Newfoundlanders and Labradorians got a vivid example on Thursday of the Orchestra Pit Theory of Political reporting.
For those who don’t know the story, the Orchestra Pit theory goes like this: two politicians are on the stage. One announces a cure for cancer. The other falls into the orchestra pit. The media will cover the guy in the pit.
Well, the guy in the pit on Thursday was Brad Cabana.
"It can be a loan, it could be cash, it could guarantees but you know that we've made it clear we are not going to fund operational losses."Well, you’ve got to admire a guy who is willing to spend public money to help out a bunch of people going through a hard time.
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?
Not surprisingly, Kruger issued an ultimatum on Tuesday to workers at its Corner Brook mill. CBC quoted the message from the company to the union in an online story:
"The first step to go forward will be to obtain a firm committment [sic] from employees by achieving a satisfactory agreement that will allow CBPPL to be competitive in the market," said the Kruger statement.
"Given the critical situation of the mill, this collective agreement will have to be reached by June 15 so that we can quickly move on to the next crucial step, which will be to submit the pension plan funding relief measures to a second vote and hopefully be able to apply them before the mill’s situation deteriorates any further."
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As an astute reader pointed out in a n e-mail Tuesday morning, the Hebron-Muskrat Falls connection is not really as important these days as the the connection between the future of the Kruger mill at Corner Brook and the plan to develop the Lower Churchill.
Manitoba Hydro International noted that connection in their review of part of the Muskrat Falls project for the public utilities board. In instance, a relatively modest change in the project cost coupled with the closure of the Corner Brook mill, erased the Muskrat Falls advantage:
Also, should the existing pulp and paper mill cease operations, and its generation capacity be available for use on the system (approximately 880 GWh), and should the capital costs of both the Muskrat Falls Generating Station and Labrador-Island Link HVdc projects increase by 10%, the CPW for the two Options would be approximately equal.
Nalcor has no export markets for most of the electricity from Muskrat Falls.
Dunderdale said she expected there would be a second vote on the pension restructuring plan.So while the pols are laying on the tough talk in a fairly obvious effort to sway the mulligan vote, what the rest of us should wonder is how much public money the politicians plan to pour into the mill to keep it running.
Once those issues are resolved, she said, the government is committed to stepping in to ensure that the mill is sustainable.
Kruger, the owners of Corner Brook Pulp and Paper, are reassessing the viability of the mill in the west coast city on Friday after unions at the mill rejected a company proposal to restructure the company’s pension plans.
In a statement issued Friday, natural resources minister Jerome Kennedy said:
We are facing a grave situation, one which could potentially lead to the closure of Corner Brook Pulp and Paper Limited. Kruger is now reassessing the viability of its operations in Corner Brook. This obviously could have very serious ramifications for the employees and the entire Corner Brook area.
The provincial government wants the company and the unions to negotiate a settlement to the dispute.
Built in 1923, the mill at Corner Brook was the second paper making operation in Newfoundland after the Anglo-Newfoundland Development Corporation mill at Grand Falls. AbitibiBowater announced that it would close the mill at Grand Falls in 2008. The provincial government expropriated the mill and all of AbitibiBowater’s assets in the province before they could shut the mill. Ab closed its Stephenville operation in 2005.
The Corner Brook mill is heavily subsidised by the provincial government. It is the largest private sector employer on the west coast of the island.
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An internal Kruger memo leaked to news media suggest that the papermaker is planning to lay off upwards of 135 workers at the company’s operation in Corner Brook.
The memo notes that comparable plants in North America function with 250 employees compared to the 385 current on the books at Corner Brook. The memo also indicates the Corner Brook mill produces paper at $140 per ton compared to $100 per ton elsewhere.
The provincial government heavily subsidizes the Corner Brook mill already.
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While it may have slipped by in the election hoopla on Monday, the people who decided to vote in a CBC online poll made it pretty clear they didn’t like the provincial government’s announcement of millions in subsidies for the remaining newsprint mill in the province.
67% of respondents picked the option “we’re throwing good money in the wrong place.” The second most popular choice (14%) thought the company should pay the money back to the provincial government when it was able to do so.
Only 12% thought it was a good idea. 6.5% felt that subsidies were a fact of life.
