As a rule, when a cabinet minister speaks publicly about a private sector company’s significant financial problems, things are not good.
Natural resources minister Jerome Kennedy told the world on Friday and Saturday that Corner Brook Pulp and Paper Limited had a heavy bank debt and an unfunded pension liability of about $80 million. Kennedy said the mill that hasn’t made money since at least 2006.
Things are so bad that Kennedy that he expected Joe Kruger was coming for a meeting to tell the provincial government he was closing the west coast paper mill.
So why was Kennedy gabbing about stuff he’d known about for some time but kept to himself?
Well, we know Kennedy wasn’t alone. Premier Kathy Dunderdale hinted at the same sort of thing on Thursday in the House of Assembly:
In this effort to try and save Corner Brook Pulp and Paper, preserve the jobs in that region, Mr. Speaker, and help contribute toward a sustainability plan, there is a role for the union, there is a role for the employer, and there is a role for government, Mr. Speaker. Everybody needs to get to their piece sooner than later because banks are waiting.
Both Dunderdale and Kennedy said last week that they were waiting until the company and the unions worked out a new collective agreement. If the two managed to work that out, then the provincial government would see what it could do to help.
What makes Kennedy’s comments bizarre is that he criticised federal member of parliament Gerry Byrne for holding a meeting in Corner Brook on Sunday to give people the chance to talk about the problems facing the meeting. Kennedy poured out a can of gasoline and tossed a match on top as he accused someone else of pyromania.
As the Telegram reported,
Kennedy said holding the meeting is “irresponsible” and would just “inflame” an already precarious situation.
“I don’t feel it’s appropriate for anyone to be inflaming this present situation,” Kennedy said. “This situation affects the families, the workers, in general the members of the Corner Brook community and the forest industry in this province as a whole.”
Maybe someone in the Confederation Building thought Kennedy could scare the Corner Brook workers into caving in to Kruger’s demands. Sure, and given the string of political successes the provincial government has been having lately, that sort of nonsense could well be what drove Kennedy to the microphones.
You see, Kennedy’s revelations fit with recent comments by Memorial University economist Michael Wernerheim. He said that subsidies to mills like the one at Corner Brook just don’t work. As CBC reported, a report Wernerheim authored concluded that “the government has given Corner Brook Pulp and Paper about $42 million in direct financial assistance over the last four years, which amounts to a wage subsidy of about $12,000 per year per worker.”
The sort of things Kennedy said government is thinking about, including loans, are just another form of subsidy. Not surprisingly, Wernerheim said last week that he thought the sorts of things the government is considering are unsustainable.
Taking all those things together, it wouldn’t be too hard to imagine a situation where the workers decided against any concessions that would merely delay the inevitable, namely the mill closure. Kennedy’s comments could easily clinch that outcome, even if that isn’t what some genius somewhere inside the Confederation Building imagined.
The choices in that scenario would be good ones for the provincial government and, in the long run, for Corner Brook. For the province, it would end a raft of subsidies that would only get bigger if the mill stayed open. The goal for the provincial government in the case should be, as Wernerheim suggested, to secure the pensioners’ future and to give workers a decent shot at finding new work.
The biggest bonus for taxpayers would be the death of the Muskrat Falls project as it is currently fashioned. Without the Corner Brook mill, there’s not even an imaginary need for Muskrat Falls to feed the island. If miners in Labrador need electricity, then they can pay for the development themselves, if they can’t figure out a more economical way of powering their operations. Taxpayers in the province won;t be forced to bear billions of dollars in debt and high electricity prices to subsidize industries in their own province and consumers in Nova Scotia.
No matter what happens, it looks like the people of Newfoundland and Labrador are looking at the end game for the paper industry in the province. Jerome Kennedy’s news of just how bad things are in Corner Brook may prove to mark the transition to that final phase for an industry that lasted about a century.