into China.
[Translation]
We have a team dedicated to the resource sector, which includes the forest industry, agriculture and fisheries. Furthermore, we have officers abroad located in the main emerging markets. We are therefore well positioned to offer our Canadian exporters the best possible support.
Thank you. I will be pleased to take your questions.
:
Thank you very much, Mr. Chairman.
I would like to thank the committee for the opportunity to address you this afternoon.
As Assistant Deputy Minister for Trade Policy and Negotiations at Foreign Affairs and International Trade Canada, I engage on issues related to the forest sector through the implementation of the Canada-U.S. Softwood Lumber Agreement, and through my responsibilities for the management of the North American Free Trade Agreement. With me today is an expert on the softwood Lumber Agreement, Mr. Colin Bird. He is the director responsible for managing the Agreement.
The Canada-U.S. Softwood Lumber Agreement has provided stability to Canadian softwood lumber exporters at a time when the entire forest sector is facing unprecedented economic challenges and structural adjustments. It returned approximately $5 billion to Canadian forest firms, and brought an end to the fourth round of trade litigation in this long-standing dispute. Canada worked closely with provinces and interested stakeholders throughout the dispute to achieve a lasting resolution. This close collaboration continues in the context of implementing the agreement.
Canada agreed to put in place export charges and, for some provinces, quotas for softwood lumber exports. More specifically, provinces subject to the Softwood Lumber Agreement export measures can choose between two alternative regimes. Option “A” consists of an export charge that ranges from 0% to 15%, depending on the price of softwood lumber. Option “B” includes both an export charge of between 0% and 5% as well as a quota, both of which vary depending on the price of softwood lumber. Funds collected through these export charges remain in Canada and are returned to the provinces.
Our entire industry and our government would prefer free trade in lumber. But these export measures provide a far better trade environment than the alternative of continued, and unpredictable, U.S. trade actions—by this I mean countervailing and anti-dumping investigation. Under the Softwood Lumber Agreement, the United States is prohibited from taking such trade actions.
Having agreed to export measures, Canada pledged not to provide grants or other benefits that would undermine or offset those export measures. Certain exceptions to this obligation are provided by the Agreement, for example for pre-existing measures and measures related to forest management or environmental protection. How to interpret this obligation under the Softwood Lumber Agreement remains an area where we have differences with the United States.
[English]
There is currently an arbitration under way in which the United States has challenged certain programs of Ontario and Quebec, including loan and loan guarantee programs, as circumventions of our export measures. Canada has worked closely with Quebec and Ontario to defend these programs. Among the issues before the tribunal is whether to consider benefits provided to pulp and paper operations that are associated with softwood lumber producers as potentially offsetting the export measures. Canada has argued forcefully that they do not and that they have no impact on exports of softwood lumber products to the United States.
We fully expect the tribunal to agree with us. We anticipate the tribunal's final ruling will clarify this matter, at least with respect to the types of programs at issue in this case. The tribunal's ruling is expected late this year.
The softwood lumber agreement has provided stable and predictable access to the U.S. market for Canadian softwood lumber producers. This has been especially important in the recent economic climate. The agreement has enjoyed the support of Canadian industry and provincial governments. Canada works diligently to ensure its terms are respected.
Foreign Affairs and International Trade Canada works closely with other federal departments and agencies as well as with provincial governments to ensure that initiatives in the forest sector respect Canada's obligations under the SLA. We have worked with Natural Resources Canada on significant initiatives, including the $1-billion pulp and paper green transformation program, the $100-million investments in forest industry transformation program that was launched just last month, and the $170-million program of other initiatives in support of market diversification and innovation initiatives for the forest sector, about half of which will be invested in Quebec.
Together with the ongoing engagement of EDC, which my colleague has outlined for you, these initiatives seek to facilitate the development of a sustainable and competitive forest sector in a manner that respects Canada's obligations under the softwood lumber agreement and other trade agreements.
I trust that this information is useful to the committee, and I look forward to answering your questions.
:
Thank you, Mr. Chairman.
I would like to thank the witnesses. While the subject is an interesting one, it is not particularly easy.
I would like to focus for a moment on the testimony provided by Mr. Boivin and Mr. Lachapelle. We have already heard three or four hours of testimony and we are no further ahead now than we were before. However, we do know that people will suffer, and that employees have already lost their jobs and may well lose their homes. I am trying to reconcile your testimony with that of Mr. Boivin and Mr. Lachapelle.