Now this is by now means a scientific survey but it should give pause for thought.
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[Michael] Wernerheim has high praise for the province's forest management strategy and for wanting to lay out a new path for an industry in decline, such as supporting smaller operations, like saw mills, and putting a greater focus on forests as ecosystems.
But he found the government spends too much time, effort and money on continuing to support failing ways to protect jobs in the newsprint sector.
"These short-term initiatives to protect jobs can retard the restructuring of the industry that we all want to see happening," he said.
cbc.ca/nl is reporting an economic miracle in Grand Falls-Windsor.
That’s the town where the major private sector employer closed its doors and where the provincial government expropriated the mill and hydroelectric assets.
When AbitibiBowater stopped production at the mill in early 2009 there were concerns the town's economy would tank, but that hasn't happened.
This time last year, construction was started on 16 houses in Grand Falls-Windsor, but by this June, work had begun on 60 new homes in the town.
There’s even a comment in the electronic version of the story, the one that aired on the supper hour news, to the effect that uncertainty about the mill kept a lid on development. Now that things are resolved, as it were, then people are now spending freely.
Well, that’s exactly the same sort of story the Telegram carried back in February; but then, as now, the story looks more like a contrived bit of nonsense rather than a factual appraisal.
Take for example, the thing about housing and a supposed dampening effect before the mill close din early 2009.
As the Telly reported in February, there were 118 housing starts in Grand Falls-Windsor in 2008, but only 50 in all of 2009. You can get links to the Telly story and other details in the Bond Papers post from February.
Based on that, the current number of housing starts in 2010 is only 20% above the 2009 level. And even if the housing starts continued at the same pace and there were another 60 houses built in the second half of the year, that would only match the last year the mill operated.
That wouldn’t be too bad, if it turns out to be correct. But it sure as heck is a far cry from the idea that people are thinking differently now that the fate of the mill is known.
The potential cause for the resurgence - such as it is - can be found in the sources of cash identified in the CBC story:
The town's hospital — the Central Newfoundland Regional Health Centre — is the community's largest employer. It serves people from dozens of communities in central Newfoundland who spend money in Grand Falls-Windsor when they come for health care.
You can add to that a bunch of other government offices moved into to the town under Brian Tobin’s administration and more recently by the Williams’ one. In other words, the town is now dependent on government spending for its major economic activity.
And what isn’t coming from government is coming from migrant labour. That would be former mill workers who are commuting to places like Alberta.
And lastly there’s another source of growth: retirees flocking home after a lifetime spent working on the mainland. Nice as that is, those retirees only add to the burden of an economy where there are fewer and fewer people earning a wage compared to those in the so-called dependent portion of the population.
If you look at it, what you see in Grand Falls-Windsor is not the picture of some sort of miracle but rather of the increasingly fragile nature of the Newfoundland and Labrador economy. No amount of spin from a local car salesman can cover over the very real problems that fragility brings for a beautiful community and for the province as a whole.
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Audio Update: CBC Central Morning Show. Look at around 6:54 for the start. The intro to one section repeats the “housing boom” – complete with the 16 to 59 numbers - evidently because someone forgot to do a simple check of the facts.
"(If it was contrary to what businesses are reporting) you would see it in job losses, you would see it in lack of inventory," [Amy Coady-Davis, chair of the Grand Falls-Windsor town economic development committee] said.
"The turnover is there - it is right in front of your face. You can't fudge those numbers. Sales are up, they have said they're up, you can see that they are up."Well, not exactly, at least if you judge by some numbers included the same Telegram article and which came from no less an authority than the town’s own economic development agency:
According to the economic development office in Grand Falls-Windsor, housing starts are down 50 per cent from 2008 - there were 118 units built then as compared to 53 units in 2009.There you have it.
Gerald Thompson, president of the Chamber of Commerce - which represents 209 businesses in Grand Falls-Windsor - tends to agree with the town's positive outlook.
He said they are getting far more positive feedback from members than negative.
"... Although there's been a number of small businesses that have closed in the last year, we still know that the people that have done business here in this valley, their percentages over last year are up.”Of course, they are up.
You just know things are pretty tense in Corner Brook.
