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Industry at loggerheads, crisis looming, operator says (11/03)

With no increase in lumbering rates from large companies to help offset the escalating overhead costs, and no sign of the United States reducing tariffs on softwood lumber, Denis Deschamps has resorted to calling an auctioneer to sell his logging equ
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With no increase in lumbering rates from large companies to help offset the escalating overhead costs, and no sign of the United States reducing tariffs on softwood lumber, Denis Deschamps has resorted to calling an auctioneer to sell his logging equipment after three decades in business.

“I’m pretty ready to get out of it now,” Denis Deschamps, owner of 682589 Ontario Inc. Deschamps Logging in Cochrane, says.

“The situation is getting tough. Now we just work to keep people working,”

In his 30 years of business, these are the worst times yet. He attributes a portion of the decline to large forest product giants that have not raised the price of logging contracts for years.

“We are lower than 10 years ago,” he says, referring to the price contracts. Meanwhile the cost of doing business in the bush is approximately 40 per cent higher.

“That is the thing that has to stop pretty soon or everybody is going to go broke.”

Costs, such as insurance rates, environmental and safety regulations and new business practices may have fatally wounded his company.

“The rate of insurance this year went up another 40 per cent. Right now we are right to the floor,” he says, explaining there is no where left to squeeze money from.

Yet Deschamps says he has no choice but to pay the price. Even if his equipment is not working in the bush, he cannot stop the insurance for fear of not being able to get it back.

“Just for my equipment I am paying $115,000 a year just for fire (insurance) on the equipment. So for the months I am not working imagine that’s $115,000 (I still have to pay regardless).”

New environmental rules stipulating the use of wide tires to avoid “rutting,” or creating deep dents in the forest floor, are other factors affecting his business.

Deschamps says each wide tire costs $6,500, and that is without chains. In his back yard sits $160,000 worth of tires just for the skidder.

“You’re talking about machines, you’re not talking about helicopters. If (the ministry) doesn’t want any rutting at all, they are going to have to go with helicopters.”

Even though loggers understand the new regulations are positive moves in the right direction, the bottom line ends up on the logger’s shoulders.

“The new rules in the environment are always on our costs. (Large forest products companies) do not want to be responsible for anything. The responsibility comes directly from us, so it is causing a big problem.”

On top of the costs of abiding by environmental regulations, Deschamps says he also has to pay for employee training.

“Last year just to train a foreman cost me $12,000. I had to send him to school and I had to pay out of my pocket. (Forest companies) don’t want to let the people in the bush if they don’t have training.”

In the last five years forest companies began training and partnering with First Nations. Native people receive logging projects and tender them out to business like Deschamps,’ but as he sees it, First Nations have a lot to learn about managing practices.

“Half the time we don’t get paid. It is really bad and half the time we are losing money. I worked for a year for them and it was O.K. but the last year, jeez, it was a mess. This year was a mess too, we had to work underneath them and they close the road and block roads. My equipment is stopped because of that right now.”

Deschamps says he would like to sell the business and keep the staff of 35 that works for him in the winter employed instead of auctioning it off, but “who is going to buy it?” he asks. “We all have the same problem.”

Richard Descarries, manager of regional communications for Domtar Inc. says he feels for the logging industry, but they too “are just struggling to stay alive right now.”

“Prices are rock bottom, plus the taxes that we have to pay and the only place that we have a certain amount of control is on our costs,” Descarries says.

“So we are trying to keep the costs as low as possible. We are not even making money. We have lost $40 million in our wood sector over the past two quarters.”

Third quarter results are expected to be disclosed to financial analysts Oct. 30.

Ultimately Descarries’ priority is Domtar and says the whole sector is waiting for the U.S. taxes to get resolved so that they can go back to making a profit.

However, “Nobody seems to be able to see any resolution that is going to be satisfactory to everybody in the short term.”




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