Mr. Boivin said that there is access to raw material, to trained workers and to plants, and that investments have already been made—in other words, everything is there. Mr. Lachapelle, you made the point in your testimony that there are other cuts still to come. The picture is more negative. You said that we were far from our market and that the exchange rate is hurting us. That is nothing new.
By way of example, I would like to tell you a story I heard in recent months. I was told that we were importing lumber from China. I wonder whether there are markets that could possibly be further away. If our competitive capacity amounts to that, I think we have a problem. I am trying to reconcile your two points of view, but I'm having a lot of trouble doing that.
Mr. Boivin, I know that you made a good presentation. I agree with you that investments have been made and that people don't understand why the companies involved are not able to manage or maintain those investments, as well as the jobs they decided to invest in last year in Quebec.
:
Is asset consolidation possible, as Mr. Lachapelle mentioned, but smart consolidation? In our region, we have the necessary supply. In our opinion, it's ridiculous to process our wood chips 400 kilometres away from our region. It's like having a spring but being unable to drink from it.
In the late 1990s, I met with Mr. Weaver. We asked him if we could implement secondary and tertiary processing. At that point, we were talking about black spruce fibre from Quebec, which is exceptional. For Mr. Weaver, the calculation was as follows: one black spruce equals one 2 X 4, and the rest goes into paper, in the form of wood chips. We make money and everyone is happy. Our shareholders are satisfied, and we leave it at that. For plywood and anything else, we go to Brazil or India, because it's cheaper. That was his vision. And, for implementing a vision of that kind, he was paid $17 million, I believe. The people who succeeded him continued to think the same way.
On the other hand, we believe that with the trees—in other words, the fibre—that we have, we are able to do the processing right where we are. Of course, things will never be the same as they were with newsprint, but—
:
Thank you, Mr. Bouchard.
Mr. Chairman, when you look at the Canadian forest industry as a whole, it is clear that operations are located in villages scattered here and there. These are isolated populations. I think we're talking about 800,000 jobs in Canada. It is one of the main industries in Canada that needs to be protected. In that respect, you are absolutely right. The federal government did the right thing when it supported the auto industry, but it should have provided the same support to the forest industry.
There are constraints; there is no doubt about that. Earlier we were talking about NAFTA, but there are ways to support our industry. As I said before, access to credit and refinancing was one avenue we were in favour of. In a few weeks or months from now, we will know the outcome of the Softwood Lumber Agreement arbitration where all these issues will be debated, and at that point, things will be clear for us.
If you don't mind, I would like to add something to the previous discussion. I would just like to point out that there are business models in Quebec. In newsprint, there are three companies: AbitibiBowater, White Birch Papers and Kruger. The first two—the two largest—placed themselves under the Companies' Creditors Arrangement Act and the last one terminated its operations. This is a very significant problem and not a simple one to resolve, because were that the case, there would also be solutions. As things now stand, it's complicated.
:
First of all, this vision is not based on a dream. It is based on a reality: the Government of Quebec wants to maximize fibre and reduce impacts.
This morning, we talked about green energy and the environment. Imagine that a log leaves Montreal bound for Ottawa. It has to be completely processed here, because of the cost. In our area, a log goes through the barking machine and then to the sawmill. The bark, called biomass, is stored. It's used to power a cogeneration plant. The log is processed into lumber and then all the small pieces can be reprocessed in a bladed-glued beam plant, and the wood can also be planed on site. As well, the chips that remain after these different stages of processing are sent across the river to the pulp plant. The bark is then shipped to the cogeneration plant and the chips are processed into pulp. Once that is done, the residue can also be processed into biofuel, ethanol or another form of energy; it can be used to produce electricity and even turned into pellets, which are in very high demand around the world. That is what is known as fibre maximization.
In our region, that complex is already almost completely in place. We feel that if we could do that, companies like AbitibiBowater would definitely find it worth their while. A case in point is black spruce fibre: the pulp can be used to enrich other types of pulp to produce a better quality paper than in China or in India. We believe we have everything we need to accomplish that here. If all the operations are carried out in the same place, transportation costs will be lower, there will be less pollution, and we will be using green energy.
At the present time, on a bole that's about 50 feet long, a company like AbitibiBowater will stop cutting at about 10 centimetres, or 4 inches, from the end and will leave whatever remains on the forest floor. It falls to the ground and isn't used. We say that biomass can be recovered and processed at this forestry complex. So, everything is in place.
