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Industry Watch

The Changing Face of BC's Troubled Forest Industry

By Jim Stirling
Copyright 1998. Contact publisher for permission to use.

The features remain unfocussed. But the face of British Columbia's troubled forest industry is undergoing profound change. What emerges may well bear scant resemblance to its predecessor.

Is that good? Well, certainly not for the many people who are losing their jobs. Theirs is the wrenching reality of change, the human fall-out from what large forest companies term rationalization and restructuring.

Is it necessary? Yes and overdue. That is not to infer the industry has been stick-in-the-mud, reluctant to embrace technological advances and attitudinal revisions. Indeed, for the last several years, BC's forest industry has been in the vanguard of such changes. But it hasn't been enough. And it hasn't been enough because the industry's costs of doing business, coupled with shifts in traditional global marketing relationships, have outstripped the benefits gained from entrepreneurship.

The province's forest companies are wrestling with these problems. They are challenging norms, assessing options, choosing courses. Some will prove beneficial, all will involve change. But the industry needs outside help. Companies can re-invent themselves internally all they want; however, at the crux of reform is industry-wide co-operation to urge a matching political commitment to challenge the fundamentals of forest land resource allocation that underpins the industry. That, scary prospect that it undoubtedly is, will ultimately reflect the new face of BC's forest industry.

Large companies typically take longer to react to change, given their layered command chains. It is significant that some of the province's largest forest companies are leading the way in processing change, which indicates shareholders have taken enough shellacking and are desperately seeking survival strategies.

For sure, BC's new-look forest industry will have a reduction in production capacity. Sawmills have already been permanently closed in the interior and on the coast. Many others are enduring shutdowns because of the Canada-US lumber quota, high costs and low product prices. Canadian Products (Canfor) has announced it will close its Netherlands sawmill in Prince George, resulting in a loss of 215 jobs. Canfor has already trimmed jobs throughout its operations in northern BC as part of its quest to return to profitability.

Northwood Inc. has been doing the same thing. The company has a program in place that is re-examining all aspects of how it conducts its business to improve profit margins by $80 million. Northwood has announced it will close its townsite at Upper Fraser to shave annual operating costs. The recently rebuilt sawmill there and planer operation will continue to produce lumber products. Northwood has created a furor with its plan to re-arrange its logging contracting relationships as a method of cost control. The consolidation means 50 per cent of its contract wood will be offered in competitive tender to contractors around Western Canada. (See "BC's Northwood Wants Fewer Logging Contractors" in this issue.)

New relationships of other kinds are being fostered. Forest companies are assiduously pursuing green credentials through certification processes like the Mexico-based Forest Stewardship Council, so their products are treated more favourably in world markets. This council is an independent auditing certifier that has earned credibility and attracted a membership of some 260 organizations in its five-year lifetime. If the council is satisfied a forest company's management and practices are ecologically sound and are fair workers it will certify its products. The Forest Stewardship Council seeks a global accreditation system with the aim of certifying 200 million hectares of forest land around the world by 2005.

MacMillan Bloedel raised some eyebrows and controversy when, it recently pulled out from the Forest Alliance of British Columbia. Northwood had quietly done the same thing at the beginning of 1998, but apparently for different reasons. Northwood viewed membership in the alliance as an unfortunate cost-cutting necessity during exceedingly tough times. MacBlo opted out on more philosophical grounds. The company had previously garnered headlines with its intention of moving away from large-scale clearcut harvesting of old-growth forests on its tenured lands. Selective and partial cut systems are the way of the future, it maintains. That meant forsaking the alliance which has worked hard and consistently to explain to foreign customers that clearcut harvesting is not a heinous crime against ecological sustainability. Instead of the alliance, MacBlo is switching gears to a company-oriented communications program to reflect its new direction.

It was MacBlo's boss, Tom Stephens, who challenged the government and industry to find a better way of awarding tenure. Clearly, a way needs to be found to silence the constant American carping of unfair subsidy of a public resource, while providing forest companies a more conclusive climate for investment in forest management and productivity.

Alan Stubbs, MacBlo's vice-president of public affairs, issued a telling statement when explaining his company's withdrawal from membership in the Forest Alliance of BC: "Challenging the status quo is bound to attract dissent and occasional misunderstanding but that doesn't diminish the necessity for change."

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