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Americans leaving Canada: it's a bad thing; Major U.S. companies with operations in Northern Ontario are moving to South America where labour is cheap and trees grow faster.

Manufacturing jobs in the forest sector are heading to South America where wages are lower, the trees grow quicker and regulations are more lax.

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Terrace Bay's Neenah pulp mill is scheduled to shut down if Buchanan Group cannot reach a resolution with its woodland unions.

Fort James sold the Marathon Pulp Mill to Tembec and in Prince Albert, Saskatchewan, Weyerhauser's pulp and paper mill closed down operations completely last December.

"The Americans are leaving Canada and I don't think we get it," Buchanan Forest Products' CFO Russell York says.

Canada now has to decide whether to pick up the pieces and start again by creating new opportunities from abandoned plants or be left without an industry of high paying jobs, he says.

Buchanan has purchased dilapidated mills before. They have fixed them up, solved the internal challenges and began making a profit. The same can happen in Terrace Bay, but everyone has to have buy-in.

York says the company is still working through the issues of financing, transferring timber licenses and negotiating with the woodland's union.

The union went on strike last January when Neenah Paper Inc. wanted to reduce wages and benefits to curb operating expenses. Kimberley Clark of Canada (KC), the previous owner, spun it off to Neenah when management realized the plant could not afford to run in a cost-effective manner, York says.

Over the years, the mill provided employees with defined benefit pension plans, something other woodland operators in the industry do not have. KC gave into employee demands to meet market demands.

Now "Terrace Bay is in the highest cost quartile," according to a Price WaterhouseCoopers report, York says.

But Buchanan has an expansion plan that would allow Terrace Bay to become self-sufficient in three years and another plan to reduce wood costs.

"You add those two items up and we can go to the bank and the provincial government can obtain financing for this major capital expansion. This is what we are trying to do, yet there are certain people who are not prepared to do their bit."

When Buchanan announced it would purchase the mill, the woodland union workers refused to accept pay, benefit or pension adjustments.

Buchanan received an extension from Neenah to come to some resolution with the union, but the clock is ticking.

"At some point we have to decide what our options are," York says.

"If they don't understand the situation today, how are they going to understand down the road?"

Previous owners were asked to make energy infrastructure investments. They declined, yet Buchanan is prepared to reinvest into the plant with some of the funds from the softwood tariffs.

"We can solve the problem; we have a solution. That plant has been viable (before) but people over the years have been spoiled and the people know it. Ninety per cent of something is better than 100 per cent of nothing."

He says the bottom line is "you gotta change, guys."

One need not look any further than Kenora to see the consequences of opposing change.

There, the same union had the same issue with Abitibi Consolidated. The company had a recovery plan, and the employees voted it down. Abitibi closed the plant.

"Make you choice."

By KELLY LOUISEIZE

Northern Ontario Business
COPYRIGHT 2006 Laurentian Business Publishing, Inc.
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Title Annotation:SPECIAL REPORT: FORESTRY
Author:Louiseize, Kelly
Publication:Northern Ontario Business
Geographic Code:1CANA
Date:Jul 1, 2006
Words:545
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