The Canadian and Ontario governments must show stronger leadership, reduce corporate taxes and stop over-burdening business with “silly” regulations, says Tembec president and CEO Frank Dottori.
If not, it could mean an exodus of companies from Canada.
“Northern companies are bleeding to death,” says the straight-talking head of Canada’s third largest pulp and paper company.
Major challenges to his and other natural resources-based companies include wood shortages, skyrocketing energy prices, a too-high Canadian dollar that hurts exports and the softwood lumber dispute with the United States.
Dottori addressed some of the key issues crippling Northern Ontario’s forestry industry before over 100 business people and economic development officials at Sudbury’s Cambrian College Jan. 12.
His speech was the second of the joint Northern Centre for Advanced Technology (NORCAT)-Northern Ontario Business Opportunity Series business breakfast meetings.
“This event brought together suppliers and a major player in the forestry industry,” said Northern Ontario Business publisher Patricia Mills.
“It was a prime opportunity for representatives from local businesses to meet face-to-face with Tembec’s president, and to find out about the industry’s current and future needs.”
NORCAT and Northern Ontario Business joined forces last year in order to create the NORCAT/NOB Opportunity Series, which helps raise awareness of regional, national and international opportunities for equipment and service suppliers based in Northern Ontario, through a series of industry-focused forums.
Twenty years of mismanagement in forest planning and over-exploitation of wood supply with sawmills in every Northern community have placed pressure on the natural resource and has created problems that are now “coming home to roost.
“And nobody’s got the fortitude to say no. It’s better to have one or two facilities that run efficiently than have ten that go bankrupt.”
Market conditions recently forced Tembec to restructure five of its sawmills in northeastern Ontario, cutting some jobs and creating new value-added positions for a proposed Kirkland Lake finger joint mill.
Dottori says wood costs in Ontario and Québec are among the highest in the world, right behind those in Japan and Germany.
Tembec pays $165 a tonne for wood chips delivered to their mills because of poor forest management planning, he says.
In facing stiffer global competition from low-cost saw log producers in countries such as Brazil, Tembec has taken to shutting down their pine operations in Ontario and Québec to import logs from their Chilean operations at half the cost.
“That’s the kind of crisis Ontario and Canada is facing and we need some (government) action plans.”
Dottori wants an overhaul in Ontario forestry guidelines from Toronto and an elimination of the federal capital tax on investment from Ottawa.
“Canada is the only developed country in the world where, if you invest, they tax you. In most other countries they give you an incentive.
“We’re overtaxed.”
He calls Ontario’s electricity rates “disgraceful” at close to $70 per megawatt hour, and cautions against the McGuinty government’s pledge to shut down coal-fired plants by 2007 until a suitable alternative is found.
Not sold on wind power’s potential, Dottori says there are better energy opportunities in the forestry industry through biomass and bioenergy. He pines for some of the government funding programs aimed at encouraging cities and First Nations communities to develop green energy sources.
“Give us the grants...I can generate power from biomass at $42 (per megawatt hour).”
Battered by currency issues and competing against cheaper, more efficient foreign producers, Dottori says forestry companies must focus on value-added products.
There remain many opportunities for entrepreneurs and small companies to make specialty products that big firms can’t afford to make.
“You’re either big in the commodity business or small in the specialty business. If you’re in between, you’re dead.”
He also urged the Canadian government to get tough with the U.S. on the ongoing softwood lumber dispute.
Tembec has paid $240 million in lumber duties to U.S. in the last 30 months, costing his company the equivalent of about $400 million in lost opportunities. Nationally, it’s resulted in $3 billion in lost investment and job creation.
“I don’t see why as Canadians we have to roll over.
“I've just been mugged and I’ve got to go negotiate with the mugger. I can’t buy that. I think our government is letting us down. They’re not defending us.”
The industry needs greater labour flexibility to operate more competitively on a global scale and needs to include First Nations in revenue sharing arrangements.
Last year, Tembec shut down 20 per cent of their operations because of blockades by Aboriginal peoples.
“I think the First Nations have got to get up and start controlling their own destiny. If we’re shut down, nobody gets anything.”
Dottori is hopeful of a Tembec announcement by month’s end to “open new ground with First Nations and try something different.”