You can tell because the provincial government has been pouring on the happy-talk while over at the city’s major employer, the company operating the paper mill is looking for a 10% wage roll-back from employees.
The latest happy-talk is a hope-drenched a study on the oil and gas potential for the west coast.
According to the official news release, the study was commissioned based on an election commitment from 2003.
That’s okay.
We can wait while you go and check your calendars again.
Yes, it was indeed seven years ago.
The work on this particular report, though, was only done in 2008. Check the dates on some of the consultation sessions; that’s the only way to figure out the timelines for sure since most of the document has been scrubbed of dates. You can hunt around and eventually find the news release that kicked it off, from December 2007.
That would make it a bit more than two years for this study to see the light of day.
After all that time and all that work, the recommendations are stunning:
In a nutshell: fix the roads, spend money on things like education and health care, protect the ecologically sensitive and important bits (like Gros Morne) and “promote” the potential in the area.
They are about as surprising as the recommendations made by the task force that spent 18 months trying to figure out how to keep more young people from leaving the province. Its major conclusion: create work for them so they can find jobs and stay here.
All standard.
All patently obvious.
Nothing concrete and measurable.
Like explaining what is meant by “[e]nsure a regulatory and administrative environment to maximize investment in onshore and offshore exploration and attract industry operators and businesses to the region.”
Maybe there is a tax issue here or problems with issuing permits. You won’t find anything in the report to explain what this means.
And the stuff that appears to be specific - like the suggestion to “twin” selected portions of the Trans-Canada between Port aux Basques and St. John’s as needed – is actually just a confirmation of what has been government policy since 1988. Under the roads for rails agreement, the provincial government used federal cash to do exactly that. And yes, for those who need reminding that would be from the last time the Conservatives formed the provincial government.
So what are these study guys talking about 20 years later?
Not a heckuva lot, apparently, given that any administration at any time can claim:
Look in vain and you will not find a single thing in this 71 pages of pure bumpf is tied to drilling more holes, finding oil and getting it into production.
Things seem to be pretty tense in Corner Brook these days. That’s just as they have been in other towns in this province since 2003 when the major employer found itself in hard financial straits.
What’s most interesting since 2003, though, has not been the problems themselves but how the provincial government has reacted to each development.
The oil and gas study released on Monday seems to be very much par for the course, very much a sign of the times.
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Kruger is talking cuts and concessions at the major private sector employer in the premier’s own district.
So far, not a peep from the provincial government.
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Kruger announced Friday that Corner Brook Pulp and Paper Limited - the only paper mill left in the province - will idle the entire Corner Brook facility for two weeks starting October 12.
The company cites the high dollar and weak newsprint prices as the reason for the shut-down.
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Paper maker Kruger may be getting additional financial help from the provincial government to keep its mill in Corner Brook operational.
There’s nothing new in this. The provincial government has been subsidizing the forest industry for years.
What makes this a bit different is that the area has such strong representation in government.
No one is explaining to forestry workers why subsidies are bad, as fish minister Tom Hedderson did a few weeks ago when people wanted some cash to help out that troubled industry.
Having big guns helps.
Of course, having those big guns a wee bit worried doesn’t hurt either.
You can tell they are worried about local public anxiety about the future of the Kruger operation when a news release appears advising that every provincial politician from the Corner Brook area will be traveling in a pack on Wednesday.
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And sometimes you wonder if the cabinet minister involved doesn’t want to answer or doesn’t know the answer.
Consider this exchange between opposition house leader Kelvin Parsons, natural resources minister Kathy Dunderdale and the future of Corner Brook’s Number 4 machine.
Dunderdale’s been known to be dodgy with the details before. In late 2006, she actually told the House two completely different stories about the Joan Cleary fiasco all within the space of a week. She may have just been stumbling at the time but she wound up – in effect – misleading the House about what was on the go with the hand-picked partisan head of the Bull Arm Corporation and the Public Tender Act.
In the case of Corner Brook, one suspects Dunderdale has avoided any potential embarrassment by learning that the session of the House is called Question Period. No where does it say you have to give an answer.
On May 14, Parsons asked Dunderdale:
What, if any, discussions have been ongoing between government and the company with respect to number four and to ensure that it will re-operate in the future?
