MADAWASKA – Fraser Papers Inc. will cut 331 jobs at the company’s flagship operations at Madawaska and Edmundston, New Brunswick, the company president announced Thursday.

Twenty percent of the 1,600 employees at the two mills will be cut by early 2004, with layoffs to start in the next two to four weeks, Bert Martin of Madawaska said during a noontime press conference at the company’s local training facility. Company officials expect that 60 percent of the cuts will be made by midsummer.

The cuts are the result of a “productivity improvement” program, made because the company’s profits have been slipping seriously and at a rate much higher than other companies in the industry, Martin said.

At the Madawaska mill, where 1,024 people worked at the end of 2002, the loss will be 190 jobs, and the work force will end up at 834.

Of those cuts, 22 percent, or 32 jobs, will involve salaried personnel, and 17 percent, or 158 jobs, will be hourly paid jobs. Martin said he expected that 120 of the layoffs at Madawaska would be made soon, with the remainder by the end of the year.

At Edmundston, 19 of the jobs will come from salaried personnel and 122 will be hourly paid workers. The Edmundston mill, located across the St. John River from Madawaska, had 567 employees at the end of 2002 and will be left with 426 after the cuts.

By the end of the year, Martin said, one complete shift at the Edmundston pulp mill will be eliminated.

The Madawaska mill makes fine specialty paper, while the Edmundston mill makes pulp and paperboard. Total paper production at Madawaska is expected to remain at 472,000 tons and at 60,000 tons for Edmundston.

Employees were notified of the layoffs Thursday during the day.

Martin said he hoped that the company would get a “good number” of early retirements to lower the number of actual layoffs. He said the two mills would be operated as a single complex.

“It’s a significant event,” the company official said about the announcement. “It’s a day of pain.”

“Our industry is facing serious and difficult times,” he said. “The slip started 18 months ago, and it has become more serious than we thought.”

Fraser Papers is one of three businesses operated by Nexfor Inc., which is 41 percent owned by Brascan Corp. of Toronto. Brascan is expected to close a $103 million purchase of bankrupt Great Northern Paper’s mills in Millinocket and East Millinocket in the next two weeks, and those mills will be operated by Nexfor-Fraser.

Martin said the layoffs weren’t related to that purchase, and that Brascan had been interested in Great Northern because of “the power side of GNP.” Brascan subsidiary Great Lakes Hydro America owns Great Northern’s former hydro-electric system.

“Brascan has nothing to do with the decision made here in Madawaska,” the company official said. “Brascan Corporation and Fraser Papers are two different entities.”

The announcement has hit the town of 4,500 people hard. Despite the industrywide cuts, Madawaska has never seen layoffs at the paper mill, and many workers thought themselves to be immune.

At a Thursday afternoon meeting of company, municipal and school officials, it was learned that the company has been looking at its slipping financial position since last July. The company’s board of directors approved the job cuts on Tuesday night.

Town Manager Arthur Faucher said Thursday he understood that companies need to manage in difficult times, but the layoffs nonetheless would mean problems down the road for the town.

Faucher said the loss of jobs could affect the town’s property tax base.

“We will have to change our schedule of street and road rehabilitation, and the future of machinery and equipment purchases,” he said. “We still have to furnish community services, but they may have to be looked at closer, and we may not fill personnel vacancies.”

“When I first heard about this, I thought it was a disaster,” Vernon Doucette, chairman of the Madawaska Board of Selectmen, said. “They [Fraser] are doing the best they can, and I am sure they are doing the best they can for the town.

“I realize it’s bad news, but in the long run, we may have a stronger company,” he continued. “I feel sorry for the people who will lose jobs, but we have to make this work.”

Even union officials at the Madawaska mill weren’t sure Thursday how things would work out. One union official said Thursday he hoped that attrition would work, keeping lower the actual number of people who would lose their jobs.

“We will be sitting with the company to find out why and how they intend to take care of this,” Lucien Deschaine, union international representative with PACE International Union, representing the four union locals at the mill, said Thursday afternoon. “The more lucrative the early retirement program is, the better it is all around, and we can save jobs for younger workers.”

The Maine Department of Labor’s rapid response team was notified about the job cuts Thursday afternoon and was preparing a plan to help the workers with unemployment benefits.

Although accompanied by his two mill managers from Edmundston and Madawaska and by personnel from the company’s headquarters in Stamford, Conn., Martin was the only one who spoke at the press conference.

He said the cuts will be expensive for the company and could not have been done without the assistance of the company’s owners in Toronto. He explained that early retirements and severance packages can become very expensive.

“If Fraser Papers was in this alone, the realities would be much harder,” Martin said. “We could not afford to do this by ourselves.”

“They [Nexfor] chose to give us dollars to do this,” he said. “The news could be much harsher if not for Toronto.”

Martin said that the business climate for papermaking has changed in North America and an upturn in the paper market would not change the impending layoffs. He pointed out that Fraser’s competitors were doing the same thing two years ago.

The cuts being made at Madawaska and Edmundston are similar to those made by the company in the Midwest in 1999, when Fraser closed one mill and cut 360 jobs at another mill.

The Madawaska-Edmundston complex, according to the president, had increased its profitability from 6 percent in the mid-1990s up to 17 percent by 2000. Returns on investments now have dropped back down to 6 percent, Martin said.

The cuts announced Thursday are expected to bring profits up 4 percent. Martin said a dollar amount of savings resulting from the layoffs had not been done.