Conflicting interests: a Newfoundland case study

In the industrialized world there is a constant conflict between companies’ interests, which seek profit maximization and efficiency, and workers’ interests in job security, secure working conditions and dignified salaries among other things. This section addresses this conflict of interests from the perspective of the community of Stephenville, a community that lost over 200 jobs with the closure of its paper mill industry in 2005.

Since 1943 the community of Stephenville evolved from being a farming and fishing village of only 400 inhabitants, to become the US most important military base overseas for aircraft refueling(1). Then, in 1973, the Labrador Linerboard Limited,  a project initially proposed by Joey Smallwood in 1955 , opened to help overcome the economic distress in Stephenville caused by the closure of the US military base. In 1978, after the government had lost $155 million due to bad investments, fraud, mismanagement and transportation cost-overruns, the paper mill was sold to Abitibi Paper Company(2).

In 1981 the Stephenville mill reopened and operated for 21 years until 2005 when it announced that it would close permanently its operations in Newfoundland due to high electricity and operational costs(3). Prior to that, in 1995, the Stephenville paper mill and the Grand Falls paper mill had achieved the highest efficiency rating for paper consistency and thickness, which made them ideal producers for the international market(4). Yet, over time running the paper mills in Stephenville and Grand Falls had become costly and no longer profitable for the company. This created a conflict of interests between the company, who wanted to close its operations in Newfoundland in order to keep high revenues, and the community who wanted to keep their jobs.

In many instances, when there is a conflict of interests between the companies interests’ and the workers interests, the government ends up bailing out companies with tax payer’s money. It is alleged that this prevents greater problems from happening like economic meltdowns and people don’t lose their jobs; yet, this may only prolong the painful process. Abitibi had requested from the government immediate assistance on the electricity cost as well as unlimited supply of wood from Labrador to continue its operations in Newfoundland(5). In order find solutions  a ministerial working group, including union leaders, was established in 2004,  yet this initiative was unsuccessful.

The government had directed Newfoundland hydro to renew Abitibi’s electricity contract while providing them rebates totalling $2.3 million/(5). However, the access to wood remained an issue since the government was not prepared to provide Abitibi with unlimited access to Labradorean wood (5). The company’s approach had other scope to undercut expenses. In a meeting held in October 2005, management officials had offered to union labour officials alternatives of wages freezes and the ability to contract out work in exchange for not shutting down the mill; this was ultimately refused by the union (6). And so, in December 14th, eleven days before Christmas, while the community of Stephenville was recovering from a flood that caused millions of dollars in damages, 260 workers lost their jobs (7).  Some of the workers had been in the mill for more than 40 years, and families were divided. The repercussions not only affected the Town of Stephenville but also the provincial economy, with an estimated $70 million in lost economic activity and wages (7).

– Perla de Abril Hernandez Gonzalez

 References

  1. Town of Stephenville. “Economy”. Town of Stephenville. 14/11/2011.
    http://www.townofstephenville.com/general/economy
  2. Martin, Melanie. “The Third Mill: Labrador Linerboard Ltd., 1973-1977”. 12/11/11
    http://www.heritage.nf.ca/law/linerboard.html
  3. Newfoundland and Labrador Heritage. “Labrador Linerboard”. 12/11/2011
    http://www.heritage.nf.ca/society/stephenville/labrador.html
  4. Executive Council, Government of Newfoundland and Labrador. “Abitibi Price”. 12/11/11
    http://www.exec.gov.nl.ca/exec/publicat/economy/abitibi.htm
  5. Byrne, Ed. “News Releases, Government of Newfoundland and Labrador”.
    http://www.releases.gov.nl.ca/releases/2005/nr/0316n07.htm
  6. CTV News. “Union Won’t Budge to Save NL Abitibi Paper Mill”. 15/11/11
    http://www.ctv.ca/CTVNews/Canada/20051021/stephenvillemill_concessionsrejected_20051021/
  7. Ryder, Amanda. “Three Towns: Stephenville”. CBC News. 13/11/2011.
    http://www.cbc.ca/news/threetowns/stephenville-1.html
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s