CORNER BROOK, N.L. – The fate of a financially troubled paper mill on Newfoundland’s west coast is now in the hands of its employees, the CEO of Kruger Inc. warned Tuesday in a letter.
The letter, addressed to the workforce at Corner Brook Pulp and Paper, openly appeals to unionized workers to ratify a new contract, which includes a wage cut and pension changes.
“A vote against our proposal would be a vote against maintaining the mill,” Joseph Kruger wrote in the two-page letter, which was forwarded to media by the Montreal-based company.
“Conversely, a favourable decision on your part will potentially benefit a lot of people in Corner Brook, starting with yourself and your family… .”
More than 300 workers at the province’s last remaining paper mill vote Thursday on Kruger’s final offer. Kruger has set a deadline of Friday to accept the deal after it walked away from negotiations last week.
Local 242 of the Communications, Energy and Paperworkers union hasn’t given any recommendation to its members on how they should vote.
Bruce Randell, president of Local 242, said workers already understand what’s at stake and it is difficult to predict whether Kruger’s letter will have any sway.
“I believe that everybody is intelligent enough to know that they’re voting on a proposal, that they got to make a decision,” he said in an interview.
“They understand the importance of it.”
The restructuring of the firm’s pension plan has been a stumbling block in the negotiations. The company has said the mill needs 10 years instead of five to pay back a pension deficit.
In his letter, Kruger described the mill’s financial situation as fragile, saying it has not turned a profit in five years and has defaulted on loan agreements since the last quarter of 2009.
Global demand for newsprint has steadily fallen in recent years, shutting down two other mills in the province in Grand Falls-Windsor and Stephenville.
Kruger said labour costs at the mill are the highest in North America and the wage cut contained in the contract is a necessary step toward keeping the mill running.
“You must realize that I resent having to ask employees to make this kind of sacrifice because it means that the situation of the mill is beyond critical, despite the fact that we have invested over $800 million in this operation since acquiring it in 1984,” he wrote.
He said the collective agreement is identical to labour contracts ratified by most newsprint mills in Eastern Canada.
Beyond ratification of the contract, Kruger said the mill must also reduce its manufacturing costs, improve productivity and establish more efficient work practices while investing in equipment improvements.
A sustainability plan will also have to be presented to the operation’s lenders.
“If we do not succeed in meeting these conditions, we will be unable to refinance the company and to fund the substantial pension plan past service costs required in 2012,” Kruger wrote.
On Monday, Premier Kathy Dunderdale said her government is willing to discuss help for the mill, but she ruled out direct operating subsidies.