MADAWASKA – The gut-wrenching crisis that has gripped the Katahdin region could occur in Madawaska, another one-industry area, if it weren’t for the fact that Nexfor Fraser Papers is paying attention to the cost of making paper and the competitiveness of the industry, according to a company official.

Fraser has about 1,000 employees and an annual payroll of about $74 million. Its sister mill in Edmundston, New Brunswick, located across the St. John River, produces pulp and steam energy for the Madawaska mill. The pulp and steam are transported to Madawaska via pipelines attached to the international bridge crossing the river and another private bridge.

“Yes, the same thing could happen here if we didn’t take action on competitiveness and the cost of making paper,” Richard D. Arnold, Fraser vice president and manager of the Madawaska operations said Friday in an interview. “We knew we could not compete as independent mills.

“We knew years ago we needed a niche in the market, and it was in finer papers,” Arnold said. “It worked for us, and we have been able to control costs.”

Across the United States in 2002, five mills shut their doors and 33 paper machines were idled permanently, not only because of bad times in the U.S. paper industry, but also because of competition from offshore paper producers.

Arnold said the paper industry in Maine has lost 1,500 jobs over the last five years. Now, GNP has cut 1,200 jobs almost overnight.

“Manufacturing jobs are important to Maine,” he said. “Manufacturing jobs bring in true income because most of the product is sold outside of the state.”

As in Millinocket and East Millinocket, Fraser pays the lion’s share of property taxes in Madawaska. Last year that amounted to more than $4.5 million in property taxes, about 66 percent of the local property tax bill.

Arnold said that Fraser has cut the cost of making paper by $150 million a year by changing the way the company makes paper.

Among the many actions taken to cut costs was the lowering of the number of employees at the facility. In 2001, the company, which historically hired new people every year during the 1970s and 1980s, ended a nearly six-year hiring freeze with the hiring of 28 people.

In the past decade, the company has invested $500 million in capital projects in the Madawaska-Edmundston complex. In the last two years, however, since the most recent turndowns in the industry, annual capital expenditures were about $10 million per year.

“When costs exceed the income you generate, you go bankrupt,” the mill manager said. “Over the years, we have done things that keep our margins up.”

“It has kept us competitive,” he said. “The actual price of paper has dropped to where it is lower today than 10 years ago.”

Arnold said the cost control measures and being owned by the same people for many years has kept the Madawaska-Edmundston complex operating.

What happened elsewhere, such as at Great Northern Paper, did not happen overnight, the industry official said.

Millinocket and Madawaska are similar, he said; they are both nice towns, with nice mills, and hard-working people.

“The problems did not come overnight,” he said. “They waited too long to go for the niche markets.

“We needed to invest in the company to make money, to keep going,” he said of Fraser. “We’ve developed markets, and we continually look to improve.”

Looking down the road, Arnold said Fraser will have to change again during the next three to five years and again have to do things differently.

“We always need to be pro-active,” he said. “We are looking to have a future here, and the future of Fraser is the future of Madawaska and Edmundston.”