Friday, December 18, 2009

Since Molly last reported on the potential employee buyout of the Eurocan pulp and paper mill in Terrace BC more has happened on that front. Here is the latest news from the Terrace Standard. A big thanks to the excellent CEP Union Blog for tweaking Molly to this story.
Sawmill, licences could be sold:
WEST FRASER is offering to sell its Skeena Sawmills plant in Terrace and its wood tenure in the region along with its Eurocan pulp and paper mill in Kitimat, says a company official.

Speaking last week, company senior vice president Wayne Clogg said the potential sale of the sawmill and tenure could take place if a legitimate buyer for Eurocan is found.

And that’s based on the tenure and sawmill providing a secure fibre supply that would then help move the pulp mill sale along, he said.

West Fraser announced the end of October it was closing Eurocan the end of January after an extensive study determined there was no way to salvage the money-losing proposition.

“We did a lot of work on the economics of Eurocan,” said Clogg. “We have not had an active sales program because we don’t believe it’s a viable business.

“But if a legitimate buyer can be found and has the confidence to buy the mill, we’ll work with them and be cooperative.

“All we’re saying that if the Terrace mill and tenure can be part of a package, we’re not going to stand in the way and we’ll look at the whole package,” said Clogg.

The Terrace sawmill has not operated, save for periods of time to chip whole logs for Eurocan, since a labour dispute between companies and the Steelworkers union ended in October 2007.
There’s also been very little activity on the one tree farm licence, which is south of Terrace and two forest licences in the past several years.

“Even when we were chipping whole logs at Skeena Sawmills, we were buying logs on the open market,” said Clogg.

But he did add that Skeena Sawmills would play an important role in providing fibre to Eurocan.

Approximately 100,000 cubic metres has been coming off West Fraser’s Tree Farm Licence 41 and far less off its two forest licences, one of which is located within the Kitimat municipal boundaries and the other in the Nass Timber Supply Area.

“Most of the fibre for Eurocan comes from mills to the east, such as the one at Fraser Lake,” said Clogg.

If a package deal does not come together, Clogg said there are no immediate plans to dismantle the Skeena Sawmills plant. “It could still make lumber and it could still supply chips and we’re going to see what kind of outcome comes out of Kitimat,” said Clogg.

He did acknowledge that having Skeena Sawmills in a mothballed state could not go on forever.

“But as I point out with our other mills, the market for lumber in America is 50 per cent of what it was. And there are many, many mills across the province and country that are closed down and will stay that way until we see lumber improve,” Clogg continued.

In the meantime, Eurocan’s unionized workers are moving forward to determine if an employee purchase of the mill makes sense.

The two locals of the Communications, Energy and Paperworkers Union of Canada at Eurocan each voted in favour of the idea by more than 90 per cent.

A feasibility study group has met with Janine North, CEO of the Northern Development Initiative Trust, who in turn recommended someone who could do the study and who then offered suggestions on where to find government grant options to pay for the work.

The union can put up $100,000, says union official Mary Murphy, but will apply for a series of grants. She confirmed that a reputable firm has come forward to back the union financially, alongside the District of Kitimat and the Kitimat Chamber of Commerce.

“The study will get underway as soon as we select the person to conduct it,” said Murphy.
“There may need to be some changes to the way operates, but I believe it can be viable.”

Murphy said time is of the essence because the mill’s shutdown is now less than six weeks away.
As regular readers os this blog will certainly be aware I am very much in favour of such employee buyouts. There are, however, certain caveats to this. The first is that I think that the idea of employee ownership should become much more prominent, especially as its most common presentation is in a crisis situation where management has already run a company near to bankruptcy. While "buying cheap" may be the best option for a private investor as the price is at its lowest it is not necessarily the best time for people who have a financial gun at their heads- potential unemployment- to jump in. It gives an incentive to the present owners to inflate the price of the assets.
The second caveat is how the new enterprise should be organized. The idea of a producers' cooperative is, in my opinion, optimum. Where the resulting new enterprise is organized as a limited partnership it presents the temptation to sell out for temporary advantage at times of apparent prosperity. This is what happened here in Manitoba at Pine Falls where the previous worker-owned mill sold out to Tembec back in the 90s. The results were great, I guess, for anyone due to retire in a few years but not so good for those who hoped to work for many years more. On the other hand when other partners such as municipal councils (both in BC and here) or First Nations (as in Pine Falls Manitoba) are involved in the purchase then a limited partnership would obviously be the only way to proceed. Whether it would be possible to have a producers' coop act as the agent for the workers in a holding company position is something that is more than slightly beyond my legal expertise, but it is a solution that comes to mind. If a company is purchased, either outright by a producers' coop or by such in partnership with others, then due care and attention must be paid to the matter of pensions, to reduce the potential friction between older and younger workers. To say the least any pension moneys must be placed in accounts that can survive the dissolution of the original enterprise.
The third caveat that comes to my mind is the incredible cost of the preliminaries. Here in Manitoba the provincial government has determined to throw over a million dollars at studying what should be done with the Pine Falls plant. Personally I am not a great fan of "consultants". In a functioning business the best that can be hoped from the majority of consultants is that they merely take their inflated prices for nothing and do the minimum harm ie that none of their suggestions are taken and have to be undone at great cost in the future. It's very rare that consultants are hired who actually know anything about the business that they presume to put in order. Accountants come far cheaper. That being said, if anyone wishing to hire any "consultant" for the pulp and paper industry needs a piece of advise it would be this. Make sure that said "consultant" speaks Mandarin. If Canada's pulp and paper industry suffers from anything it is that, like the lumber industry in general, it is tied into present markets where buyers in the USA have a death grip on the market prices courtesy of the US government.
All that being said I am still very much in favour of such buyouts, as the obvious path to what I consider a humane cooperative socialism. It is just that they are not a universal panacea, and they have their difficulties.

1 comment:

Anonymous said...

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