Paper mill experts outline problems facing industry in Maine

BANGOR – Despite Friday’s news of 300 more pulp and paper jobs lost to the recession, industry experts who gathered here to consider the future of papermaking in Maine were guardedly optimistic.

Maine’s timber resource is world-class, yet the paper industry will survive only if the government intervenes to lower the cost of doing business, making the state more attractive to investors, they said.

“Maine is on the edge of the cliff,” said James McNutt, who heads the Center for Paper Business and Industry Studies, a think tank at Georgia Tech. “Your future is in your hands.”

Experts from Maine and throughout the country were brought together by the University of Maine’s Margaret Chase Smith Center for Public Policy to participate in a day-long seminar called “The Current State of Maine’s Paper Industry: Challenges, Strengths and Opportunities.”

U.S. Rep. Mike Michaud, speaking via telephone from Washington, pledged his support and blamed the industry’s dire situation on international competition created by a strong dollar and global trade agreements like NAFTA.

Other speakers were hesitant to lay so much blame overseas. Rather, they said a combination of missteps by the industry, external pressures and a lack of state support for manufacturing are provoking its demise.

“These problems are endemic,” McNutt said. “People look at Maine as a great place to live, but not necessarily as a great place to work or to invest – perceptions count.”

All afternoon, speakers flashed graphs illustrating the high cost of doing business in Maine – the seventh-highest state in the nation, according to the Maine Pulp and Paper Association. Energy, labor, taxes – essentially everything but timber is expensive for a Maine mill.

Many Maine companies have chosen not to invest in new equipment, or if they do, they keep the old, inefficient machines up and running. As a result, mills are producing the same amount and quality of paper as an overseas competitor, but at a substantially higher cost, said Lee Bingham of SCA North America, a paper manufacturing firm.

All Maine’s mills have above-average labor costs, both because of overstaffing and because the industry here is full of men and women with 20 or 30 years’ experience who top out the pay scale, he said.

Powerful unions ensure that salary and benefit packages are generous: The average wage for a paper manufacturing employee in Maine exceeded $51,000 in 2001, about $6,000 higher than the national average.

“This is not new news to us,” said state economist Laurie Lachance, describing a troubled manufacturing sector that has been in decline since the 1960s.

“The state of Maine has not invested in its people, in technology and in capital equipment to the degree that other states have,” she said.

Maine’s taxes, wages and energy costs all exceed national averages, while the productivity of the state’s workers lags behind. Statistically, Maine can’t compete, yet the state relies on the industry for a huge portion of its economy, she said.

“Even with big layoffs, the mills still contribute one out of every five jobs in Maine’s economy,” Lachance said. “We’re five times more dependent on the paper industry than the U.S. as a whole.”

But the outlook isn’t all dark. Speakers praised the health of Maine’s forests, the access to New York markets, the network of logging roads and the quality of the work force.

Papermaking need not go the way of textile and shoe manufacturing in Maine, they said.

“I really believe that the paper industry has been critical to Maine in the past, [and] it’s important to Maine in the present – but its future is not assured,” Lachance said.

“At a minimum, we’ve got to reduce the costs of doing business across the board, and they’ve got to be big and substantial changes,” she said.