Pensioners from Catalyst Paper's British Columbia mills in Port Alberni, Crofton and Powell River play integral role in convincing province to approve reduced costs to company's pension plan, part of 11th-hour deal allowing Catalyst to continue operations

NANAIMO, British Columbia , July 4, 2012 () – Retired employees at Catalyst Paper mills on Vancouver Island were the driving force behind a restructuring deal that will keep the beleaguered forest company afloat.

Pensioners from Catalyst mills in Port Alberni, Crofton and Powell River were integral in the discussions that convinced the province to approve reduced costs to the company's pension plan.

It was part of an 11th-hour deal between the company and its creditors that became the accepted strategy to reduce its debt from $650 million to $250 million and allowed Catalyst, and its approximately 7,000 Island employees, to continue operations.

Workers taking the initiative to ensure the continued operations of local mills during the ongoing global downturn in the forest industry is not new to the region. Employees at the Harmac pulp mill in Nanaimo decided to combine forces and joined a number of private investors to become part-owners of the mill and prevent its closure after its parent company, Portland's Pope & Talbot, went bankrupt in 2008.

However, analysts agree that the ongoing struggles in B.C.'s forest industry will likely continue, at least for the short-term, despite enterprising and entrepreneurial moves by forestry workers to revive and restore individual mills.

Kevin Mason, an industry analyst with Vancouver's Equity Research Associates, said it's noteworthy that Catalyst's retired workers decided to "have a voice" and were willing to get involved in the process to save their pensions, albeit at reduced rates, and the company itself.

However, Mason said similar scenarios and many other B.C. mills are unlikely.

"Some mills and their workers can sacrifice all they want and there will still be no pot of gold at the end of the rainbow because the markets for their products continue to suffer," he said.

"While some domestic markets for our forest products are starting to look encouraging, the export market continues to plummet. The industry is far from being out of the woods yet."

It has been a difficult five-year stretch for Nanaimo's struggling forest industry.

The collapse of the American housing market in 2007, the main market at the time for most of the province's forest exports, hit local saw and pulp mills hard.

A series of work curtailments, shutdowns and the layoff of hundreds of local forestry workers followed and many mills are still working with skeleton crews on minor contracts until market conditions improve.

The successful relaunch of the Harmac pulp mill, with its new worker-led ownership model, in 2008 was widely seen as one of the few bright spots in a battered industry.

Harmac president Levi Sampson said, while the model may work for Harmac, he agreed that the mill's accomplishment may not be easily replicated with other forest companies.

He said that in the case of Catalyst and many other of B.C.'s forest companies, employees may not be able to buy into their companies "in any meaningful way" due to their enormous debt loads.

Sampson said Nanaimo Forest Products, consisting of the workers and private investors, were able to buy the Harmac mill for just $13.2 million and that allowed the employees to invest into a big stake of the mill.

"The worker-led model has allowed us the ability to decrease our costs and still be internationally competitive in these hard times," Sampson said.

"While all companies are different and face their own challenges, I'd recommend our model to anyone. In my view, the success with many forest companies these days lies in a ground-up approach with significant investment from the workers."

Arnold Bercov is the president of the Pulp and Paper Workers' Union Local 108, which represents employees at Harmac and at Western Forest Products' sawmill in Ladysmith.

He said that while he's optimistic that the local forest industry will eventually recover, he doesn't necessarily see its revival coming as a result of drastically changing the structure of B.C.'s forest companies.

"There are so many factors to consider, including the fact that the Chinese and European economies are stuck in neutral right now and it's a struggle for everyone to survive until there's an upturn in the industry," he said.

"But I do think things will eventually get better. We have the best wood basket in the world and we're geographically positioned on the water to take advantage of the markets when they recover."

Mason said the demand for B.C.'s wood products is still shrinking and, with changing markets, he wondered if it will ever regain its vibrancy.

"It's a fact that people are switching away from news print and are increasingly turning to mobile devices for their information," he said.

"We're seeing quite a shift in the market as people's habits change and that means demand for many of our wood products continues to shrink."

NANAIMO MILLS

Number of employees at Nanaimo's mills

800 Approximate number of workers at Western Forest Products' two city mills in 2008

300 Approximate number of WFP workers currently at the two mills

525 Approximate number of workers at Harmac pulp mill in 2008.

300 Approximate number of workers now at Harmac.

160 Approximate number of workers at Coastland Wood Industries.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.