22 March 2009

Whose side will they be on in an Abitibi bankruptcy?

The provincial government may find itself in a fight with AbitibiBowater pensioners in the province very shortly, as a direct result of the expropriation bill forced through the legislature last December.

If the paper company is unable to come to an arrangement with the creditors, it will likely have to file for bankruptcy protection.

One of the biggest creditors looking for cash will be AbitibiBowater retirees, including people who are retiring at the end of the month or who already have retired from the paper mills at Stephenville and Grand Falls-Windsor. There’ll also be a bunch looking for severance but that’s another matter.

That’s where the expropriation comes in.

The provincial government expropriated the company’s most lucrative assets – the hydro bits – in anticipation the company might go bankrupt.  Rather than let the trustees sell off the assets, the provincial government probably figured they could get the whole thing for nothing.  If the company sued, the thing will take years in court anyway.   In the meantime, the company is faced with the huge cost of the environmental clean-up at the mill.

The government gets the sweet bits and the company gets the bile. The people back the government.  Everybody is happy.

Well, not exactly.

There are those Abitibi pensioners.

They’ll be one of the Abitibi creditors looking to the trustee to sort out the company financial state and secure them some cash.

In the event the company files for bankruptcy protection, you can guarantee that the trustees will come looking for every nickel they can find. If the expropriation lawsuit was doubtful before, under a bankruptcy scenario, you can guarantee that all those creditors will want their cash.

Creditors that include the pensioners.

People from Newfoundland and Labrador.

Suing their own provincial government for their own money.

Wow.

So which side will the provincial government be on:

The pensioners…

or its own?

-srbp-

9 comments:

WJM said...

Or, from Our perspective, which side will the pensioners be on?

Their more-for-me-please rants?

Or Ours?

D'Arcy said...

Let's not forget that the Provincial Government is not looking for something for free through the expropriation process, simply what is due the people of Newfoundland and Labrador. The deal was resources in exchange for jobs. Stop providing jobs, and lose access to the resources. The goal of the government is to come to a resolution in this matter whereby both sides is happy; namely 1) Abitibi-Price will get something close to fair market value and 2) the province gets to retain the rights and hopefully create some jobs in the process.

It's about time a government stands up for the rights of its citizens rather then simply rollover and take it from yet another corporation who has made massive profits on the backs of its workers.

Edward G. Hollett said...

Thanks, D'arcy.

You did an excellent job of not only reciting provincial government talking points around here but also slipping in an actual provincial Conservative talking point with that last bith of blather about "standing Up".

Bravo.

Well done.

Let's see if any of it stands up, though.

"Stop providing jobs, and lose access to the resources."

Since the company didn't actually stop providing jobs when the expropriation took place, how do you reconcile that?

Since Star Lake was still going to provide jobs, how come it was expropriated?

Since the power assets could have still provided jobs, how come they were expropriated?

"The goal of the government is to come to a resolution in this matter whereby both sides is happy; namely 1) Abitibi-Price will get something close to fair market value and 2) the province gets to retain the rights and hopefully create some jobs in the process."

Do you have anything you can cite to indicate that any of that is even vaguely true?

Even the Premier never said anything of the sort at the time of the expropriation last December.

D'Arcy said...

HI Ed,

While my points may be in common with our current Conservative government, do not for a moment assume that I am a supporter of their government.

Truth be told, I am an ardent supporter of the left, and a staunch union supporter, who believes that resources, such as timber and water rights, forever will belong to the people first. In my humble opinion, the state should merely be a tool for the people in that same fashion as unions are a tool for the use of the workers. There to ensure that the people are not being taken advantage of in a situation with grave power dynamics.

Further, do not assume that I am a supporter of state owned industry. I have seen how poorly that has been done in other places. I am a strong believer in private enterprise, as it has been proved time and again that private enterprise is the best way to extract maximum profit.

Ideally, I would prefer to see resources values considered from a much broader perspective, and viewed as an investment in a business, rather then something simply for the use by foreign companies, who can pick up at a whim and walk away from a larger number of employed people. Why not view resources such as timber as a capital investment into a company?

Now, to address your points:
Since the company didn't actually stop providing jobs when the expropriation took place, how do you reconcile that?
* While the legislation has been introduced and passed, the expropriation has yet to be completed. Negotiations are continuing to determine the true value.

Since Star Lake was still going to provide jobs, how come it was expropriated?
* As I see it, it was part of a deal in order to operate the mill. Why get the gravy for free if you are not going to bother with the main entree?

Since the power assets could have still provided jobs, how come they were expropriated?
* see above

"The goal of the government is to come to a resolution in this matter whereby both sides is happy; namely 1) Abitibi-Price will get something close to fair market value and 2) the province gets to retain the rights and hopefully create some jobs in the process."

Do you have anything you can cite to indicate that any of that is even vaguely true?
* While I am not prepared to out my sources, I can say for certain that negotiations are continuing with the eventual goal of a scenario whereby all parties are happy, and a NAFTA challenge is avoided. This is viewed as a likely outcome should Abitibi not be satisfied, and a scenario the government very much wishes to avoid.