Dunderdale’s response:
Mr. Speaker, first of all I have to correct the Opposition House Leader. Thirty people were not laid off. Thirty people were affected. In fact, there has been no job loss. There has been hours of workers on the call-in list affected but there have been no layoffs permanent or temporary as a result of the shutdown of number four.
Now, Mr. Speaker, Corner Brook Pulp and Paper made it quite clear in their announcement yesterday that markets have not improved. In fact, one of their largest customers does not have the need and requires less paper.
SOME HON. MEMBERS: Oh, oh!
MR. SPEAKER: Order, please!
MS DUNDERDALE: So, because of those circumstances, number four will, from a month-to-month basis, continue to be shut down.
At least one paper machine at Corner Brook has been idled since 2007. Dunderdale said at the time the provincial government was pumping $20 million in subsidies into the Corner Brook mill.
Her predecessor, Ed Byrne, announced subsidies for Kruger in 2006 but didn’t reveal the dollar amount involved.
In the latest round of cuts at Kruger, the provincial government is already offering unspecified additional cash to keep the mill going.
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Corner Brook Pulp and Paper Limited announced Wednesday the company will not re-start the Corner Brook mill’s idled Number 4 paper-making machine. The move will result in the loss of 130 jobs.
The move is blamed on deteriorating markets.
The Premier and other members of cabinet met with union officials on Wednesday afternoon at the government’s main office building in Corner Brook.
"There's no numbers put on the table from a perspective of … 'government, give us a cheque for this amount of money.' But [what] we have said is that we're prepared to play our part quite simply as we always have in any of these situations," [Premier Danny] Williams said.
"Our primary concern at these times is always the workers, the workers who are affected right now. And this mill needs to stay viable and competitive and needs to stay alive. And that's what we're discussing."
That tone compares markedly to the confrontational one that characterized government discussions with AbitibiBowater in Grand Falls-Windsor before that mill closed earlier this year.
Corner Brook is represented in the House of Assembly by the Premier and justice minister Tom Marshall.
In a related story, loggers are protesting on the Great Northern Peninsula to draw attention to their plight.
The forestry industry employs between 400 and 500 people on the peninsula.
The protest was called off around midday [Tuesday] to give politicians time to respond to the loggers. [Spokesman Ralph]Payne said Transportation and Works Minister Trevor Taylor, who is the Tory legislature member for The Straits and White Bay North, did call Tuesday afternoon and agreed to meet with the association Thursday, but Payne wants more than that.
“We want to meet with all four of them and that includes Trevor Taylor, Natural Resources Minister Kathy Dunderdale and the two other MHAs from the area, Wally Young (Tory legislature member for St. Barbe) and Darryl Kelly (the Tory legislature member for Humber Valley),” said Payne.
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1. Vale Inco will be cutting jobs from its Canadian operations, including an unspecified number in Newfoundland and Labrador.
2. Kruger, Inc will be reducing production at Corner Brook by 15,000 tonnes in 2009. One of the mill’s machines will be idled for eight weeks.
3. Iron Ore Company of Canada announced it has ceased work on refurbishing at pelletizing plant at Sept Iles.
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A short news release from Kruger on Wednesday confirmed the company will shed 25,000 tonnes of production in the first half of 2009 with the cuts being spread across the company’s three Canadian mills.
KRUGER TO REDUCE NEWSPRINT PRODUCTION IN 2009
Montréal (Québec), January 7, 2009 – Kruger Inc. announced today its intention to reduce its newsprint production by 25,000 tonnes in the first half of 2009. This curtailment will allow the company to re-balance its order book to capacity. The downtime will be spread throughout the Company’s three Canadian mills.
Founded in 1904, Kruger Inc. is a major producer of publication papers, tissue, lumber and other wood products, corrugated cartons from recycled fibers, green and renewable energy and wines and spirits. The Company is also a leader in paper and paperboard recycling in North America. Kruger operates facilities in Quebec, Ontario, Alberta, British Columbia, Newfoundland and and Labrador, in the United States and the United Kingdom and has 9,000 employees.
This cut will affect the mill at Corner Brook but no details were released by Kruger.
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