Canfor is seeking significant labour cost reductions of $50-million in negotiations with the United Steelworkers union. The company’s proposal also calls for a lengthy six-year agreement, and seeks a simplified collective agreement that covers all of Canfor’s operations. Contracts can vary from mill to mill.

In the company proposal provided earlier to workers in Prince George, Canfor says the $50-million cost reduction will enable it to reduce cash losses and survive. “This will also position us for a market recovery and attract investment critical for long-term sustainability,” said the company in the two-page document. Canfor said it also intended to link the changes to a profit-based cash incentive plan. The company declined Monday to comment on the document or its contract negotiations.

The company proposal gives the first inside glimpse of the negotiation battle that may unfold between the B.C. sawmilling sector and the United Steelworkers, the largest forestry union in the province. The union has already indicated it’s looking for wage increases and a shorter contract.

The existing six-year contract covering 10,000 unionized workers in the Interior — which also includes companies like West Fraser and Tolko — ends June 30. Canfor has 13 sawmills in B.C., 11 of them in northern B.C., of which two have been indefinitely shut down, and another three are scheduled to go down indefinitely this month or next. The $50-million annual reduction — based on 3,000 workers with wages and benefits pegged at $80,000 — could amount to a 20 per cent labour cost cut.

That reduction is in the same range as a recent rollback taken by workers at the shuttered sawmill in Mackenzie represented by the Pulp, Paper and Woodworkers union, according to sources familiar with that rollback. United Steelworkers local 1-424 president Frank Everitt observed that Canfor is counting on the workers becoming their banker.

But he said, despite the dismal economic picture which workers acknowledge, they are not in a mood for this kind of roll back. “I imagine we’ll spend a fair amount of time talking back and forth before reaching an agreement,” said Everitt. He also cautioned that these are only initial proposals, and it has yet to be seen which are real and which will fall away.

Everitt is also taking heart in the recent drop in the Canadian dollar, and some housing statistics which appear to a slightly improving picture. However, the negotiations come at a challenging time. The forest sector is undergoing an unprecedented downturn led by a collapse in U.S. housing, but also exacerbated by a more general economic slow down.

Lumber producers are contending with historically low prices, weak demand, a 15-per-cent tariff on shipments to the U.S. and a resurgent Canadian dollar which erodes income. Major forest companies, including Canfor, are bleeding red ink. Even perennial money-maker West Fraser is losing money.

Forest analyst Kevin Mason said the call for a major labour cost reduction is not surprising, but it is unusual. Usually, negotiations in the forest sector are a dance around the size of the wage increase, he observed. Given that he has seen a United Steelworkers document that calls for a “substantial increase” in wages, it looks like there is a “massive gap to be breached,” said Mason, managing director of Equity Research Associates. “It will be interesting discussions,” Mason said dryly.

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