Finally, while it is your blog, and obviously many people read it, your tone to my comments is rather juvenile. We are all entitled to our own opinion, and you obviously dislike the current government, you seem rather presumptuous about my own opinions. It appears to me that more and more each of us has become more cynical, and prepared to dismiss others comments when they do not match our own. Why not look to the positive in someone's ideas and try on improve on them, rather then just point out the perceived faults.

Edward G. Hollett said...

D'Arcy:

You may not like the tone but when a comment consists of nothing but talking points, (or unsupported propositions) don't expect it to be met with too much seriousness.

That said, let's deal with your points:

** While the legislation has been introduced and passed, the expropriation has yet to be completed. Negotiations are continuing to determine the true value.**

The expropriation was to take effect from the time the bill passed.

What you refer to as negotiations are apparently nothing close to negotiations as most people would understand them.

The expropriation bill sets up an entirely new process compared to the one in the existing expropriation legislation. This new one makes cabinet the sole arbiter of the value. That's hardly a fair process nor is it one that is in any way intended to determine a "fair value".

** As I see it, it was part of a deal in order to operate the mill. Why get the gravy for free if you are not going to bother with the main entree?**

Star Lake wasn't supplying power to the mill.

** While I am not prepared to out my sources, I can say for certain that negotiations are continuing with the eventual goal of a scenario whereby all parties are happy, and a NAFTA challenge is avoided. This is viewed as a likely outcome should Abitibi not be satisfied, and a scenario the government very much wishes to avoid.**

For someone who claims not to be necessarily a supporter of the current administration you do a good job of speaking for them, giving us their intentions which, as you descibe it, are very different from what has been in public thus far.

If the government wished to avoid a NAFTA challenge and arrive at an arrangement whereby by all would be happy, then they needn't have rammed the expropriation bill through the House in the first place.

**Further, do not assume that I am a supporter of state owned industry. I have seen how poorly that has been done in other places. I am a strong believer in private enterprise, as it has been proved time and again that private enterprise is the best way to extract maximum profit.

Ideally, I would prefer to see resources values considered from a much broader perspective, and viewed as an investment in a business, rather then something simply for the use by foreign companies, who can Why not view resources such as timber as a capital investment into a company?**

That's a rather interesting proposition since it is inherently contradictory. Private enterprise is favoured in general, in your first proposition, then it is disfavoured with the assetion that "foreign" companies can "pick up at a whim and walk away from a larger number of employed people."

In private enterprise business operations are intended to be profitable. If they aren't profitable, then they would have to be changed until they are profitable or closed.

That seems to me to be essentially what happened in Grand Falls-Windsor yet when the private enterprise makes a decision it is characterised in some sort of sinister terms.

I don't quite follow how you reconcile those two contradictory ideas.

D'Arcy said...

Hi Ed,

listen to the news. Talks have broken down between the two, i.e negotiations as I suggested. Confirmed by both parties.

As far as reconciling what seems problematic to you. I am for private, not free enterprise, i.e. heavily regulated industry which must benefit all who work for it, not just shareholders. An example would be to make all businesses co-ops where the employees then have a stake in the businesses success as well as a voice in its operations.

Edward G. Hollett said...

I do listen to the news. That's why I questioned your idea as to what government's intention was and what constitued negotiations.

What is the difference between private enterprise in your arrangement and a state-owned monopoly?

Who gets to determine what "the benefit of all" is?

D'Arcy said...

The difference being 1) state owned monopolies are monopolies with the premise being that these monopolies benefit all citizens. All decisions are made by central planning agency or bureaucrats who are not employed by the business. Thus, they have little at stake and often are less concerned with its success. Further, many state owned industries tend to become bloated and must create further profits to support a bloated "managerial class". Further, with no competition, there is no need to ensure maximum profitability.

Co-operatives on the other hand are owned by all those employed. As an example, the most profitable airline in this country is Westjet, a company where all employees are share holders. As such, they now have a voice in the management of the company, and an interest in ensuring that it is as profitable as possible. We need to start valuing those at the bottom recognizing that without them, the company can do nothing.

Heavily regulated industry does not have to mean monopolies. One need only look to the Canadian banking system, one of the most heavily regulated in the world, and now one of the most profitable and secure, not to mention the darling of the G20 to see that regulation does not have to limit profitability.

Further, one need only to look at the world of deregulation in the western world to see the horrible effects that it has subjected to many of underprivileged classes. Marx wrote much on this. It is my belief that labour power should be viewed as an investment into a business rather then simply another commodity to be bought and sold at the lowest price. I recognize that investors are risking their capital by investing it into a business and thus are eligible for profits, but I ask why we do not see the risk that employees make when investing into the development of the business? Why do we not reward these "investors" in the same fashion? If the company fails, these "investors" are left with little.

It is my firm belief that we must move past all the existing paradigms of business and government. It is time to recognize that it is possible for us to take care of the lowest, while ensuring rewards to those willing to risk it all, and creating a much more level playing field for all.

I do not presume to know all the answers, but I am very willing to engage in a debate of ideas to try and improve the lot of all.

Edward G. Hollett said...

Thanks D'arcy for explaining that. I was genuinely trying to figure out what you were driving at. Not saying I agree with you on everything, but the ideas are interesting and worth some discussion.

Let's see if anyone wants to discuss them.