As I said a little earlier, will AbitibiBowater do this? Are there developers interested in operating sections of this complex?
We were really expecting to receive a response from AbitibiBowater on September 14. Mr. Paterson partly answered this morning, and I believe we will be getting additional answers in the coming days.
:
Thank you, Mr. Chairman.
Mr. Lachapelle, a little while ago, we were talking about the federal government's $10 billion investment in the auto industry. You were questioned about this. That fact is that it was a very good thing for the auto industry.
I hope we are wrong, but we think that since the Conservatives would really like to get their hands on some NDP ridings in Southern Ontario, they targeted their assistance to that industry. A political decision was made. On the other hand, only crumbs were offered to the forest industry, along with untenable conditions, since it has to do its share, even though it is not in a position to do that now, as you explained earlier. I hope that this can be corrected. When you make the same error twice, that's serious; but if there is a recognition that a mistake has been made and if Quebec is not abandoned by the current government, we can take another look at the situation. The forest industry and paper mills, which are located not only in Quebec, but in Ontario, New Brunswick, British Columbia and several other places as well, are suffering enormously because of this government.
I would like to address another aspect of the situation and talk about the industry as a whole. We spent a lot of time this morning—and rightly so—talking about two plants in particular—the ones in Dolbeau-Mistassini and Gatineau. However, there are others. We could have opened the umbrella a little wider and taken a close look at all the plants. The workers feel cheated and they have every reason to feel that they have been had by AbitibiBowater. And we have also seen how this company deals with people who want the industry to work, even though they may not be directly involved in that industry, but still want to ensure that their residents have jobs in the paper mills and the forest industry. And then there are the small- and medium-sized businesses—the subcontractors—which work with the paper mills, either in terms of transportation or in other areas. They don't work in the plant, but they haul the products, first for processing purposes, and subsequently for sale or reprocessing.
So, a lot of people feel they have been had. How does the industry intend to compensate the people who have been penalized by plant closures?
:
Mr. Lachappelle, I agree with you, we do have to work to develop the future. In any case, we have no choice. Tomorrow is coming, yesterday is behind us, but the fact remains that people are suffering now as a result of decisions that were made yesterday. Do you see what I mean?
As we heard this morning, people are now losing their pension funds or are in danger of losing a significant part of their pension. We're told they will lose only 25% of their pension fund, but in other places, it's 40%. I'm sorry, but that is huge!
Furthermore, some suppliers are losing 100% of their contracts. That means they are losing the money owed to them, and that doesn't include the contracts they will be losing in future. All of that is extremely difficult.
Mr. Boivin, how do you see the current situation? I'm talking about the SMEs and the complex you are proposing. Given how difficult things now are, as you see it, how could this improve their situation?
:
Thank you very much, Mr. Chairman.
I am happy to be part of a government which, for the past four and a half years, has been there for the workers and the forest industry. Today I heard Mr. Nadeau talking about peanuts. But in the last four and a half years, I've seen some pretty large peanuts being given to the forest industry. Unfortunately, I also saw Bloc colleagues abandon the forest industry on a number of occasions when there was a need to invest. And we saw what the Liberals did.
It's important to remind people that when we took office, we resolved the softwood lumber dispute. It's important to remind people of that today, when we have witnesses here describing how the industry should evolve. It is also important to remind people that, as early as 2007, we invested $1 billion in the Community Development Trust. Our support for the forest industry didn't begin yesterday. We will continue along the same lines with Ministers and . We have invested $1 billion in greening the paper mills.
I'm sure Mr. Lachapelle would acknowledge that that is a positive measure. Of course, there are the workers. But we're talking about $1 billion for communities, not including the $235 million provided by the Canada-Quebec Forest Task Team, the $170 million set aside for regional diversification, and the $100 million provided for industry transformation.
Of course, in the last two years, through the Economic Action Plan, at a time when Quebeckers were most in need of help, Bloc members refused to allocate $8.3 billion for additional help for the workers as well as $60 million for older workers, to help them relocate.
The record is there. Can we do more, and continue to do more? I can tell you that we certainly will. Today we saw that the industry needs help. So, yes, we will extend a hand to people in the industry, and work with them.
Today we also talked about financial assistance for industries. Export and Development Canada officials are with us today.
Ms. Hendricks, Export Development Canada allocated $16 billion in 2009 to support Canadian industry. That was alluded to this afternoon. Can you tell us how many forest industry clients benefitted and, of that $16 billion, what amount was specifically allocated to Quebec?