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AbitibiBowater: From behemoth to lean and green

Under CEO Richard Garneau, AbitibiBowater moved from its lavish downtown headquarters to modest digs in Old Montreal.

Christinne Muschi for The Globe and Mail/christinne muschi The Globe and Mail

Veteran forestry executive and accountant Richard Garneau is notorious in the industry for his frugality. He took over at newsprint and paper giant AbitibiBowater Inc. – presently being rebranded as Resolute Forest Products – in January and later renounced his annual incentive compensation of $1.7-million (U.S.) as part of a cost-cutting and restructuring drive. Mr. Garneau met with The Globe and Mail in his modest office in the company's new digs in Old Montreal, a striking departure from the former lavishly appointed head office downtown.

Was part of the problem at the old AbitibiBowater a way of doing things at the management level that was perhaps rather extravagant?

When I came on board … I just brought my way of doing business that was really lean, tried to show that we care for shareholders, that when the employees and the unions come to the office, they see we are exactly like them, that we don't spend anything that is not needed, that we have put new limits on travel … I travel economy like everyone.

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Are you satisfied so far with the efforts to remake the company?

I think that we are making progress. You're never satisfied. … we've still got more progress to make. And demand is declining, so you always have to adjust your strategy and also look at where we have to go in the future to make sure we'll be able to pay for all that and pay down the [$1.5-billion] deficit that we have on pensions.

Is the industry still suffering from overcapacity?

There is still overcapacity … not only in North America but also in Europe. Our strategy is really to make sure that the mills that we have in our networks are going to be lower cost. … when you are in a trough or you go through the valleys, you need to have low cost and I'm very, very focused on that.

How do you manage the decline in global newsprint consumption?

We're going to continue to see a migration, a slow migration to tablets and a digital age. We have to adjust our production to the declining demand. But timing is the difficult part.

Where is the growth, the renewal going to come from?

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The growth, we see mostly in Latin America and Asia. … [where]they don't have the fast network to accommodate the iPad [or computers, and]the population doesn't have the money to buy them. When we look at Brazil, for example, it's one of the good markets that we have. Latin America, in general, is growing.

AbitibiBowater was not known as an innovator. How are you changing that culture?

We're looking at other products. Biofuel is one I believe makes economic sense. It's based on wood waste. With about 300,000 cubic metres of wood, we can produce about 25 million gallons (94.6 million litres) of biofuel that could replace [certain types of aviation oil]and it's carbon-neutral.

We're also developing engineered wood products [that use]recovered fibre, such as all the small logs, the treetops … to produce a value-added product.

Many "green" sectors are high-risk and require billions in investment. What do you see as the most promising?

Lumber is a green product. It's like my farm in Lac Saint-Jean. My cousin harvests wood in the fall and every year he has a crop. Lumber is the same thing. You cultivate trees; the only difference is it takes 50 to 75 years. We're investing in the forest.

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Do you think the so-called green revolution is overhyped?

I always like to say that sustainable development is important but there are three pillars: the first one is protect the environment; the second one is social – the people; and the third is economic, and these have to be balanced. We are involved in the [Canadian Boreal Forest Agreement]and in our discussions with our friends in the NGOs it's something we are trying to do, to keep the balance.

Should governments help forestry companies make the transformation to biomass and so on?

Investment climate is very, very important. The government has to make sure the policies they put in place are not going to disadvantage Canadians compared to the competition in Europe or in Asia.

One union leader described you as a "fierce cowboy." Would you say you take a hard-line, confrontational approach to labour?

No. Absolutely not. I disagree completely with that. I think that I share the information as well as I can. When I talk about the market, for example, I share with all of our employees, the union, that demand for our products was 24 million tonnes in 2009. Now in 2011, it's going to be 13 million tonnes. Don't expect that we're going to continue to do business as usual.


This interview has been edited and condensed

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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