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AbitibiBowater swings the axe 2,600 jobs affected

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MONTREAL—The fears of AbitibiBowater Inc. employees have come true after the newly-merged company announced yesterday it will embark on a sweeping restructuring of its pulp and paper operations affecting 2,600 jobs in Canada and the United States.

In addition to closing or idling more than half-a-dozen mills in Quebec, New Brunswick, Ontario, British Columbia, and Texas, the Montreal-headquartered company also wants to re-open its labour contracts as part of the cost-cutting efforts.

“The company evaluated a range of options,” CEO David Paterson said in a conference call after stock markets had closed.

“Our decisions are the outcome of careful deliberation and represent the best course given the current market realities and challenges that lie before us,” he noted.

A second wave of closures are possible in the second quarter of 2008 if governments, unions, and communities don’t assist in reducing energy, labour, fibre, and other costs, the company warned.

“Over the next three months, the company will also be conducting an indepth review of its wood products business with the objective of selling non-core assets, consolidating facilities where appropriate, and curtailing or closing non-contributing operations,” added chairman John Weaver.

The AbitibiBowater restructuring is one of the biggest blows yet delivered to a forestry industry hit by a combination of factors, including higher fuel costs, a slowing U.S. economy, and the competitive disadvantage of a high Canadian dollar.

Of the jobs affected by the restructuring, 1,000 are at locations that already have been idled and 1,600 additional jobs in this phase of the restructuring.

All but 450 jobs identified by the company are in Canada.

In total, the 2,600 jobs represent more than eight percent of the company’s total workforce of 20,000 people.

Parti Quebecois leader Pauline Marois denounced the Quebec government, saying the workers were hit with the bad news just as they are getting ready for Christmas.

She said Premier Jean Charest must answer for his inability to resolve the crisis in Quebec’s forestry industry.

“People have been crying for help for years and he hasn’t responded or he has appeared to respond with programs that have done nothing,” Marois charged.

The downsizing follows the merger less than a month ago of Montreal-based Abitibi-Consolidated and the paper division of Bowater, an American forestry company based in Greenville, S.C.

Affected employees include union and salaried workers.

The new company’s management warned earlier this month that it would be moving quickly to reduce debt by $1 billion over three years and to reduce annual costs by more than the original $250-million, two-year target given when the merger was announced.

Yesterday, the company said it is now targeting $375 million in “synergies” and plans to raise $500 million from the sale of assets. Dividends to shareholders also are suspended to conserve cash.

There will be permanent closures in Shawinigan, Que., affecting 513 workers; Dalhousie, N.B. (278 workers at mill and 52 at woodlands), and at the previously-idled mill at Thunder Bay, Ont. and the No. 3 paper machine at a mill in Gatineau, Que.

The number of workers affected in Thunder Bay and Gatineau wasn’t provided.

In Lufkin, Tex., 450 workers already have been idled.

In addition, the company will indefinitely idle paper mills in Donnacona, Que. (206 employees) and Mackenzie, B.C. (235 employees), as well as two sawmills supporting the Mackenzie mill that employ a total of 337 other workers.

The previously-idled mills at Thunder Bay, Lufkin, and the machine at Gatineau have a total capacity of about 650,000 tonnes.

None of the facilities to be closed are generating cash, analysts were told.

Company officials said they have had preliminary discussions with union officials and are hopeful they will co-operate. They declined to elaborate on the form of concessions being sought.

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