How Employees Took Over the Mill
April 1, 1988 -
A British Columbia wood products manufacturer went bankrupt and closed its doors in 1984. Today its 270 employees are living proof that workers can own a business and make it thrive.
In 1984 Sooke Forest Products Ltd., overburdened with a debt load of $55.8 million, closed its sawmill in New Westminster, B.C. and its manufacturing mill on Vancouver Island, throwing close to 300 employees out of work. In the spring of 1985, a few employees from both the union and management of the closed mills decided to explore the possibility of buying the company and starting it up again. By dint of hard work, determination, and the help of the IWA & Community Credit Union, they put together a financing scheme totaling $13.5 million. Each employee signed a personal guarantee of $12,500 as collateral, which later on translated into 12,500 shares at $1.00 each to be paid for through wage deductions.
In its first year of operation, the new employee-owned Lamford Forest Products Ltd. declared a healthy profit,-so that part of the long-term debt could be repaid and the value of the employee-shareho1der's stock nearly doubled.
Lamford Forest Products remains a union shop (IWA). Its board of directors now includes two management people, the two union local presidents, three outsiders selected for their industry experience, and two members of the mill workers. Management and workers meet weekly to review operations, while financial reports are discussed at monthly share-holder meetings. Decisions are made through group study and consensus.
Now that the employees are part owners and represented on the board of directors, their attitude to their work has changed. "A majority of people work harder than they did," according to fork-lift driver George McKimmie. "It's like your own. It's like your house, or your yard." Said another employee: "If it was strictly a union shop, people wouldn't put the emphasis on their work because they are going to get that wage anyhow. Here, you cut out of your own pocket if you don't produce." The mill's customers have noticed the enthusiasm and improved attitude wrought by worker ownership, and the Lamford sawmill has become a very desirable place to work in the community. There are few openings, however, because so far employees leave only for retirement.
One of management's concerns is how an economic downturn and the resulting retrenchment in business would affect morale at the mill. Said Bob Anderson, the New Westminster plant manager: "If we go through a protracted loss period, and we have to report that to the shareholders, I'm not sure what that will do to the attitude here." At any rate, Lamford Forest Products is off to a good start and has laid the foundation for an excellent relationship in the plant. (John Frustman, "When Workers Turn Bosses," Report on Business Magazine, March 1988, pp.41-48; Leslie W.C.S. Bames, "Cooperation the Key at Lamford Forest Products," The Worklife Report, Vol.5, No.6, 1988, pp. 1-2.)
B.C. Workers Become Mill Owners
October 1, 1990 -
Hard times have hit the B.C. plywood industry. In the last decade numerous plants have shut down in a sea of red ink. It was therefore not surprising that the large forestry company Weldwood decided in the summer of 1988 to close its money-losing plywood plant in South Vancouver. About 300 workers, some of whom were long-time employees, would be without a job.
But the employees and the local plant manager, Lance Ripley, decided to try to rescue the mill with an employee buyout. Weldwood management agreed to cooperate, but there were many hurdles to overcome. The first requirement was to buy time so that a complicated financial package could be assembled. Weldwood agreed to keep the plant operating for another six months despite the fact that it was losing money. Local management and hourly paid employees took the drastic step of agreeing to a 25 per cent wage cut (some or all of which they would recoup if the mill became profitable again). These were hard times for the workers. About 100 employees left the company, but the rest persevered. One mill employee said the handwriting was on the wall. She explained; "Everybody at the mill knew the B.C. plywood industry was in a very insecure position. If we refused to take a rollback, the mill would go under and everybody would be out of a job."
An option-to-buy agreement was signed and the employees assumed responsibilities for the mill. They worked hard at cutting costs and improving efficiency, bringing the operation back into the black. But the biggest hurdle was arranging the financing for the buyout.
Weldwood set the price of the mill at $7.2 million. Substantial additional finances would be required to upgrade the mill equipment. The employees had to raise some $3.5 million themselves. About 220 of them agreed to become shareholders. It was decided that once the buyout plan was completed only employees who agreed to buy shares in the new company would have a job. (After October 1989, the minimum price of shares was set at $ 22,000.)
The B.C. government, through its Employee Share Ownership Plan, provided a generous 20 per cent tax credit. In addition, the B.C. Regional Development Ministry promised to lend $4 million, and the government also provided a $2.5 million loan guarantee to back up an operating line of credit from the bank. Negotiations with the various parties were time-consuming and there were many delays. Finally, the deal was completed and the proud new owners are now facing the challenge of combining ownership with their employee status.
"Putting More Into Our Jobs"
The new employee-owners are very well aware of how much is riding on the success of this plant. Yet they are confident and optimistic that they can make it succeed. They are also realistic about the tough economic times facing their industry. As union business agent Gary Wong said, "Everyone who made a decision to participate knew what they were getting into. And they understand that plant shutdowns and future layoffs are always a possibility."
According to spokespersons for the unionized (International Woodworkers of America) employees, they are prepared to approach their work differently. One 26-year employee explained, "When we sign the final deal and the mill is ours, I think a lot of attitudes around here will change. Some will be happy, some will be proud, and some of us will be scared to death." A young foreman-trainee said, "We're our own bosses now, and we have to watch out for each other. That may mean putting more into our jobs than we've been used to, but that's what it will take to make this place work."
Lance Ripley, the plant manager who has worked long days to arrange the buyout, said, "It's been tough. But once everybody knows for certain that the deal is done, we're going to have a good company, because we have good people."
It is obvious that the task before the new mill owners will not be easy. They know that not every buyout is a success. Another sawmill on Vancouver Island (Lamford Cedar) was bought out by the employees after the previous owner went bankrupt in 1985. As of January of this year, the company folded despite the best efforts of the new owner-employees.
Much is at stake for the owners of the new company (renamed West Coast Plywood), which has an annual payroll of $8 million and an assumed debt load of $10 million. One thing will make a significant difference, namely, the positive attitude of the workers who realize that cooperation and their best efforts will be required to ensure that their jobs will exist in the future. Now if all unionized workplaces could benefit from a similar attitude, that would be true progress!
(See Gordon Keast, "Employees....to the Rescue," B.C. Business, June 1990, pp. 16-23.)