The Battle over the Newfoundland Fishery

By Peter Fenwick

Even though Newfoundland’s FPI is a $700 million company, their latest fight with the provincial government makes you sympathize with their plight. The provincial government has threatened to impose restrictions on the company that amount to nationalization without compensation. It is the latest move of a government that is proving increasingly hostile to the business community.

Early in January 2002, FPI released a strategy to revitalize their groundfish operations on the south coast of the province. The plan called for an injection of $12 million in new capital and a general reorganization of their three south coast plants to take advantage of new technology and increased specialization. In the process they would eliminate 580 jobs from a total workforce of 1300.

The response from most Newfoundlanders was immediate and violent. The layoffs were a violation of promises made to the workers and their communities when the new board took overlast May. The more paranoid complained that FPI’s proposed takeover of Clearwater Fine Foods had stripped the company of cash and forced it to lay off a good chunk of its workforce in the three communities of Marystown, Fortune, and Harbour Breton.

The provincial industry Minister, Beaton Tulk, vowed to use the power of the legislature to stop the layoffs. Although the provincial legislature chartered FPI, its legislation addressed questions of ownership and board representation, rather than workforce levels. Short of nationalization, it was not clear how the province could save the jobs.

For its part, FPI promised to look at a variety of means to soften the blow, ranging from job sharing, to early retirement. Unfortunately, when it suggested that government should play a role in helping laid off employees, it caused a further uproar.

Most attacks on the new FPI managers and board centred around their promise last year to “grow the company”, and their repeated comment that they were not taking over FPI to lay off people and close plants. The government vowed to hold the company to the promises they made last spring when the board was replaced by dissident shareholders. To buttress its argument the government released several letters from the dissident shareholders that appeared to commit the company to keeping plants open and to maintain the workforce.

But while the letters painted a promising future for the company and the communities they operated in, they only promised to maintain the plants they now have and to invest in their modernization. “We do not intend to close any of FPI’s processing plants in Newfoundland or otherwise. On the contrary, we are committed to reinvesting and enhancing these facilities.”

At the time, the dissident shareholders did not point out that modernization of groundfish plants would often, especially in the short term, lead to fewer employees. But that claim was made by the board being ousted, and by other fisheries’ observers who could see that many of the FPI operations had not modernized their facilities during the decade-long moratorium. A new cod processing line had been installed at Marystown, and had led to layoffs. More of the same investment would likely lead to more layoffs.

Missing in the whole debate was any discussion of whether this investment was necessary for the long term protection of both the company and the communities. Prior to the present uproar, there had been general agreement that the Newfoundland fishery, especially the groundfish sector, had to be modernized. During the cod moratorium, the then fisheries minister, John Efford, had predicted that the post-moratorium fishery would be a high quality, highly professional fishery, with year-long plants and a smaller workforce. Exactly what FPI proposed.

The Fisheries Association of Newfoundland (FANL) had also predicted that the new ground fishery would have to concentrate on quality in fewer plants with a more professional work force.

But no one was prepared for the size of the proposed cuts. In Marystown the fish plant would go from 600 employees to slightly over 300. In Fortune and Harbour Breton both plants would lose over one third of their workforce. In a area where the unemployment rate is often over 30% and where the other major employer, the Marystown shipyard, is virtually closed, the panic among the workers and the civic leaders was understandable.

But this cut in the processing sector of the Newfoundland fishery was long overdue. Although the fishery has benefited by improved technology in the shellfish sector, the groundfish sector had so little product to process in the last decade that needed investment was postponed. FPI brought in some new cod processing equipment at Marystown in anticipation of a reopening of the groundfish sector on the south coast. That proved to be premature as the quota rose for a year or
two and was then cut again as the cod stock assessments turned gloomy.

Part of the reorganization will be to move the new cod processing equipment out of the Marystown plant and replace it with $9 million worth of flatfish processing equipment. Yellowtail flounder is one stock that has been recovering and FPI has 80% of the Canadian quota.

For its part, the management and board of FPI claimed they could not move forward into additional processing and aquaculture while their groundfish operations lost money. The status quo would bleed profits from the other shellfish, secondary processing, and fish marketing arms of the company. Indeed, since the company loses money on groundfish it may even stop buying raw fish from around the world to process in its plants, thus leading to just as many layoffs without any hope of a brighter future.

The company also predicted that the new technology would upgrade the quality of the jobs on offer. Instead of a filleting knife, workers will work with computer terminals and highly sophisticated equipment that requires extensive training. Employees to fill these jobs are more difficult to hire and retain when only 26 weeks of work can be guaranteed. They need to be promised full time employment, something that would have occurred under the restructuring.

FPI chairman Derrick Rowe promises he will not move forward with the restructuring without the consent of the people affected. So far that is not forthcoming.

After mulling over its options the provincial government threatened to impose a provincial government oversight on the company. By changing the FPI legislation they would impose actual employment levels on the company. Using this club they forced the FPI management to review their plans.

The fight over FPI’s plans is a replay of the recent fight over the introduction of woods harvesters into the paper industry. While labour agreements slowed the introduction of the new technology, the companies eventually prevailed. In the process, a large number of loggers lost their jobs. Many were retired early, some were retrained, while others looked for work elsewhere. But the modernization went ahead.

The Newfoundland fishery is in dire need of restructuring. In the last decade while the cod moratorium was in place, new technology was developed by European and Icelandic companies.

They replaced labour with highly efficient processing equipment. That equipment is now industry best practice. If FPI were to reopen their plants using decades-old technology they would see an endless flow of red ink that would eventually close their fish plants.

The recent threat by the provincial government is part of a series of interventionist policies that has gained Newfoundland and Labrador a reputation as a hostile place to do business. The recent regulation of gas prices, the stalemate over the development of Voisey’s Bay, and the de-facto nationalization of FPI will scare prospective investors away even more.

In a province with the highest unemployment rate in Canada, scaring away business is not a wise move.