MADAWASKA, Maine — The United Steelworkers union will take an immediate 8.5 percent wage cut in accepting a new three-year contract Monday that Fraser Papers Inc. management calls critical to keeping the town paper mill going.
About 65 percent of the 460 members of USW Locals 291, 365 and 1247 approved the three-year deal in voting Monday. They didn’t do it happily, said Duane Lugdon, Maine’s USW international representative.
“The members have been running in and out all day voting and expressing their dismay. They don’t consider this a fair deal but they recognize that the company has a gun to their heads,” Lugdon said Monday.
Bill Peterson, Fraser’s human resources department director, did not immediately return telephone messages seeking comment late Monday.
Management declared last week that the new deal is among three conditions the re-formed, post-bankruptcy Fraser company, temporarily called Newco, must meet to prevent the closing and scrapping of the 680-worker mill and its sister pulp mill across the St. John River in Edmundston, New Brunswick.
A credit group of Fraser owner Brookfield Asset Management of Toronto, CIT-Canada and the New Brunswick provincial government won’t proceed with a proposed $180 million bailout of Fraser without the contract. The contract had been negotiated intermittently since August and twice rejected by large margins.
Fraser sought bankruptcy protection in Canadian and U.S. courts in June.
The new union contract, and its $4 million in concessions, comes with a restructuring plan that cuts another $7.5 million in salaried positions in Toronto, company officials have said. Management has also said that the mill’s executive and salaried positions have not received wage increases in three years.
A mill closure would produce economic disaster and a massive population exodus from Madawaska, which had about 4,500 people according to the 2000 census, town officials have said.
The St. John Valley’s largest single employer and the town’s largest taxpayer and employer, the Fraser mill manufactures coated and uncoated freesheet papers and hybrid and uncoated groundwood papers.
The wage concession returns union pay to 2003 levels and places union pay behind wages at paper mills in Woodland and Bucksport and ahead of those in Lincoln and East Millinocket, Lugdon estimated.
By Lugdon’s calculations it will cost the average millworker about $6,500 annually.
“What we have done through the acceptance of this agreement is put them [Fraser] a step head of their competition. The people they compete with will have higher costs than they have,” Lugdon said. “That’s fine. We want Fraser and Newco to be successful, but we don’t want them to do it just on the backs of the employees.”
“It’s an example of the kind of sacrifice the employees have made. Over the last five or six years, they [management] have asked the employees to sacrifice one thing after another,” he added.
Workers will get back a 1 percent wage increase after one year of the contract, in 2011, and a 2 percent increase in 2012, but that will still leave union workers earning 5.5 percent less in three years than they earned under the previous three-year deal, Lugdon said.
“It’s awful,” he said.
The union also agreed to allow its Defined Benefit Pension Plan to lapse now, instead of in 2013, as the union had originally agreed in 2007, Lugdon said. The company also will walk away from $6 million in annual pension liability — another key concession to the company’s Newco rebirth, Lugdon said.
“There are other losses built in, but they are nothing as significant as that rollback,” he said.
The new contract struck union members as a bitter blow, particularly when executives were taking hundreds of thousands of dollars in bonuses while Fraser filed for bankruptcy protection.
“This is not just sour grapes,” Lugdon said. “The most important thing for those employees throughout this was that if there was going to be pain, management should share the pain. If there were going to be wage rollbacks then they believe that management salaries should be rolled back, too.
“If anything has made those employees bitter throughout this negotiation, it has been the fact that management has been unwilling to share the pain,” he added. “They want all the pain to come from the hourly employees who have been making sacrifices again and again.”