To all Corner Brook Pulp and Paper Employees,
In the next few days you will be asked to vote on a collective agreement proposal which we submitted after an intense bargaining process that ended June 15.
In fact, you will not only be voting on a labour contract proposal, but you will be deciding whether or not Corner Brook Pulp and Paper has a future.
This is a tough choice that will have an impact on your livelihood, as well as on the entire community.
Therefore I think it is important to go over the reasons why we find ourselves in this situation today and why we need your support and commitment to keep this Mill in operation.
As you already know, the financial situation of Corner Brook Pulp and Paper is very fragile. Together, the declining demand for newsprint, the high value of the Canadian dollar and the challenging economic environment have seriously affected its financial performance over the last five years.
In addition to these challenges, the fact that CBPP has higher operating costs than most paper mills in North America has created a significant disadvantage for our Mill. Because of this combination of adverse factors, the mill has been defaulting on its loan agreements since the last quarter of 2009.
During the last 12 months, we have had to work relentlessly and negotiate with our lenders to avoid the irreversible damages that closing the mill would have caused to the Corner Brook community. But CBPP has not turned any profit in half a decade and we have now reached a point where we will not be able to refinance the Company unless we meet three essential conditions.
The first of these conditions is the ratification of a collective agreement modeled on the one that was reached by our main competitors in Eastern Canada. Our proposal is in fact a carbon copy of the labor contract ratified by most newsprint mills in Eastern Canada. It is designed to provide our Mill with a competitive wage structure similar to what our competitors have achieved; nothing more and nothing less.
The next requirement will be the application of funding relief measures to our pension plan liabilities.
Then, after we meet those first two conditions, we will have to submit a sustainability plan to our lenders, demonstrating that the mill can be viable in the future.
In order for CBPP to survive, it has to be competitive on the basis of Total Delivered Cost, which represents how much we have to disburse to manufacture our products and deliver them to the world markets. Although the Mill has a definite advantage when it comes to the cost of electric power, it is completely offset by our higher distribution costs to reach our markets.
If you consider the fact that CBPP’s labour costs are the highest in North America, the only conclusion to be drawn is that this operation cannot be competitive unless we settle on a labour contract that will level the playing field with the rest of the industry.
To reduce our manufacturing costs further, the mill will also have to improve its productivity and reliability, on the one hand by establishing more efficient work practices and, on the other hand, by continuing to invest in equipment improvements and maintenance. I am very much aware that our proposal means accepting a wage reduction. And I also know that employees do not like the idea of wage concessions any more than a company wants to incur losses. But that’s the reality we are facing today.
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.
At this point, all of us — employees, Management and owner — must come together and demonstrate our commitment to the future success and competitiveness of the mill and thereby convince our lenders to continue supporting CBPP.
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. Essentially, the fate of the Mill is now in your hands.
What we are asking of you and your colleagues is to ratify a collective agreement that is line with the competition’s and consistent with the new industry standard.
When you vote on our proposal this week, please keep in mind that we are all working towards a common goal, that is, to ensure a future for Corner Brook Pulp and Paper.
A vote against our proposal would be a vote against maintaining the Mill. Conversely, a favourable decision on your part will potentially benefit a lot of people in Corner Brook, starting with yourself and your family, as well as our retirees and all pension plan members, not to mention all the businesses and workers that directly or indirectly benefit from the mill’s economic activity.
In fact, to put things bluntly, as the unique shareholder of the Company, I will be the very last person to benefit from maintaining CBPP. Just as I have had to support the mill through the crisis these last few years, I will have to continue absorbing its losses until we succeed in making it more competitive and until we restore the solvency of the pension plans to an acceptable level.
I am absolutely ready to assume that risk and to commit to the future of CBPP if I feel that I have the support and commitment of all our employees.
Sincerely, Joseph Kruger II