AbitibiBowater head office in MontrealRyan Remiorz
AbitibiBowater Inc. has reached a tentative labour contract for the bulk of its unionized workers in Canada, a deal that could help the insolvent newsprint giant to emerge from bankruptcy protection later this year.
The agreement requires about 4,000 workers in Quebec, Ontario and Atlantic Canada to accept wage concessions, which would be used to fund pension contributions for the existing employees and 8,000 retirees.
Members of the Communications Energy and Paperworkers Union of Canada are expected to vote by the end of the month. Approval for the deal, reached on the weekend, is also required from pension regulators in Ontario and Quebec.
The union said the tentative pact came after the company withdrew a proposal to terminate employee pension plans, which would have reduced retirement benefits by an average of 25 per cent.
David Coles, national president for the union, said workers are being asked to accept concessions to allow AbitibiBowater to continue as a viable company.
"Our guys are taking a hit for the pensioners as well as themselves," Mr. Coles said in an interview.
He said the agreement was difficult and historic for the union because it has never before "bargained backwards."
But at stake was the survival of the pension plan and retirement income for pensioners, along with getting the company out of court-supervised protection from creditors.
Details of the tentative agreement weren't being disclosed until they are presented to workers. But sources suggest they match the 10 per cent wage cut accepted by workers at privately held Kruger Inc.
Richard Kelertas of Dundee Securities said the total value of concessions could be double that.
Failure to achieve such a reduction in labour costs could force AbitibiBowater to halt additional paper machines to reduce capacity.
Mr. Kelertas said he expects North America's largest newsprint producer, which has been hit by a downturn in the newspaper industry and weak U.S. economy, will emerge from creditor protection in September.
Negotiations are continuing with other unions, which represent about 1,200 workers.
Company spokesman Jean-Philippe Côté declined to discuss details of the CEP agreement or why the company removed other proposals from the table, including the elimination of shift premiums, longer work weeks, and reduced vacations.
"Agreements with the unions are an important component of the restructuring process so it's certainly an important headway in that direction but we need to negotiate with the remaining unions as well," Mr. Côté said.
AbitibiBowater has been operating under court protection from bankruptcy in the U.S. and Canada since April, 2009.
In addition to its large debt, the paper, pulp and wood producer has faced a collapse in newsprint demand caused by dwindling advertising and a structural shift to electronic media.